It’s been a long time coming but finally some positive news has been delivered. The Spanish court appointed administrator investigating Silverpoint has now completed his review of the company’s liquidation. It appears that the news is not good for the company or for several key personnel. Although the report is welcome it appears that the administrator has not included some key points which the lawyers behind the majority of cases against Silverpoint expected.
Back in early 2020 the CEO of Silverpoint, one Mark Cushway, placed the company into voluntary liquidation, suspicions were already aroused that this was a deliberate action, a ploy instigated by the Limora Group, Silverpoints’ overall parent company. Limora, a British Virgin Island registered company was thought to have taken this action to consolidate as much financial gain as possible for the benefit of the family of the late Bob Trotta, the owner of both Limora and Silverpoint.
This now seems to have been officially recognised as the administrator has concluded the liquidation could have been avoided, had it not been for the mismanagement by the company directors and key personnel.
A disappointing facet is the fact that although the administrator acknowledged the role played by the legal advisors of Silverpoint they have not been held them accountable. Given that the administrator has established that the company bankruptcy could have been avoided, exactly what advice was received from whom to avoid the decision and take action to avoid the collapse?
Alvarez & Marsal
A few years ago nobody had really heard of Alvarez & Marsal until they seemed to suddenly become involved in liquidating timeshare companies, Azure Malta would be one such example. Basically, Alvarez & Marsal based in the Cayman Islands to try and extract as much wealth as possible from the companies before they actually declare bankruptcy. Alvarez & Marsal are large bankruptcy practitioners who are also known for asset decommissioning, put another way, asset stripping which is the practice of taking over a company in financial distress and selling each of its assets separately at a profit, regardless of the future of the company.
A name synonymous with Alvarez & Marsal is that of Alex Lawson. In every timeshare related bankruptcy Alex Lawson is heavily involved.
Kwang Boon Sim
There is no doubting that the financial brains guiding the Trotta family has been and still is Kwang Boon Sim. Wherever the late Bob Trotta was financially dealing, Kwang Boon Sim was never far from sight. Alvarez and Marsal’s team, led by Alex Lawson and assisted by Kwang Boon Sim, have been working their way through the large and complicated network of 123 companies comprising the Limora Group, along the way taking over and then declaring them insolvent. This means that Lawson and his team evaluate the company’s ability to pay its debts and declare that they are unable to do so.
It is claimed that the insolvency of each company is justified by cancelling debts to other companies that appear to be unrelated, but are actually effectively controlled by the Trotta family. The purpose of deliberately inducing these insolvencies is to get out of liability to consumers. The Trotta trust fund and the Trotta family would keep the cash and fail to deliver on promises and products sold to customers. Of course, Alex Lawson and his firm Alvarez and Marsal, the insolvency specialists, are extracting hefty fees along the way.
Although Kwang Boon Sim was not an employee or director of Silverpoint it was recognised by the administrator that there is sufficient evidence that he played a significant and very influential role in the company.
Further investigation
During his investigations, the Silverpoint administrator also uncovered a huge range of financial and management irregularities which he believes directly contributed to the collapse of the company. Because of this, he has classified the liquidation as “culpable”, which actually means it was a negligent bankruptcy.
The administrator also made it very clear that those responsible for the negligent bankruptcy are the former CEO Mark Cushway and the former CFO Diana Aitchinson. This obviously doesn’t look good for either of them; the administrators report raises the possibility of criminal charges being brought against them. The question we would pose is why Alvarez & Marsal are not equally culpable; it was they after all that proffered advice and were instrumental in the winding up the company.
The administrator equally acknowledged the existence of some very “dubious” transactions between Silverpoint and Excel, another Limora Group company, this we reported on in a recent article. Lawyers representing claimants have also formally requested that the liquidation of all the other companies of Limora Group should also be investigated, which they believe will increase the overall asset value of the liquidation process.
Limora Investments Ltd
At the head of the 123 companies in the group is Limora Investments Ltd, yet another British Virgin Island registered company. On the 23rd May 2019 Limora Investments Ltd filed for Chapter 15 Bankruptcy proceedings in southern district of New York. Not so strange is the fact that Alexander Lawson and Paul Pretlove, are quoted as the foreign representatives of Limora Investments Limited, at the U. S. Bankruptcy Court.
From this gloom there may be a glimmer of hope in as much as the purpose of Chapter 15, and the Model Law on which it is based, is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest concerning more than one country. This general purpose is realised through five objectives specified in the statute:
(1) To promote cooperation between the United States courts and parties of interest and the courts and other competent authorities of foreign countries involved in cross-border insolvency cases;
(2) To establish greater legal certainty for trade and investment;
(3) To provide for the fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested entities, including the debtor;
(4) To afford protection and maximisation of the value of the debtor’s assets;
(5) To facilitate the rescue of financially troubled businesses, thereby protecting investment and preserving employment.
From this we can only presume that creditors of failed Limora companies, wherever their jurisdiction will be allowed to represent their interest and be recognised as creditors under Chapter 15.
A PDF of all the Limora companies may be downloaded here:
Final thoughts
Even though this report is welcome and is good news for claimants, it was hoped the administrator would have gone further with his investigation. For instance, it was also hoped that the corporate veil would be lifted; this would have shown a very well-orchestrated asset stripping of Silverpoint through other entities such as Excel, Signalia and Inversiones Oasis amongst many others in the Limora Group.
Previous investigation carried out by the Spanish Social Security office clearly identified and highlighted the link between all the various Limora companies, it begs the question why the results of this investigation haven’t formed part of the administrator’s report.
The Spanish State Attorney will study the administrators report in detail and then will make his comments which will be placed before the presiding judge. This report along with the criminal reports launched by Spanish lawyers for “allegedly” the hiding and removal of funds and assets in order to obstruct payments to clients during enforcement procedures. This is known as “frustration of payments” and is, in itself, a criminal offence.
As we stated in our previous article, although still a way off, the settlement of legal claims awards against Silverpoint and associated companies moves a step closer. Naturally we will bring updates as soon as we are in possession of the same.
Finally, many thanks to Inside Timeshare for their invaluable assistance in the preparing this article.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk