The trial in the Oracle Fund case scheduled to begin in January will cast a spotlight squarely on the Bahamas. In addition, international financial institutions and high net worth individuals throughout Europe who invested in the Fund will be waiting to see how the matter is dealt with.
This is yet another example of instances which suggest that corporate governance in the Bahamas is poor, said a source close to the case.
The $257 million Oracle Fund was poorly managed in the Bahamas about three years ago under the watchful eyes of local regulators, who were harshly criticized for allowing the fund to fail and investors to lose millions of dollars.
Hong Kong Shanghai Banking Corporation (HSBC), one of the top ten banks in the world, lost $60 million while Union Bank of Switzerland (UBS) lost almost $90 million. The administrator of the fund, Fortis Fund, reportedly did not follow investment guidelines, which led to Oracle’s troubles.
The administrators made poor investments. As a result, the fund lost a tremendous amount of value, according to the source.
The fund was reportedly suspended because there was a problem regarding the valuation of the assets owned by the Oracle Fund. As a result, the auditors could not issue financial statements.
The fund’s administrator invested in a New Jersey-based company known as the Breen Capital Group, which issued promissory notes. The company then reportedly bought tax lien certificates with the intentions of fulfilling its obligations to pay off the debt. But that investment proved to be a bad one.
Following the fund’s collapse, the Securities Commission of the Bahamas had issued an order preventing Fortis Fund from licensing any additional funds.
οΎ The Breen Group was reportedly making payments to Oracle based on a Restructuring Agreement signed last September.
Smaller investments from around the world made complaints to the Bahamas Securities Commission following Oracle’s demise. After a five month investigation, the commission came to the view that Fortis did not act properly.
In considering their options, commission officials found after consultation with the Attorney Generals Office, that their powers to impose fines or other disciplinary actions against the administrators were limited.
The Journal reported in August that three years after the multi-million dollar Bahamas-based mutual fund collapsed, shareholders were still fighting over some of the money recovered by the liquidators.
Ernst & Young, which was appointed liquidator of the Oracle Fund, which suspended in July 1999, at the time retrieved $78 million of the $257 million of the fund’s assets.
Earlier this year, the firm was still attempting to collect more assets for investors and had taken legal action against Fortis Fund.
But investors in the failed fund appealed a recent Supreme Court ruling that gave priority to holders of cumulative dividend preference shares, while pay fixed annual returns on investments.
As a result of the appeal, none of the investors was able to get any of the funds recovered.
The Oracle Fund was registered in February 26, 1997 as an authorized mutual fund under the provisions of the Mutual Funds Act of 1994.
During the time of the fund’s collapse, a source close to the matter had said the Securities Commission was unable to detect that a “financial blow up of monumental proportions” was brewing because it was undersourced.
The Bahama Journal
