By Iain Martin originally published 23 December 2009

PricewaterhouseCoopers (PwC) is preparing to sue the founder and director of Shepherds Select, the Isle of Man-based life settlement fund that collapsed four years ago.

Acting as the fund’s liquidator PwC will sue former Shepherds directors Mike Abraham and Jeremy Leach for breaching their duty to investors in an attempt to recover money for investors.

PwC plans to file a case in the Isle of Man High Court in an attempt to claw back commission paid out by collapsed broker Mutual Benefits Corporation (MBC), which supplied the fractional traded life and endowment policies for the $46 million Shepherds funds.

MBC paid 10% commission on the policies bought by the Shepherds funds to Abraham through his Gibraltar-based company Financial Partners Limited. MBC founder Peter Lombardi was given a 20-year prison sentence by a Florida court in January 2007 for operating a ‘ponzi’ scheme and fraudulently lowering the life expectancy of its policies.

PwC will also sue Caledonian Trust Isle of Man, the administrator of Shepherds Select fund and the manager of the Shepherds Traded Life Policies, for breach of its fiduciary duties.

Investors have been calling for action since the fund was suspended in May 2004 when controversial MBC went into receivership.

PwC partner and liquidator Mike Simpson said he had been investigating the former Shepherds directors and administrator since the fund went into liquidation in May 2005.

‘Since the start of the liquidation, it has been apparent that there were several parties involved in the running of the companies whose actions should be investigated in order to determine whether any legal action should be taken in order to increase the recovery for shareholders,’ said Simpson.

Published on 11 Jan 2010 at 10:53 pm