Questions & Answers
Did Mr. Abraham have any financial interest in the arrangements with MBC?
When Mr. Abraham moved to an offshore location in 2003, it quickly became clear that receiving commissions from MBC into a UK company, which then paid him and the offshore Investment Manager, was an inefficient strategy for tax management. Consequently Mr. Abraham set up a Gibraltar based company to receive those commissions; the average being just over 10%. From that 10%, 7% was paid to the offshore Investment Manager, Shepherds Investment Ltd (a Cayman Islands registered company). The balance was held by the Gibraltar based company and used to fund Mr. Abraham’s business and personal interests. To counterbalance this he took no further income from any of the Shepherds Group companies.
Did Shepherds ignore a due diligence report which recommended that the Shepherds Select Fund stop investing new assets with MBC and start seeking new sources of policies?
Mr. Abraham himself actually commissioned a review of the US Life Settlement market. He employed a legal assistant on a 6 month contract to assist in the strategy of moving away from the purchase of fractionalised policies to whole ones. During the investigation of other suppliers there were criticisms made against MBC. These had been previously reported and were almost all available on the internet. These criticisms had also been investigated and reasonable answers had been provided. All of these issues were reported to financial advisors in a Q & A along with the relevant explanations. In this way the advisers were given the information so that they might make their own decisions.
As is well known, the US is a litigious and critical society and though there had been a number of legal cases and criticisms against MBC they had in the main been defended successfully or penalties had been satisfied. However, and not withstanding this, from a regulatory perspective MBC held a current license in one of the most regulated states in the US. It also had more than 29,000 investors. Consequently though the decision to purchase from other suppliers was made in August 2003 there seemed no immediate need to move away from MBC. With the benefit of hindsight, Mr. Abraham feels that the company should have moved more quickly to buy policies from alternative suppliers. However, it should be understood that this would have done nothing to protect investors as the fund would still have carried MBC sourced policies and therefore would still have been suspended.
A former director has stated that he and three colleagues left Shepherds because the company was unwilling to make any changes following the delivery of the due diligence report
Mr. Abraham states that this is untrue. In the High Court in London, a prosecution was brought against four former directors of Shepherds. These directors were proven to have begun work on their own fund in March 2003 even before the due diligence report was commissioned. Three of the four directors were found guilty of a breach of fiduciary duties and obligation of loyalty. The fourth director settled out of court prior to the start of the trial.
It has been suggested that Mr. Abraham acted fraudulently.
It is true that certain individuals continue to make these allegations. Even in 2009, some five years after the MBC closure, an employee of an offshore regulatory authority has indeed made such an accusation. Mr. Abraham’s lawyers took this up with the authority’s director and received the following response –
“…On behalf of (regulator), I can confirm that the (regulator) is not presently aware of any grounds for believing that Mr. Abraham has been guilty of fraudulent conduct of any kind.’
At no point has a complaint been made, nor an action been taken, against Mr. Abraham in his 28 years of involvement in Financial Services.
