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U.K. Bans Directors From Three Diamond Investment Schemes

Jul 24, 2015 12:45 PM   By Jeff Miller
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RAPAPORT... The Insolvency Service (TIS) of the U.K. disqualified  three directors of Cohen Stones Ltd., Imperial Assets Solutions Ltd. and Tudor Global Ltd. from a "director" role at any firm for more than a decade after investigators determined the men  misled diamond investors and then filed voluntary insolvency.
 
The TIS said that the three directors, Charles James Sewell, 25, Edward Lionel Phillips, 61, and Liam O'Keefe, 24, operated in a similar fashion: selling diamonds to customers with an extraordinary markup, claiming the stones would increase in value annually and recording a profit before filing for bankruptcy. Each of the firms were said to have stored the diamonds in a free trade zone, which would require their clients  to pay a 20 percent VAT on the purchase price to have the stones released. TIS estimated that customers, many of whom were elderly, lost more than $5.4 million (GBP 3.5 million).

Investigators found that Sewell, Cohen Stones' director,   purchased diamonds from a supplier and sold them to customers with a markup of between 510 percent and 1,007 percent. He told buyers that the diamonds were worth the purchase price and suggested the value would further increase by between 4 percent and 20 percent annually. However, investigators determined from a sample of the diamonds that the actual value was anywhere from between 4 percent and 13 percent of what the customers paid.

Cohen Stones held no assets at the time of liquidation; it owed creditors $1.3 million (GBP 821,525) and TIS stated the scheme resulted in a profit of $971,000 (GBP 626,487) for the firm, while customers lost $1.1 million (GBP 719,597). Sewell was banned from being a director for 14 years.

Imperial Assets Solutions, under the directorship of Phillips, held no assets at the time of liquidation either and it owed creditors $2.2 million (GBP 1,405,460). Imperial Assets purchased diamonds to sell to customers, using a markup of between 229 percent and 870 percent, adding that the stones  would increase in value by 8 percent to 80 percent annually.  However, a sample of the diamonds revealed the value was between 5 percent and 13 percent of what customers paid. TIS determined that Imperial's clients lost $2.1 million (GBP 1,384,117), while the firm profited by at least $1.7 million (GBP 1,110,377). Phillips was banned from a director role for 14 years.

The third man, O’Keeffe, was the director of Tudor Global, which held no assets at the time of liquidation but owed creditors $2.6 million (GBP 1,646,709) and had recorded a profit of $2.1 million (GBP 1,362,428). O'Keeffe also failed to disclose certain funds to liquidators. Diamonds were purchased from a supplier and marked up between 475 percent and 1,084 percent before being sold to customers, who were led to believe the value would increase between 8 percent and 30 percent annually.  TIS found, however, a sample of the diamonds were valued at only between 3 percent and 13 percent of what customers paid. Tudor Global's clients lost $2.5 million (GBP 1,612,929), but the company recorded profit of $2.1 million (GBP 1,362,428). O'Keeffe was disqualified from being a director for 13 years.

Under the disqualification rules, the three men may not act as a director of any company, take part -- directly or indirectly -- in the promotion, formation or management of a company or limited liability partnership nor may they  be a receiver of a company’s property.

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Tags: diamond, diamonds, fraud, Insolvency, investment, Jeff Miller, scheme, u.k
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