Harlequin’s Derelict Hotels and the Disappeared £400m

 

I recently wrote about the Harlequin Property scam (see footnote on this link) and its apparently very similar MO to Bacolet Bay – get investment from UK investors via IFAs and SIPPs for Caribbean resorts that would never be built. Harlequin director David Ames was made bankrupt late last year and is the subject of an ongoing Serious Fraud Office investigation. Here’s an update via the Money Marketing website, which would appear to hold out some hope for Bacolet Bay victims…

 

The Financial Services Compensation Scheme has released new information on how the recovery of money for clients from the Harlequin group is progressing.

The Harlequin group is a well know collection of companies involved in the marketing, sales and development of overseas investment properties.

Many of these are unregulated investments and have featured prominently in many upheld Financial Ombudsman Service decisions.

In an update published today the lifeboat fund says it has recovered just under £300m from failed financial services firms since 2014.

The same update sheds light on the action that has been taken against Harlequin in what the FSCS calls one of its “most interesting, current recoveries cases”.

Harlequin sold speculative overseas property developments promoted by a UK registered company, Harlequin Management Services (South East) Limited.

Customers purchased, through UK-based IFAs and Sipp providers (and sometimes directly), various off-plan property development investments and hotel rooms.

These were primarily in Caribbean resorts operated by offshore Harlequin overseas resort development companies.

Approximately 6,000 investors invested a total of around £400m in the projects, with in some cases the same property being sold to multiple investors.

Some investing in this location had completion dates as early as December 2013. The FSCS says there are many reasons the Harlequin developments failed and, ultimately, investor funds were not used to develop the resorts.

The common ownership of Harlequin is shared between David Ames and/or his family members.

Ames is subject to an ongoing prosecution by the Serious Fraud Office while he and his wife have both been made bankrupt.

A number of Harlequin entities are now in formal insolvency processes and the FSCS has compensated in excess of 2,700 investors who had collectively invested more than £125m.

The FSCS is currently pursuing recoveries against various Harlequin entities, largely through the insolvencies which are already afoot in the UK, St Vincent and the Grenadines, St Lucia, Barbados, and the Cayman Islands.

See original article at https://www.moneymarketing.co.uk/harlequins-derelict-hotels-and-the-disappeared-400m/

Construction Work to Commence?

 

Yesterday Heather Bain sent out a brief email to all investors informing us that construction work on the Bacolet Bay site may be about to start:

 

We have received sufficient pledges from investors to finance the recommencement of works on site.  We are in the process of collecting those monies.  We will report shortly to confirm that that process is complete and generally in relation to other matters, including the appointment of a purchaser committee, for which we have had expressions of interest.

 

‘Pledges’ are obviously pretty meaningless and so we will withhold judgement until we see some actual evidence of construction work happening…

Did You Invest in Bacolet Bay Via a Financial Advisor? Get in Touch!

Just a quick post – if you purchased your Bacolet Bay unit on the advice of a UK financial advisor, we’d love you to get in touch…

Latest Purchaser Update from Bacolet Bay

Bacolet Bay purchasers received a rare update from the BDF yesterday, though as usual it didn’t contain anything new and merely parroted the same “cheque’s in the post” message they’ve been repeating since going into breach of contract in 2014. The only new item is the mooted formation of a purchasers’ committee. Here it is:

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Whatever Happened to Bacolet Bay Private Residence Club?

Long-suffering Bacolet Bay investors may remember receiving a letter from Kash Lais on 20 December 2013 (you can read it online here) in which he announced the launch of Bacolet Bay Private Residence Club. Lais wrote:

Our product offering in the fractional sector has historically been promoted most widely to the Self Invested Pension sector (see footnote). As a result of changes to the regulatory regime that avenue for achieving sales has been significantly narrowed. We have restructured the fractional product offering to focus upon a lifestyle orientated market and have recently established a Private Residence Club structure to that end.

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Global Citizen Realty STILL Selling Bacolet Bay Property

Despite no construction having taken place for 5 years, despite BDF being unable to meet its financial obligations, and despite the project being in a “perilous state” according to the Financial Risk Committee, Gunn & Lais’ other business, “golden visa” middleman Global Citizen Realty, is still selling the resort not just as a going concern but as a completed project – check out this sales blurb from their website.

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Gunn, Lais & the Golden Visas

For several years now BDF have been stressing the importance of the Grenada CBI (Citizenship by Investment) scheme, under which investors who invest $350,000 or more in Grenada real estate projects qualify for Grenadan citizenship – fairly desirable given that the Grenadan passport is in the top 40 most powerful in the world.

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Another Breach of Contract by Bacolet Development Finance

As followers of this site may know, last year I signed a variance agreement with Michael Gunn of BDF which guaranteed full repayment of my original $30,000 investment “in any event” (ie regardless of the progress or otherwise of the Bacolet Bay project) by 7 December 2018. Michael assured me in August of this year that he was confident the payment would be made.

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Bacolet Bay News Update 28 November 2018

I and another angry purchaser exchanged a large number of emails with the FRC yesterday and learned a number of new things, mainly things that should have been communicated to purchasers as a matter of course as they affect our investment in the project. Here is what we now know:

Where Has the Money Gone?

The money raised by sales over a decade ago has apparently been spent on land, the initial construction work and, somewhat scandalously, on repaying the original founders of the project who are no longer involved but have walked away with their money.

New Investment is NOT Going to BDF

According to David Arnold, the management company BDF (Bacolet Development Finance) is  in “a distressed state”, so a Newco called BB Investor Co Ltd has been created to handle new investor funds.

The FRC Are Not Looking After Purchasers

Contrary to what we had been led to believe over the last couple of years, the FRC is not looking after the interests of purchasers – just investors. “I think that you are purchasers, and not investors. That is a very important distinction because the FRC is appointed by the investors, and we do not represent the purchasers.” – David Arnold. So basically if you’re a purchaser, you’re on your own.

The Land is Not Owned by BDF

Thought the management company owned the land on which the resort will be built? The only asset the project currently has? Think again. It’s actually owned by a vehicle called Ivymount, which is listed in the ICIJ Offshore Leaks database as being based in the British Virgin Islands. Ivymount is in turn managed by a Channel Islands company called Nerine Fiducaries. Nerine and various permutations thereof – most likely connected companies – appear frequently in offshore leaks including the Panama Papers and Bahamas Leaks. See the ICIJ search results.

Optimism is Not High

Whilst Fleury and Gunn have been talking up their optimism about the project, the fact remains that construction has not started and the project has run out of money. David Arnold says: “All in all, just like many construction projects, a lot of money has been spent on groundwork without much to show for it. And then the money ran out as the global financial crisis struck. The consequence is that the company has no money leaving all its contracts in great distress, not helped by a lack of communication and the fact that management then offered financial compensation to some which could never be met. This project needs investors and purchasers to act collectively; it will only take one investor or purchaser acting out of turn to cause it to fail and that would be catastrophic for all. It is in a very perilous state.”

QUESTIONS

The above raises several questions for the BDF and the FRC that we are yet to receive an answer to, notably:

Why was I (and presumably other purchasers) issued a contract for a full refund last year, and assured 3 months ago that this would still happen, when it was known all along that the company would be unable/unwilling to honour it?

Who are the original founders of the project who were able to walk away with their money?

Why were purchasers not informed about the creation of a Newco, and that the investment money that has been talked up in the last couple of years would go to this Newco and not the entity our contracts are with, BDF?

Which individuals are in charge of the Newco?

If the FRC is independent of BDF and trying to put pressure on them to secure a successful outcome, why is Christopher Williams on both the FRC and the board of GCR with Michael Gunn and Kash Lais?

Can BDF or the FRC explain the number of offshore entities related to this project?

Why is nothing being communicated to purchasers? Why has it taken the hard work of individual purchasers to obtain and publish this information?

Why are purchasers threatening legal action to obtain what is contractually theirs by right being accused by the FRC of “acting out of turn“?

 

The Global Rise of Online Real Estate Fraud

 

Not related to the Bacolet Bay project, but an interesting article for those of us who’ve lost money on dubious property investments…

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