Investors sue Towry Law

TOKYO — Aggrieved investors in Towry Law International (TLI), a licensed U.K. insurer and financial advisory group, are taking legal action against the firm. TLI owned by HHG Plc, sold several high risk products as low-risk, which have led to enormous losses up to US $400 million.

The investors' group along with London-based Class Law Solicitors is urging other victims to participate in the action.

The major defective products, which investors from Dubai, Bahrain, Saudi Arabia, Kuwait, Oman, Cyprus, Tokyo, Singapore and Hong Kong purchased, include the following funds.

Firstly, the Global Diversified Trading (GDT) hedge fund which was suspended from trading in September 2002 when investors lost over US$29 million. Another is the Global Opportunity Trading (GOT) fund also resulted in loss of nearly US$22 million. Thirdly, the Circus Capital Protected Growth Fund (PGF1), which caused a loss of over 80% of client investments. Lastly, the Geared with-Profit (GWPs) which is the largest in terms of value invested and funds at risk sold by Towry Law.

These allegations were recently subjected to regulatory approval from the Bahrain Monetary Agency (BMA). Accordingly, Towry Law offices in Dubai, Bahrain and Japan will close by the end of July as part of a global wind-down.

However, Wayne Sheridan, branch director of Towry Law said, "The closure is the result of a strategic review of the viability of Towry Law, which was influenced by the war in Iraq and SARS in Hong Kong last year. It is not related to the collapse of international funds.

"Our office is simply moving from Dubai to Hong Kong. All client investments are safe and will have the same commitment. We are a third party provider, hence we have no big problem in operating from any remote area," he added.

At the same time, TLI advised that if clients do not wish the company to service their investment and financial affairs, they should seek a locally authorized advisor to discuss a transfer. Inevitably they will need to write a cancellation letter to Towry Law and do paper work to establish a new agreement with the next advisor.

However, several former Towry Law staff admitted to the allegations, giving practical evidence to UAE investors who are seeking redress for their loss. Mike Chaplin, a Bahrain-based former TLI consultant between 1999 and 2002, wrote a letter of apology to his previous clients in the Gulf Daily News of Bahrain about three months ago.

Regarding the GDT, Chaplin turned over a liquidators report by Deloitte Touche Tomahtsu that blamed the collapse on the fund manager, the Hong Kong stock exchange, and the Securities and Futures Commission (SFC). He said, "TLI was charging excessive annual trail fees to 5% including a percentage of incentive fees from the fund manager. It was nearly 15 times the other firms."

In addition, he revealed that leverage of PGF1 was prevented from being reduced as a result of intervention by Towry Law. "Excessive leveraging and borrowing costs are what led to the collapse of this fund, as the return from assets was insufficient to pay loan costs. It is a classic liquidity crisis," he said. He contended that knowing it was neither protected nor to produce growth, TLI promoted the PGF1 exclusively to TLI clients especially during seminars provided to them. That was possibly because level of trail commission was made payable to Towry Law.

Chaplin, also a victim of TLI with a US$75,000 loss, admonished, "These issues will not disappear with investor indifference."

The UAE Ministry of Economy and Commerce and the UAE Insurance Federation have formed a legal action group in London. The group is organized by the Bahrain Action Group, which was formed last year to push for compensation for investors. A law firm in the U.K., Class Law, which specializes in class-action cases, has been retained. As many investors received a letter from SFC in search of feedback on PGF1, the investigation continues.

Moreover, the action group is still assembling additional victims of TLI at a reasonable cost as a sharing group. Since group legal action is considered a contingency in the U.K., the cost is made by the accuser in advance. Only when they win, the costs will be paid by the accused. Therefore if they work together, a better chance of compensation ensues. For this reason, former TLI consultants are also recalled for more evidence and testimony.

The action group questions the reaction of TLI when the chairman of the parent company HHG, Roger Yates is earning 3 million pounds a year plus stock options, and the company has not paid any compensation yet. In fact, they are still trying to develop their financial advisory business.

Investors hope that their action will teach other investors not to trust them, advise people with losses of what they can do, and push HHG into doing the right thing.

The action group can be reach by e-mail: ohare@cytanet.com.cy, Denis O'Hare. Also, please check, Class Law http://www.classlaw.co.uk for details on how to join the group.