RE: BANK CROZIER LIMITED (IN LIQUIDATION)

INTRODUCTION                                                                                                    Top  Back    I am the Chief Executive Officer of Louison Consulting. On 24th July 2003 I was appointed by the court to be the liquidator of Bank Crozier Limited (the bank).   Pursuant to paragraph 16 of the Liquidation Order, this is my second report.     The objectives of my appointment are to:         Determine the potentially realizable assets of the Bank;     Assess the number and value of legitimate creditors claims;     Assess the extent to which creditors legitimate claims can be met;   Assess the extent of progress made in accomplishing the tasks set out in the Liquidation Order and;    Form a view regarding the likely future direction of the liquidation. Top  Back    SCOPE OF WORK                                                                                                          Top  Back     Assets Cash at Bank    The cash at Bank in Grenada is the sum of USD$ 5,000,000 at RBTT Bank which  has been frozen by the High Court pending the outcome of two court actions (namely BCIL and Carla Bella Ltd.) and USD$ 137,540 at the Grenada Co-operative Bank Limited. (See Appendix A).   Top  Back    MasterCard Deposit   5.      As of September 30, 2003 Bank Crozier’s membership with MasterCard International (MasterCard) was terminated. To date, Bank Crozier’s unpaid obligations to MasterCard are as follows:   $289,080 Unpaid settlement obligations $194,266 Termination fee 7,000 Processing fees owed to Tecnicard $490,346   6.      Under MasterCard Bylaws, Article I, Section 12, Bank Crozier is still obligated to pay for any fees incurred prior to its termination. Additionally, under Article VI, Section 10, MasterCard has the right to charge a termination fee. The calculation of Bank Crozier’s termination fee is shown in Appendix B.   7.      All amounts outlined above were due by February 20, 2004. The cash deposit which is currently held by MasterCard will be utilized to pay Bank Crozier’s obligations, hence we are likely to receive USD$ 109,654. Top  Back    Stourbridge   8.      Documents have been submitted to liquidator Blake Elyea of KPMG in Vancouver, Canada. To date I have not had a response from him. I intend to step up my effort to produce a resolution in this matter. Top  Back    Bear Stearns   9.      After careful evaluation and legal review, I have written to Bear Stearns and Company indicating that all existing accounts are to be closed and that our position within the Bear Stearns Venture Partners fund be terminated and all relevant sums be repatriated to my account in Grenada. Top  Back  Blue Ocean Properties   10.  I have taken control of this company, which was a wholly owned subsidiary of the Bank. I have also obtained independent valuations of the company’s assets mainly a house at Lance Aux Epines and land at Point Salines in Grenada. These assets will be liquidated at the appropriate point in time  Top  Back  Fixed Assets   11.  The majority of fixed assets have been sold realizing a value of USD$ 19,687.00. What remains are a few items continuing to be used by the office.   The assets were depreciated using the straight-line method to arrive at the net book value of those assets. (See Appendix A Table B) The depreciation was calculated from the time of the last financial statement December 2001 to July 2003, hence the one and a half year period. After adjustments were made for the depreciation cost for the period, the assets were then marked down by 75% to represent the amounts, which may be realized in the event of a sale of these assets. (See Appendix A, Table D)  Top  Back   Liabilities   Table H below shows the number of creditors as per the Bank’s records to amount to three hundred and forty-six, with a value of USD$ 15,845,198. The number of creditors who have sent in claims amounted to one hundred and forty-two (142) claims with a value of USD$ 7,689,262. Of the one hundred and forty-two claimants, sixty (60) of these claimants were certified claims with a value of USD$4, 768,348.     Table H – Creditors Claims   As per Bank Records Claims Received Certified Claims No. of Claims Value of Claims No. of Claims Value of Claims No. of Claims Value of Claims 346 $15,845,198 142 $7,689,262 60 $4,768,348   14.  The matter of a sum of the bank’s funds being available for distribution lies fully at the discretion of the court; assuming that all claimants to date are legitimate and are able to provide a verifiable certified claim and that all other things remain equal one can project a payout ratio in the region of 50%.  Top  Back     PROGRESS TO DATE                                                                                                 Top  Back    Matters before the Court   I have successfully defended two actions brought against the Liquidator before the High Court to date:   Mr. Daryl Sands of PricewaterhouseCoopers attempted to retain control of the Bank’s funds and resisted attempts by the liquidator to have funds of the Bank transferred into accounts held by the liquidator on behalf of the Bank. It was ordered that such funds should be held in the name of the liquidator.   Mr. Daryl Sands of PricewaterhouseCoopers applied to the Court to have an unspecified amount set aside by the Bank in the event that Sands were to defend himself personally or as a Controller of Bank Crozier, in upcoming legal actions. It was held that Sands’ primary duty as Controller is to the Minister of Finance and as such should initially address his concerns to the Minister prior to instituting court proceedings.   Both matters are now the subjects of appeals brought by Mr. Daryl Sands of PricewaterhouseCoopers. The OECS Appeal Court is due to hear these matters upon fixing a date.  Top  Back  Individuals to be pursued   The following individuals and institutions have outstanding balances with the Bank. Several letters have been sent requesting the return of these funds, however to date none of them have responded. (See Table I)   Of the individuals and institutions to which money was loaned, many of the loans were unsecured. In cases where security was provided, the value and existence of the security could not be ascertained.   It is in my intention to approach the Director of Public Prosecution (DPP) to have the necessary proceedings instituted against these individuals for steps to be taken legally with a view to the recovery of the outstanding assets.                           Table I – Individuals to be pursued  Name of Institution Name on Account Loan Amount (US Dollars) Secured / Unsecured Brian and Janet Terry Dr. Brian Terry 90,000.00 Secured Peter Johansson Peter Johansson 257,150.00 Unsecured Olof Hogstrom Olof Hogstrom 224,633.00 Secured Peter Johansson/ Olof Hogstrom Peter Johansson/ Olof Hogstrom 1,000,000.00 Secured Stourbridge Limited Olof Hogstrom 5,841,200.00 Secured Grenada Offshore Management Peter Johansson 48,980.00 Secured Crozier Financial Services Limited Peter Johansson 250,000.00 Unsecured B A Group Bruno Andersson 60,216.00 Secured B A Investments Bruno Andersson 499,304.00 Secured Parman Enterprises Par Wannman 357,056.00 Secured Evergreen Company Corporation Bjorn Andersson 1,004,078.00 Secured Othello Holdings AB Mikeal Lithman 561,723.00 Secured Private Portfolio Management Ltd. Frank Mc Namara 969,070.00 Secured Hygia Foundation LLC 3,724.00 Unsecured Frank Mc Namara Frank Mc Namara 4,925.00 Unsecured Donal Scannell Donal Scannell 9,850.00 Unsecured Cap South Financial 196,409.00 Secured City International Peter Johansson 200,000.00 Unsecured Miscellaneous 18,499.00 Total $11,596,817.00  The management of the bank was not only inefficient and inept, but clearly also used their position to extract in excess USD $11.5 million from depositor’s funds to be utilized without benefit to the bank.   These individuals and the institutions they represented owe a duty to answer to the relevant authorities for their illegal acts.  Top  Back    Collections and Disbursements    22.  Table J below shows the classification of collections and disbursements for the period July 2003 to January 2004. A summary of these collections and disbursements is shown in Appendix C.   Table J – Collections and Disbursements to date   Description Disbursements USD$ Collections USD$ Sale of Motor Vehicle 13,618 Sale of Office Furniture 6,069 Total 19,687 Description Disbursements USD$ Collections USD$ Personnel 27,851 Severance Benefits 24,555 National Insurance 465 Legal & Accounting Fees 96,787 Electricity 11,686 Telephone 23,348 Office Supplies 184 Office Expenses 35,304 Agents Fees 22,700 Liquidator’s Fee 60,000 Publication Expenses 2,663 Expense Claims 1,632 House Repairs 7,459 Other 4,802 Total 319,436 Top  Back    Office of the Bank    23. The final members of the bank’s staff were terminated in December 2003. I intend to officially close the office at the end of March 2004, saving rental payments of the sum of USD$8,200 per quarter and to maintain reduced operations involving my agents at a new, cheaper location.  Top  Back    FUTURE DIRECTION OF THE LIQUIDATION                                           Top  Back     At this point my work has progressed sufficiently to allow me to draw the following conclusions:    I am satisfied that all creditors have notice of the liquidation in progress;     I have identified and in several cases taken possession of the beneficial assets of the bank with a view to securing the interest of creditors;   The operating costs of the bank have been reduced to a minimum so as to avoid attrition of available funds;    The bank was poorly operated and managed;   The CEO Mr. Peter Johansson and his friends used the bank as a vehicle to extract funds from legitimate depositors and to utilize these funds for their own purpose. Clearly steps must be taken to ensure that legal proceedings are instituted against these individuals with regard to their outstanding balances and loans that are unpaid;   The majority of the bank’s funds were invested in non-performing activities and low return projects. This has led to low or negative profitability capital erosion and zero or negative return on investment.     Creditors have expressed the view that, given the fact that the problems of the bank did not lie in its core business, but rather in the manner in which its affairs were conducted, it maybe possible to allow the bank to function again under new management and with revised operational objectives. It is my intention to hold a meeting of a cross section of creditors to determine their wishes.   In the mean time the remit of the liquidator is clear as stated in the Court Order. Thus creditors wishing alternative courses of action are advised to obtain independent legal advice on how this can be achieved.   The alternative of course is to progress ‘full steam’ towards liquidation irrespective of the possible low asset realization and resultant losses to legitimate investors.    Top  Back Home