Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a649608

Cru claims hit £334m as cells launch latest legal battle

by Jun Merrett on Jan 11, 2013 at 07:45

Cru claims hit £334m as cells launch latest legal battle

The board of the cells that make up the Arch Cru funds has launched a £3.7 million legal battle against the cells’ former auditors in a bid to recover money owed to its 20,000 investors.

The board has accused Moore Stephens of breaching its duty as auditor by failing to detect overstatements of the value of assets held by the cells and failing to exercise reasonable care in considering the valuations of the cells’ investments.

It is the latest in a long line of legal battles launched by the current board against parties in relation to the Arch Cru funds’ failure, with its claims totalling around £334 million.

In January 2012 it started proceedings against the funds’ investment managers Arch Financial Products. This was followed by a case against Arch’s chief executive Robin Farrell for £20 million. The board had also issued legal action against the cells’ former directors and former administrators Bordeaux Services.

Moore Stephens was appointed to audit the Channel Island-listed cell companies that make up the Arch Cru funds’ financial statements in June 2008.

The board alleges there were delays in submitting audited statements and that the auditors accepted a commentary in the financial statements written by Arch Financial Products which said the financial crash of September 2008 had ‘no significant impairment’ on the cells which had been ‘relatively unaffected’.

The board argued there had in fact been a substantial fall in the value of the ships the cells invested in as a result of the September 2008 shipping market collapse.

The board alleges Moore Stephens should have considered this was misleading and possibly revised it to disclose an estimate of the financial impact of the fall in the ships’ value.

The board argued if Moore Stephens had complied with its duties it would have had sufficient time to obtain proper audit evidence and concluded there was inadequate support for the valuations of a number of the cells’ investments and referred its conclusions to the Guernsey Financial Services Commission, which it said would have led the cells to cease further investments pending a full review and possibly replace Arch as investment manager.

Moore Stephens were unavailable for comment at the time of going to press.

4 comments so far. Why not have your say?

alec hargreaves

Jan 11, 2013 at 09:16

It is up to the Government to reconsider the powers that the FSA continues to hold and in particular the difficulty that anyone, least of all the Government , has in holding them to account. I suspect that this weak Government are happy to hold the status quo as it allows the government to not take responsibility for the ineptness of the FSA as the Government apparently are powerless to intervene. Unfortunately we are governed by a bunch of weak weasels.

report this

James Hurdman

Jan 11, 2013 at 09:25

So all the individuals and organisations involved in running this fund are blaming and suing each other. How is any of this the fault of the advisory community?

report this

Ned K

Jan 11, 2013 at 10:28

There has not been any press coverage regarding a claim against the PI insurance that Arch has but lots of comment about IFA's PI insurance. Surely if Arch directors have been 'reckless' then their PI should respond to a claim!! Or does 'reckless' behaviour invalidate their insurance?

report this

Ned K

Jan 11, 2013 at 13:02

IFA's are paying for the bungling incompetence of Capita.


report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Opportunities emerge as production moves back home

As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

A spotlight on Alastair Mundy

Alastair Mundy met Citywire's Daniel Grote at the London Stock Exchange Studios for a detailed interview about the Investec Cautious Managed fund.

Sorry, this link is not
quite ready yet