Park First investors push back against proposal to “wipe off £115m of debt”

A meeting of victims in the collapsed Park First investment scheme to approve the administrators’ proposals has been adjourned to 25 November, after a proposal to appoint alternative administrators was not included on the agenda.

Smith & Williamson (also administering Reyker Securities and London Capital and Finance) were the choice of Park First’s directors.

US-based Safe or Scam LLC has proposed an alternative administrator, Quantuma LLP (currently attempting to gain control of collapsed care home investment scheme Carlauren Group).

Safe or Scam characterise Smith & Williamson’s proposals as amounting to the write off of £115m of debt owed by Park First group companies to the companies in administration.

The administrator’s report confirms that the four Park First companies involved in the CVAs are owed a total of £115.4m by other companies in the Park First group, but that this £115.4m “has no recoverable value”.

They are actually saying that these four Park First companies transferred £115.4m to other group companies and there is no chance of recovering that money for the investors !  There has been no explanation why this money was transferred nor any explanation as to why is cannot be recovered.  The administrators are just expecting creditors to accept a loss of that magnitude because they tell them to.  So….. if creditors vote FOR the CVA proposals what effect would this have ? Well, if they vote FOR the proposals they would be agreeing to the following:

To write off £115.4m where the administrator has not even told them which companies took the money, why they were paid the money and why it is not possible to recover it; and

To sign away their rights to be able to take any form of recovery action against any of the parties involved; and

To allow the existing management to continue to run the businesses without any investigation into their conduct or the possible misappropriation of funds.

I asked S&W for comment on whether this was an accurate description of their proposals a week ago, and have not received a reply.

In a subsequent blog post on Saturday 12th October, Safe or Scam accused S&W of misinforming creditors by implying that a proposed £33m cash injection from Group First companies was contingent on Smith & Williamson’s proposals (including the £115m debt write off) being accepted, and the company entering a Company Voluntary Arrangement.

In short: either take £33m or risk getting nothing.

According to SOS, this was “erroneous”; the FCA has confirmed to rival suitors Quantuma LLP that the £33m should still be available to a liquidator, whether the original proposals are accepted or not.

The meeting of creditors has been rescheduled for the 25th at City Temple Conference Centre, London.

Comment

The rescheduled meeting sets up an intriguing clash for the fate of the administration between the Park First directors’ chosen administrators and Safe or Scam’s.

The parallel between London Capital & Finance and Park First goes beyond the fact that the unrelated collapses of both are being cleaned up by Smith & Williamson.

In both cases Smith & Williamson were appointed by the directors of the unregulated investment schemes themselves.

There is of course no suggestion that S&W are failing to carry out their statutory duties to act in the interests of creditors, over the people who appointed them if necessary.

There is also no question that the first job of an administrator of a collapsed unregulated investment scheme is to win the trust of creditors – and this goes double when the administrators were appointed by the people who lost their money in the first place.

Smith & Williamson’s appointment to London Capital & Finance was followed by a series of gaffes, which included unquestionably parroting the idea that LCF investors were sophisticated and high-net-worth (which very quickly turned out to be false), and saying on national radio that it was a good thing that LCF invested in a handful of companies linked to the directors, rather than hundreds of SMEs as investors had been led to believe, because it made the administrators’ job easier.

(Which is true, but the kind of thing you should look over your shoulder before saying if you’re at the Friday night office social, and is a downright stupid thing to say on national radio in front of stricken investors.)

S&W also claimed in the same interview that “the numbers all add up” and suggested investors could hope to get their money back; only to later reveal that what the numbers added up to was 80% losses as a best case scenario.

All that has however been left in the past, and there was no serious attempt to replace S&W with completely independent administrators of LCF investors’ own choice. Nor has there been any suggestion that S&W hasn’t maximised recoveries so far.

By contast, in the case of Park First Safe or Scam are accusing Smith & Williamson of being far too quick to effectively write off £115m of intercompany loans by proposing a Company Voluntary Arrangement.

Whichever choice the investors make, no-one can deny that more scrutiny over where the money went and whether it can be recovered is sorely needed.

Park First investors sue Park First and its directors for “fraudulent misrepresentation”

In other Park First news, a group of Park First investors are suing both Park First itself and Park First owner Toby Whittaker personally, alongside others including Park First director Ruth Almond, the Evening Standard reveals.

The investors are seeking £6 million which suggests that they represent a relatively small percentage of Park First investors.

A key part of the scheme was that the Park companies would sub-lease the plots back from the investors, offering a guaranteed return of 8%. The company said “projected returns” would rise to 10% in years three and four and 12% in the two following years.

In fact, the claim says, the sub-leases only lasted for two years, after which Park broke them and failed to provide subsequent services, leaving the plots impossible to sell. The investors also claim Whittaker’s companies misled them that they would easily be able to sell their spaces if they wanted to. There was no secondary market to buy them, which Whittaker knew, the case alleges.

The claim says some of the car parks in Glasgow were fenced off, making it impossible for them to return the kinds of profits being promised.

Park First director Ruth Almond said “The action will continue to be defended. We believe investors would be better served by pursuing options set out by the administrators.” That would be the option which apparently involves writing off most of the liability owed by Park First discussed above, then.

In general it takes exceptional circumstances for directors to be held personally liable for the failings of their companies; limited liability companies are called that as a reason.

Whether such circumstances exist remains to be proved in court.

Sadly, people investing lots of money in obscure micro-cap unregulated investments and losing all their money is not in itself an exceptional circumstance.

Update 17.10.19

The FCA has now also joined the legal fray, the Evening Standard reports.

The FCA’s action alleges that Park First was an illegal collective investment scheme, which we already knew as that was why it was originally shut down in late 2017 (not 2016 as the Standard says).

More seriously, the FCA alleges that Park First’s directors claimed the parking spaces were being sold at a 25% discount, based on independent valuations, but were “aware that the valuations were based on unrealistic returns”.

The FCA is suing Park First owner Toby Whittaker, director John Slater, Park First and numerous other connected firms, demanding the defendants repay a “just sum” to be distributed to victims.

The FCA has justified its lack of previous action, which allowed Park First to remain in control of the scheme’s assets, and its attempts to return the money to Park First investors, on the basis that if it had wound up the companies earlier, it might have made it less likely that investors got their money back.

Whether leaving Park First and its directors in overall charge of the money for another one-and-a-half years succeeded in increasing recoveries for investors remains to be seen.

In the original settlement in late 2017, the FCA secured a “promise” from Park First not to dispose of their assets, and ringfenced the sale proceeds of a car park at Luton Airport plus a further £1 million – £33m in total – to meet buyback payments for investors. This is the payment at the centre of the dispute above.

8 thoughts on “Park First investors push back against proposal to “wipe off £115m of debt”

  1. I’ve just come across this amazing well written post after being alerted of recent events in the evening standard paper.

    I purchased spaces on the Glasgow site via a marketing company. I’ve been speaking with solicitors at ClaimExperts.co.uk. They are mega clued up. Definitely recommend them. Plus safety in numbers etc.

    Hopefully one day soon I’ll be able to draw a line through this and move on. It’s great to see some progress being made by fellow investors especially potential action directly against the people at the top.

    Well done to the people behind this blog website too. Great work.

    Like

  2. A very good article with good details of what is effectively a very clever scam. The administrators are there as a result of PFs preference. Read into that what you will.
    I hope that Mr Whittaker and his crew are pursued to the end of the earth and that his lifestyle businesses are dragged into the pot.

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  3. I’m rather surprised Safe or Scam (which is a New Mexico-incorporated LLC, not an LLP) gets so much airtime. To the extent it’s helping people with claims, users need to understand that it seems to be operating illegally because it’s not authorised as a claims management company in the UK – do you want to give a chunky part of your claim to foreign criminals?

    Smith & Williamson may be Park First’s own choice of administrators, but I’ve never seen anything in their track record to suggest that the directors of an appointing company have been able to influence what they do. S&W are a large organisation and consequently neither need to take on rubbish clients nor are likely to be subject to undue influence (economic or otherwise) from them.

    All the foregoing sounds rather partisan, so I’m happy to confirm I’m not associated with any party in this matter in any way. Readers are of course free to do what they will, but I hope my reasonably informed £0.02 is of help to someone.

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  4. Thanks for the correction regarding the LLC status.

    If “airtime” refers to my coverage, Safe or Scam has been covered here because it was involved in the appointment of administrators to one unregulated investment (Carlauren) and has made a proposal to appoint alternative administrators to another (Park First), which has resulted in a lengthy adjournment and could have a significant impact on the course of the administration.

    This is a blog which covers news about unregulated investments. Those are significant events in the collapses of two unregulated investments which have been covered neutrally and factually. I didn’t cover these events because Safe or Scam bought me a beer.

    Whether their activities in the UK amount to claims management and are illegal is something I’m not going to comment on, because I don’t really care. The unregulated investments are what I focus on. If people want to use CMCs they should do their due diligence, and seriously consider whether they should use one at all, given there is often virtually no benefit in doing so. If the FOS or FSCS apply then people don’t need CMCs as the process is straightforward, and if the FOS and FSCS don’t apply they need an SRA-registered solicitor if they want to take the risk of throwing good money after bad.

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  5. I’ll reiterate that I would have liked to give S&W’s response to how SOS characterised their proposals for balance, but they didn’t want to give me a response, so there’s only so much I can do.

    The last public statement by S&W on the proposals was the one on 9th October which claimed that the £33m cash injection was contingent on the proposals being accepted (i.e. take £33m or risk getting nothing). A further update on the 11th simply reported the adjournment.

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  6. This article has been updated regarding the new lawsuit launched by the FCA against Parkfirst – scroll to “Update 17.10.19”.

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  7. They are all the same! Typical uneducated boys who are normally actually failed sales brokers at the larger alternative investment houses. They idolised there peers to which they have turned against them in jealously but try to replicate everything they have learnt from them and still they have not succeeded.

    Now they are just bitter but still completely brainwashed in there abilities and trying to chase some sort of success hence they all say the same thing in response and make the same threats.

    Its just laughable! Get a real job boys stop living off your bosses or actually try to achieve something yourselves

    Like

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