Investment company misused more than €56m of clients' funds, report finds

The High Court has appointed a liquidator to investment fund management company Custom House Capital Ltd after two Central Bank inspectors found "a systemic and deliberate misuse" by CHC of more than €56m of their client's assets and cash.

In their report the inspectors said this misuse of client's assets was deliberately disguised by CHC through the use of false accounting entries and the issue of false and misleading statements to clients.

CHC, they added "deliberately adopted and pursued processes, policies and procedures that facilitated misconduct."

The Central Bank sought the appointment of the Inspectors, Noel Thompson and George Treacy, last July to conduct an investigation into the affairs of the firm and assess its financial position, as there were significant concerns about the operation of the firm which has an estimated 1,400 clients.

Today the High Court made an order allowing for the publication of the inspector's report

Mr Justice Gerard Hogan, whose said the report described "a sort of an Irish ponzi scheme" ordered that copies of the report be furnished to the Minister for Justice Alan Shatter, the Director of Public Prosecutions, The Director of Corporate Enforcement and the Gardai.

The Judge also, following an application by David Barniville SC for the Central Bank confirmed the appointment of Kieran Wallace, Chartered Accountant, of KPMG, as liquidator to act as administrator of Custom House Capital Limited. His appointment was sought as the firm has been found to be insolvent and unable to pay its debts.

Counsel said the appointment of a liquidator was being sought in order to protect the immediate and ongoing interests of CHC's cleints.

In their report the inspectors said CHC's board of directors and senior management "failed in their duties to clients and allowed the company operate with inadequate controls over a significant period of time."

The inspectors said CHC board's significant failures include a lack of ethical and responsible decision making, the provision of false and misleading information to the Central Bank, misrepresented client holdings on client statements, disregarded the clients interests whose trust was placed in CHC, and a failure to maintain appropriate standards of corporate governance.

There was, the inspectors added, inadequate control at board level of all business operations of CHC.

In a statement following publication the Central Bank said its key priority is to ensure that the position of client investments is established and it has agreed with the Liquidator that the assessment of client investments is concluded as a matter of urgency.

Clients of CHC will be contacted directly by the liquidator to advise them of the process in relation to their investments. Mr Wallace will undertake a full assessment of the firm to establish the current position of clients’ investments and funds.

Clients will also be contacted by the Investor Compensation Company (ICCL) by 4th November to invite clients to claim compensation under the Investor Compensation Scheme.

Investments that are covered by the Investor Compensation Scheme may be eligible for up to 90% of any amount lost, up to a maximum of €20,000.