Cook in soup as global broking empire crashes to earth
14 March 2015
Australian businessman Bryan Leonard Cook is in a lot of trouble. The 59-year-old has been held in a German jail since June last year while authorities there investigate him and his globe-spanning financial services empire, the London Capital group, for serious fraud and market manipulation, allegedly involving more than a dozen companies.Meanwhile, in a Canadian court, London Capital is accused of involvement in an alleged exotic financial scam, Virgin Gold Mining Corporation (VGMC), which is said to have taken about $US2 billion ($2.6bn) from investors in Asia who were enticed by lavish events and promises of extravagant returns.
A former Sydney accountant who until his arrest last year lived in the Swiss ski resort town of Engelberg, Cook is the chairman of London Capital group, which takes in companies in Britain, Hong Kong, New Zealand and the Seychelles.
Suing him in Canada is David Mapley, who as a director of hedge fund Basis Capital helped take on Goldman Sachs in a $US1bn lawsuit over toxic Timberwolf securities, which was described within the Wall Street giant as “one shitty deal” (the lawsuit remains before the New York Supreme Court).
Mapley alleges investors in VGMC were tipped into a Canadian company, Asia Pacific Gold Mining Investments (APGMI), but only after being charged hundreds of dollars in “due diligence” and “share transfer” fees in a process that for some seems to have involved a trip all the way to London for a face-to-face “know your customer” session.
He also accuses Cook’s sister, Julie Cook, and fellow Australian citizen Thomas Ungchun Yi of complicity in the APGMI fraud.
The allegations against Cook highlight the difficulties faced by regulators, including the Australian Investments & Securities Commission, when dealing with businesses that use the internet to operate across borders from secret jurisdictions, and demonstrate loopholes in New Zealand company law that seemingly make “the land of the long white cloud” an undercover tax haven. Lawyer Julie Crengle, who represents the NZ arm of the London Capital group, Asia Finance Corporation, also known as London Capital NZ, said Cook “maintains his innocence of any wrongdoing”.
“Both Julie Cook and Thomas Yi categorically deny the allegations of wrongdoing made against them by Mr Mapley and others, whether relating to APGMI, Virgin Gold Mining Corporation or otherwise,” she said.
“Neither they, nor APGMI, LCA (London Capital) or other parties named by Mr Mapley, will, in light of the ongoing proceedings in Canada, engage in debate in the media over those allegations.” How it came to this is a tale that takes in locations from the luxurious (the russet-carpeted ballrooms of Singaporean casino Marina Bay Sands) through the grim (a prison cell in Stuttgart) to the utterly prosaic ( an office tower above a Travelodge in New Zealand’s capital, Wellington).
By all accounts the gala dinner VGMC put on for shareholders at the Marina Bay Sands in December 2012, two years after the company started offering “convertible preference shares” to investors, was a glittering affair.
Video uploaded to YouTube to spruik VGMC shows performers in Venetian masks, hundreds of attendees and an address by the evening wear-clad chief executive and chairman of one of its spin-offs, Roland Hurni-Gosman, who assured shareholders “strict discipline” would be applied to the management of their money in the proposed venture.
Also present, photographed standing alongside Hurni-Gosman beneath a VGMC banner, were English solicitor David Orchard and his son Chris Orchard, who are the president and chief executive of corporate consultancy William Grosvenor & Partners, based in central London’s ritzy Mayfair area.
The dinner was not the only flashy event put on by VGMC. Other promotional videos show events in The Philippines, mainland China and Indonesia — the latter including performances by pop star Ruth Sahanaya and Indonesian Idol judge Titi DJ.
Shareholders also visited a Bali beach resort and the company’s “Premier Office” on the 25th floor of the Jumeirah Emirates Towers in Dubai, which boasted a tank full of tropical fish and the giant glowing letters “VG” carved into the ceiling above the reception desk.
Company announcements show a three-day trip to Dubai, flying business class, was offered to any investor who pumped more than $US110,000 into VGMC “within the month of July 2011”.
Big investors were also offered free gold ingots and coins if they bought enough VGMC “convertible preference shares”.
They were also given bonus shares for introducing new investors — 10 per cent of the sponsored shareholder’s holdings, according to a VGMC presentation.
The company promised vast returns in the form of monthly dividends, which were paid in ounces of gold — or at least entries in investors’ online accounts.
Investors were told that if they ploughed their dividends back into VGMC they would “compound their wealth” by “10 times your initial investment within two years on the most basic assumption”.
“Dividend came to an average of 147 per cent for every VG Convertible Preferred share in 2010,” chief executive “Johann Hansen” said in a January 2, 2011 announcement.
“Though this is an incredible return by any definition, it is not something unheard of, as new and upcoming natural resources companies record growth of more than 1000 per cent annually during their prime years.” And investors were also told VGMC would eventually unlock their investment by listing on a stock exchange somewhere in the world. It’s not clear how many investors piled into VGMC, but by the end of 2012 it boasted that “the global shareholder base now exceeds 150,000 in over one hundred countries”.
The Weekend Australian has been unable to locate any of VGMC’s purported executives.
But Mapley said investors he had spoken to estimate about $US2bn was pumped into VGMC.
“Some of the APGMI investors based in Singapore told me there were in excess of 14,000 investors in VGMC in Singapore alone,” he said.
It’s clear some were nervous as early as March 2011. The company was being asked “time and time again” whether it could keep up the hefty dividend payments, but chief financial officer “Peter Nolinski” reassured investors that it could because of its “tax-free offshore jurisdiction”, Panama, its “lowest possible overheads” and its lack of borrowing.
The following month, Hansen said investors could “not now” visit VGMC’s “actively producing goldmines”.
“Reasons being that Virgin Gold has been working from an offshore jurisdiction for the past decade on the principal (sic) of strict privacy and confidentiality for all parties,” he said.
Pressure also came from the Panamanian authorities. In March 2012 the tax haven’s market regulator, the Superintendencia del Mercado de Valores, warned that VGMC was not authorised to raise funds from the general public.
By the end of 2012, there was a solution, announced by Hurni-Gosman from the stage at the Marina Bay gala dinner. Shareholders would be able to convert their stakes into shares in Asia Gold Mining Assets Corporation (AGMAC), registered in tax haven British Virgin Islands.
However, the BVI Financial Services Commission effectively put an end to the idea on May 27, 2013, when it warned AGMAC was publishing “false and misleading information” on its website and said the public should “exercise extreme caution” when dealing with the company.
Documents seen by The Weekend Australian show investors were offered another option: converting their stake into shares in Virgin Gold Resources, listed on secondary Dutch exchange GXG.
This represents the first sighting of Bryan Cook in connection with VGMC. He was a director of VG Resources and London Capital NZ was its listing adviser.
On October 6, 2012, a fortnight after VG Resources listed on GXG, Cook told the market he was “very pleased” to announce VG Resources would buy “joint venture and development rights in a number of present and future mining ventures” from VGMC.
But by June 2013 that plan too had gone wrong, with VG Resources saying the deal was not going ahead and distancing itself from VGMC by telling the market it “is not and has never been a company extension, spin-off or listing of Virgin Gold Mining Corporation of Panama”.
GXG eventually kicked VG Resources off the market in September last year. The third option presented to investors was to convert to shares in APGMI, again listed on the GXG with Julie Cook as an initial director, although she resigned shortly after the company floated in April 2013.
But this came at a price. At least some investors were asked to travel to London, to the offices of a company called Nauer Corporate Services, to complete “know your client” procedures. They were instructed to bring £360 ($700) to 17 Hill Street, Mayfair — the same office address the Orchards’ outfit, William Grosvenor & Partners, mentioned on its website (both have also used an address a few doors down at number 25).
The two companies share more than an address. British company documents show Nauer’s founding director and shareholder was Chris Orchard, who remains its sole shareholder.
Investors were also asked to cough up a share transfer administration fee of some $US500. It appears unhappy investors caused a ruckus in Mayfair’s genteel streets.
“We have recently experienced several instances of unprofessional and threatening behaviour towards our staff from a number of individuals and Nauer Corporate Services will not provide its services under such unacceptable conditions,” the company said in an announcement postponing “know your client” services until further notice.
Hosni-Gurman and the Orchards did not respond to emails.
Meanwhile, APGMI got a new board, apparently unconnected with London Capital or the Orchards: Mapley, former RAF officer and BAE executive Michael Cunningham and European businessman Philippe Cappelle. It also got an asset: 25 per cent of GP Resources, a company with which it has a joint venture agreement to develop a gold and graphite project in Ethiopia.
Mapley said he was invited on to the board in May last year by “street savvy commercial rogue” Bryan Cook, who he met after investing in another GXG-listed company, City Windmills, which is developing small windmills that sit on top of office or apartment towers.
“When I listed it and the company eventually moved up to the main quote (board) of GXG, I needed to appoint a corporate adviser and GXG introduced London Capital and Bryan Cook to City Windmills — he was based in Switzerland, as we were.
“Through my direct contact with many, many investors in APGMI, as identified through the share register and public research, it’s clear that most of the 860-odd investors in APGMI were initially induced into VGMC shares through heavy marketing in the Asian and Middle Eastern region.” Despite the new board, the London Capital group remained APGMI’s majority shareholder, holding more than 80 per cent of its shares, and controlled the company’s cash.
“London Capital — both Thomas Yi and Bryan Cook — were vehemently against APGMI having its own bank account and the financial requests to release capital were all managed through Julie Cook, who controlled any payments,” Mapley said.
According to Mapley, in the middle of last year London Capital asked the board to come to a meeting at an office on Bruton Street in Mayfair where each director was individually summoned before Julie Cook and Thomas Yi and told Bryan Cook was in jail in Germany.
Money started to dry up a few months later. “In about September, we’d already put down a £64,000 deposit on a drill rig that was going to be shipped out to Ethiopia — and all of a sudden the money stops,” he said.
In an affidavit filed with the Court of Queens Bench in New Brunswick, the tiny Canadian province where APGMI is registered, Julie Cook alleges Mapley and Cunningham personally bought another 26 per cent of GP Resources at a knock down price.
Mapley said this was true — but he offered the shares to London Capital both before and after buying them.
“London Capital seemed to run out of money for everything, which is why they couldn’t buy the GP Resources shares that we continually offered to them,” he said.
On December 30, the board called a shareholders’ meeting — in the Ethiopian capital Addis Ababa, to consider resolutions Julie Cook alleges would have effectively tipped London Capital out of APGMI.
But the Canadian court granted London Capital orders installing Yi on the board, and at a February 20 shareholders’ meeting — in New Brunswick, not Ethiopia — turned out Mapley, Cappelle and Cunningham, replacing them with London Capital employee Lydia Amanuel and Australian businessman Chris Eddy.
Mapley responded by telling the court that “APGMI was used as a ‘bait and switch’ for a previous major financial scam”, VGMC, alleging that London Capital NZ “fraudulently manipulated the GXG market by posting a false trading price of £2.33 per share on July 15, 2013, thus creating a paper value for APGMI of £233 million” — despite the company holding assets of less than $C1m.
He also alleges London Capital last year sold 18 million of its shares at £2 each through “aggressive share marketing programs”.
APGMI is one of more than a dozen companies associated with London Capital to be floated on GXG, although the friendship between bourse and broker appears over. Last month GXG terminated London Capital’s broker membership, citing “severe and extensive noncompliance” with market rules by companies it shepherded to a listing.
One of the GXG floats London Capital boasts about on its website is British-registered but Adelaide-based “diversified global asset company” Astra Resources, which ASIC last year took to the Federal Court for allegedly illegally raising more than $6.5m from 281 Australian investors (the case is awaiting judgment). Astra was kicked off GXG on June 6 last year for “repeated breaches against the reporting requirements” and failing to send share certificates to investors. Before being delisted it disclosed total assets of €17.6m, and yet somehow had a market capitalisation of a staggering €2.75bn.
Astra’s lawyer, Niren Raj, said London Capital was only engaged to convert paper shares to electronic shares and it was impossible for it or Bryan Cook to have manipulated the share price because “Astra would know” if that had happened.
A spokeswoman for German financial regulator BaFin, Dominika Kula, confirmed investigations into market manipulation claims against 14 companies associated with London Capital.
She referred inquiries about possible fraud at VGMC involving the Cooks or Yi to the Stuttgart public prosecutor and said BaFin investigations into APGMI, VGMC and Nauer Corporate Services were closed because they did not involve “financial instruments” and fell outside BaFin’s jurisdiction.
Kula said probes into City Windmills and AAIC Bullion Group were “closed as no evidence for market manipulation was found”.
But investigations into Cassona (listed on GXG), Waste4Power (listed on the Frankfurt exchange) and Rainpure Water (Frankfurt) were under way, she said.
And “tips on potential offences” involving four other German-listed companies — Gulf Projects, Sejong Investments, Alta Aerial, True Green LED and Klares Wasser (also known as GlobalM-Group) — have been forwarded to the prosecutor.
Responding in German to inquiries, Stuttgart prosecutor Claudia Krauth said Bryan Cook had been held in custody “since late June” after being arrested in Switzerland.
He is accused of conspiring with others, who Krauth said she was not authorised to name, to commit commercial fraud by sending email newsletters making aggressive stock recommendations that “massively influenced the share price of that stock, without pointing out that his principals were holding bigger positions in those shares and sold those shares in that period for a profit”.
“Furthermore there is a suspicion that while doing these buy recommendations and advertising these shares some incorrect statements were made.” Krauth declined to name any companies involved in the investigation, but The Weekend Australian can reveal that her office has been looking into the structure, management and corporate purpose of the London Capital group.
Mapley said London Capital’s activities in Europe were enabled by lax rules in New Zealand that allow financial service providers to operate without oversight, as long as they only offer their services outside the country.
Despite its friendly face, NZ has gained a reputation as a haven for the misuse of laxly regulated shell companies by organised crime and money laundering.
Under international pressure, NZ has been tightening some rules — for example, from May this year companies will need to have a resident director.
London Capital NZ, which operates out of an office in one of Wellington’s few towers, has no Kiwi directors — its directors are Australian academic Angus Hooke, who could not be reached, and a British resident, Andrew Macfarlane of Reading, who could not be located.
It is registered as a financial services provider, but a NZ Financial Markets Authority spokeswoman said this “does not give the FMA jurisdiction over activities taking place overseas”.
“It’s like a driving licence that says you can drive anywhere in the world other than my country,” Mapley said.
Back in Australia, ASIC records showing Cook’s former and current shareholdings and directorships stretch to a whopping 32 pages, involving more than 95 companies — most of which have been deregistered.
He is a director at London Capital Advisers Pty Ltd alongside Sydney accountant Paul Jones, who said he’d known Cook for about 15 years but did not know what he did for a living.
According to one of his corporate bios, Cook studied at UTS, Sydney, and Deakin University, Geelong, before becoming a certified practising accountant.
He claimed a string of senior executive roles, including “president of European operations for an ASX listed company”. For almost nine months now, his European operations have been confined to a German jail cell.Do you know more? email@example.com