Bahamas News

The property at the center of the Anna Nicole Smith controversy was handed over by the British Colonial Hilton’s developer as part of an agreement to settle allegations that he received a $3 million fraudulent preference from a failed offshore bank run by Prime Minister Perry Christie’s brother.

Ron Kelly handed the property over to BDO Mann Judd accountant Clifford Culmer, the court-appointed liquidator for Americas International Bank Corporation (AIBC), to strike an out of court settlement and avoid the expense of a Privy Council appeal.

Mr Culmer and his attorney, Callenders & Co’s senior litigation partner, Michael Scott, had won verdicts over the alleged fraudulent preference at both the Supreme court and Court of Appeal levels.

Mr Kelly had in February 2006 won leave to appeal the verdict to the Court of Appeal verdict to the Privy Council, but instead decided to settle and use his Horizons property on Eastern Road as part of the settlement.

Details of the settlement came to light last week, when Callenders & Co confirmed that it had acted for Mr Culmer in conveying Horizons to Ben Thompson, the businessman and ex-boyfriend of Ms Nicole Smith, who is alleging that the property is not hers because she never obtained a mortgage to finance its purchase. In denying conflict of interest allegations, Callenders & Co had said: As to the position regarding conflict of interest, we acted for the vendors Kelly/Culmer/Thompson (Mr George Clifford Culmer was a liquidator involved in the transaction) with the knowledge and approval of both the vendors and the purchaser. It was only at the eleventh hour that the decision was made to put tittle in the name of Ms Marshall subject to financing.

The Court of Appeal had found that the $3 million paid by Americas International bank Corporation (AIBC) to a company controlled by Mr Kelly, the man who acquired both the British Colonial Hilton and South Ocean Golf & Beach Resort through his RHK Capital vehicle, was made just weeks before the bank was placed in voluntary liquidation.

Justices Dame Joan Sawyer Justice Ganpatsingh and Justice Ibrahim upheld the Supreme Court liquidator, BDO Mann Judd accountant Clifford Culmer, saying: This, in our view, was clearly a fraudulent preference made within three months of AIBC going into liquidation.

In there 13-page judgment, the Court of Appeal justices recorded that Mr Kelly became embroiled with AIBC in 2000 the year it began to experience financial difficulties.

Mr Kelly was approached to provide capital support, and ti was proposed that he take over the banks entire shareholding from existing shareholders, Goes Damian, Barry Dennison and Martin Berholz.

To show his seriousness and ability to pay, Mr Kelly arranged to deposit $3 million with AIBC to be held in escrow. He had already opened up a current account with AIBC, numbered 306900 on August 31, 2000.

To facilitate the purchase of AIBCs share capital, Mr Kelly in March 2001 arranged a #3 million loan to Techstar, a Panamanian-registered holding company he controlled, from a Panamanian bank, Banco Atlantico Panama (BAP).

AIBC was then to open an account with BAP into which the funds would be paid on fixed deposit. On Marc 19, 2001, BAP issued AIC with a certificate of deposit for the $3 million backdated to March 12, 2001, for a one-year term at 6.5 per cent interest.

The judgment recorded: The liquidator deposed that he was informed by [Gary] Christie, president of AIBC, that the funds for this fixed deposit were transferred by BAP to AIBCs account at the direction of [Mr Kelly]. There is no evidence to suggest whatsoever that BAP was aware of, or had notice, that these funds were being deposited for any special purpose.

In return for BAP granting banking facilities up to $3 million to AIBC or Techstar, in return AIBC irrevocably and unconditionally pledged and assigned to the Panamanian bank all of its rights and interest in the fixed deposit as security for its Techstar indebtedness. According to Mr Kelly’s attorney’s this agreement was governed by Panamanian law. The Justices found: We are of the opinion that had these funds on fixed deposit been subject to a primary trust in favor of Mr Damiano, Mr Denison and Mr Bernholz, AIBC could not have pledged, assigned or charged its right, title and interest in the fixed deposit as security for any obligation of itself, or for Techstar indebtedness to BAP.

The fact that AIBC was in a position to credit the appellants account with the equivalent sum of $3 million for value is certainly conclusive of the view that the funds on deposit with BAP were being treated by AIBC as part of its general assets. When the funds were credited to the business account of the appellant he became in law an unsecured creditor of AIBC…..

When no approval came from the Central Bank, Mr Christie instructed BAP to transfer the loan monies held by BAP in Panama to Mr Kelly’s company Techstar.

The Court of Appeal found that on both occasions – when the $3 million was credited to Mr Kelly’s business account, and when they were transferred following the failure to obtain Central Bank approval, he was an unsecured creditor of AIBC.

By establishing the business account, the appellant had voluntarily accepted the risk that AIBC might become insolvent and unable to discharge its obligations in full, the Court of Appeal ruled.

AIBCs shareholders resolved to place AIBC into voluntary liquidation on October 11, 2001, and under Section 72 of the Bankruptcy Act, a fraudulent preference is made if anyone unable to pay his debts transfers money to a creditor within three months before becoming bankrupt.

The court found that by September 4, 2001, the day Mr Kelly received the $3 million transfer, it was clear that AIBC was in financial difficulties and unable to pay its debts. Therefore, it was clearly a fraudulent preference.

By Neil Hartnell
Tribune Business Editor