My letter to IOM ministers (Action 07/02/09)

Posted 10/02/2009 - 11:54 by tonycBrisbaneOz

Dear X,

I had entrusted my life savings, a substantial six figure sum, to Kaupthing Singer Friedlander IOM, a bank in your jurisdiction regulated by the Financial Services Commission. I have been badly let down. So far I have patiently waited for four months for a disappointing proposal for an inadequate Scheme of Arrangement that would return nowhere near to 100% of what is owed to me and take years to do it. Does the Isle of Man intend to stand out as one of the very few jurisdictions that have failed to ensure that 100% of depositors funds are secured? These days news of such a failure will spread everywhere in a matter of days. How can other depositors (including Isle of Man residents, and voters) be sure of the security of their savings?

There is a way to avoid this fate. On the 19th February the IOM Courts will decide whether to place KSF IOM in liquidation or allow a vote on a Scheme of Arrangement with the creditors. There remains a small window of opportunity for the IOM Government to avoid being one of the only jurisdictions that failed to ensure 100% of savers deposits are secured. This is no time to be standing out from the crowd in such a dramatically negative way.

A solution is available to the IOM Government, who after all did accept full responsibility for their depositors at the Treasury Select Committee Meeting 3rd of February in London. It will require political will from the IOM Government and compromise on the part of the larger depositors in KSF IOM.

1.IOM Government must effectively nationalise KSF IOM taking the KSFIOM Loan Book on at value.
2.Large depositors to accept a freeze on their deposits for 2 years.
3.IOM Government to run the bank loan book down and pursue the claim for the KSFIOM deposits in KSFUK.

This solution will:

a. Enable the IOM Government to demonstrate that it is a jurisdiction that is secure for retail depositors.
b. Give time for both the loan book to be realised and a negotiations over dividend from KSF UK and if necessary for a loan from the UK Government to be arranged and possible compensation from the FSA for mis-representation and poor regulation.
c. Allow depositors to receive 100% of their capital back but with a time delay to facilitate b above.

It is widely believed that the FSA and FSC colluded in the transfer of approximately 550m pounds from KSF IOM to KSF UK where it was subsequently seized. As the government likes to boast about its transparency why don't you release the correspondence between the FSC and FSA relating to KSFIOM and put this rumor to bed? So far it has been necessary for the Depositors Action Group to take legal action to obtain this information. Is the much vaunted boast about transparency just that, a boast?

I note that during the discussion of Freedom of Information legislation that the Chief Minister asserted that the new legislation wasn't in fact needed to give out information the public had the right to see, adding: 'As far as I'm concerned my administration has been open as any, if not more open.' Another boast?

If KSFIOM goes into liquidation then not only will the IOM's reputation be forever sullied beyond recovery it will open a Pandora's box of litigation against numerous parties both in the IOM and the UK. Surely, both the cost of the loss of reputation and the litigation costs will far outweigh even the worse case scenario of an IOM nationalisation of KSF IOM would they not?

On the government's website it is stated that “The Isle of Man Government (the Government) is committed to protecting the interests of the depositors, the creditors and the reputation of the Island in the difficulties being experienced with Kaupthing Singer & Friedlander (Isle of Man) Limited (KSFIOM). By our actions we are demonstrating that the Island is a responsible International Finance Centre and we take this matter seriously.” I urge you to demonstrate that this is not just another boast by ensuring depositors get 100% of what they are owed.

This is the last chance for the IOM Government to not to stand out from the crowd.

Yours faithfully,

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