Posted 30/06/2009 - 16:23 by HOPPER

Please see the attached document: Word format or PDF format


Good afternoon everyone.

This email is being sent to ALL DEPOSITORS on behalf of the HNW Committee of 9 – Adrienne Liebenberg, Hilde Bartlett, Peter Wakeham, Mira Davidovski, Steve Thomas, Dipika Shah, Alastair Lees, Nigel Smith & Gavin Brake. We operate with a publicly named committee of individuals, and all decisions are taken on a majority voting basis.
Thank you to those of you have granted either your General or Special Proxies to Gavin Brake on behalf of the HNW Committee – we very much appreciate your continued support. Thank you also to those who have chosen to support the HNW Group for the first time on this vote.
Following recent events three members of the Committee have now put forward their names for the Creditors Committee (Gavin Brake (under resolution iii), Peter Wakeham, Nigel Smith). We will use your support to seek the best possible representation on the Creditors Committee.
Please note that the HNW Group was established to represent the interests of larger depositors of KSFIOM (generally those over £50,000 who do not receive protection under the DCS). At the time of the SOA vote our average proxy value was approximately £350,000.
We apologise if the acronym HNW causes offense to some of you – it is an industry standard term and no offense was intended. In summary we are a group of depositors who have larger retail deposits with KSFIOM. We have significant financial, legal and business expertise among our group, and seek to represent the interests of larger depositors in KSFIOM.
Where possible we work with and support the DAG Strategy Team (DST), but if required we will pursue a different route if our Committee of nine judges this to be more appropriate. For example we have actively supported the DST nomination of Stuart Roberts to the Creditors Committee (in fact we the HNW Committee proposed the idea of a resolution appointing one HNW, one DAG, one insurer and one unsecured creditor to the Committee through a single resolution).
This email covers the following topics in more detail,
1. The Debate on PWC
2. The Debate on Appointing a Conflict Liquidator
3. DAG, DST and the HNW Group
4. The Proxy Process

  1. The Debate on PWC
    As previously communicated over the past several weeks, our overall position remains, on balance, to support PWC. It would appear that the DAG Strategy Team (DST) are coming to this same conclusion, although we understand that they have yet to finalise their decision. You may have seen the survey carried out last week on the DAG website – we have asked for a split of the results by size of investor (fearing that smaller depositors, with nothing to lose given their full protection under the DCS, have dominated the poll), but the DST have refused at this stage to provide this breakdown.
    In any event, the topic of PWC has been debated at some length at the HNW Committee. As several of you have asked for more detail in recent days, here are some of the key points which were debated,

- The liquidation must be run out of the IOM. If it is run out of the UK, by a UK based partner of any accounting firm, the UK tax authorities will tax the company as a UK company. This will be a massive problem and materially reduce our ability to recover our money. If there are three liquidators instead of two, then we understand that it will be necessary to have a majority from the IOM
- This means we are only left with the choice of firms with an IOM presence to be the liquidator. Frustrating we know, but the harsh reality of the situation. You can't just fly in a London partner and pretend he/she is "running" this from the IOM. However, everyone is connected on the IOM, again frustrating for us, but the business community is so small it is inevitable, and this cannot be changed in the short term. All the big four firms apart from Deloitte are conflicted (KPMG as auditors of KSFIOM and administering the DCS and E&Y through their role in the administration of KSF London).
- There are concerns on the HNW Committee about a second tier firm running this process – do they really have the expertise, manpower etcetera for what is quite a large financial liquidation?
- If we change PWC for another firm, costs will increase, and only those > £50k pay for this in terms of reduced returns
- We agree mistakes have been made by PWC and like you we are angered by this. One clear example would be the “£180m accounting error” in the SOA documentation. It relates to the accounting treatment of a share repo. Luckily this was only made in an historic balance sheet (re)statement, and not in the calculation of expected returns, which is the important bit (i.e. they messed up a statement of the historic balance sheet as of 9 Oct 2008 but we understand did not make the same mistake on estimating how much pence in the pound we are due to get, which is the critical thing). But there are other mistakes too

On balance, the HNW Committee decided to stick with what we know. A tough decision, but one we feel is right.

In our view, this liquidation has both “extremes”. On the one hand, the bulk of the liquidation is quite simple - running down a loan book and administering payouts to depositors. Less straightforward will be the relationship with KSF London, but again this will follow strict UK practice and PWC as a firm have the necessary expertise & “weight” to deal with E&Y.

On the other hand there are some very tough/uncomfortable decisions to be made on such things as whether to sue the directors, sue the FSC etc. Concerns have been expressed on numerous occasions about whether Mike Simpsom alone will push for these, given the clubby nature of the IOM business community. The HNW Committee take comfort from Peter Spratt's involvement as Joint Liquidator. Several of us have met him in person and Gavin has spent quite a bit of time talking to him one to one over the past weeks since the SOA vote. We understand he is Global Head of Restructuring in PWC - he spends lot of time in the US and Asia. Given there are 4 big accountancy firms globally, this means he should be one of the top 4 in his field on a global basis. He has given some comfort on these difficult issues & the level of his personal involvement here. It is also critical having him involved for the discussions with E&Y on the KSF London liquidation.

  1. The Debate on Appointing a Conflict Liquidator
    The Conflict Liquidator idea is interesting. We have been debating its pros and cons at some length this week on the HNW Committee, and several of the Committee have spent several hours on the phone over the past weekend with the DAG DST exploring this. It will cost more - the question is whether or not it brings additional benefits worthy of this cost. We understand that the DAG DST are still working through this with the accountancy firm who suggested this idea to them, and we are in close touch so that the HNW Committee can form a view as soon as the proposal is fleshed out in more detail.

  2. DAG, DST and the HNW Group
    There has been “debate” on the website this weekend which some of you may have seen. The nature of the DAG website is that, from time to time, differing opinions are aired online, for all to see. This has pros and cons. We won’t go on at length here but would like to state the following (i) the HNW Committee view has always been to support open debate and full disclosure (of people, processes, views etcetera), however uncomfortable (at times) this may be – in our combined experience we believe differences of opinion/alternative ideas generally lead to better decisions, (ii) we regard the HNW Group as a subset of the broader DAG – we are a group which was established to represent the interests of those depositors with large balances in KSFIOM. On many occasions we have strongly supported the actions of the DST, but on some occasions we have advocated and pursued a different route which suits the interests of those depositors who support us (iii) we have had and continue to have great respect for the individuals in the DST who have made significant personal sacrifices – as we have all learnt in our professional careers, you can respect someone for their contribution but at the same time disagree with their actions or viewpoint (iv) as perhaps 2 above demonstrates (regarding the Conflict Liquidator) there has always been and will be regular contact between the HNW Committee and DST – we aim to be supportive when we believe it is the right decision, as demonstrated by our idea to have a single resolution appointing both a DAG and a HNW person to the Creditors Committee.

  3. The Proxy Process
    On the proxy vote situation, we want to remind you of the key facts. You have the choice of either a General or a Special Proxy. The HNW Committee would strongly prefer you to give a General Proxy to Gavin Brake. Otherwise please consider a Special Proxy which supports our aims. Please only complete either a General or a Special Proxy – DO NOT COMPLETE BOTH.

For a General Proxy - Complete the form as follows “I [your full name] of [your address], a creditor of the Company, hereby appoint [Gavin Brake] to be my/our general proxy......” and please date and sign the form as indicated.

For a Special Proxy – Complete the form as follows “I [your full name] of [your address], a creditor of the Company, hereby appoint [Gavin Brake] to be my/our proxy......”. In the gap one quarter down the page, please insert FOR or AGAINST and specify the resolution (i, ii, iii). Then please date and sign the form as indicated. You can also add in your own specific instructions, and we would ask that you add language such as "In the event that resolution (iii) below is not passed, I/we support any additional resolution appointing Gavin Brake and/or Peter Wakeham and/or Nigel Smith to the Committee of Inspection".

Please send the ORIGINAL form (either General or Special) back to KSFIOM. The letter (on page 2) provides a postal address, an email address and a fax address. However, in ALL CASES you must provide, eventually, a hard copy by post with an original signature. We suggest you also send back your Proof of Debt form at the same time.

Please send a PHOTOCOPY/PDF of your General or Special Proxy to Adrienne Liebenberg (one of the founder members of the HNW Group and a HNW Committee Member). You can send this by email (adrienne(?)vasat [dot] co [dot] uk), by fax (+44 (0)20 8929 0875, or by post (email to request details). This is for administrative purposes only. This is so we know how many proxies we hold.

Remember the deadline is 12 noon Friday 3 July 2009. We strongly suggest you send back your Proof of Debt forms at the same time.
The key thing here is to use your vote. You may have received an email late last week from DST stating that unless you give your proxy to DAG your vote will be wasted. This is a ridiculous comment to make and in our view, such a dogmatic (and incorrect) statement reflects very poorly on those who sent it.

In our more balanced way we would advise the following,

  • If you have not applied to the DCS, you have a vote, so you must use it
  • The HNW Committee strongly advocate a General Proxy in the name of Gavin Brake, who will exercise these proxies on behalf of the HNW Committee
  • Otherwise a Special Proxy which allows you to tell us exactly how to exercise your vote. Gavin Brake is willing to act as your Special Proxy, but because you are dictating how to cast your vote on the day, the person appointed is merely acting as your agent and has no choice but to do exactly what you tell them to (e.g. you could write strict instructions such as, please vote in favour of any proposed resolution which appoints G Brake/S Roberts .... to the Creditors Committee", and/or "please vote in favour of any proposed resolution which appoints a conflict liquidator/third liquidator” etcetera)

In summary we want to say again that we are very grateful for the continued support we have received and as before we will keep you updated as soon as we have further news.

Sent by Gavin Brake, on behalf of the HNW Committee. For more information contact adrienne(?)vasat [dot] co [dot] uk
CVs of the HNW Committee of 9
Please find below the brief CVs of the 9 HNW Committee Members. As a brief reminder, and unlike the DAG, we fully disclose our names and backgrounds. We vote by simple majority on all Committee decisions. Given the legal expertise of several of our members, we generally do not need outside legal advice. We have strong political connections with the UK Shadow Cabinet. We have very senior level connections into PWC. We have a “working relationship” with the IOMT. We have visited Iceland to meet with their Finance Ministry and the Chairman of the Resolution Committee & Moratorium Supervisor of the parent company Kaupthing Hf. We have not yet sought funding from group members, although if we decide this would be beneficial in the future, we will seek to do so. We work with the DAG, where possible, but on our own if we judge it to be in the best interests of our supporters – the larger depositors in KSFIOM.
Hilde Bartlett - UK national, living in Hampshire. £2.6m deposited in KSFIOM, which is the majority of the proceeds on selling her business. Was aiming to retire. All private money, tax paid. Together with a business partner, over many years, Hilde built up an IT company to approximately £16m turnover. During that time Hilde won two "Women in Business Awards" in 1995 (presented by Richard Branson) and 1996 (presented by Kenneth Clarke when he was Chancellor). Hilde was a magistrate for over 8 years and sat on the bench at Aldershot. She currently lectures part time at Surrey University on Entrepreneurship and runs mentoring sessions with young, budding entrepreneurs. Hilde is totally committed to our cause and will put all her energy and skills into getting 100% of our money back.
Gavin Brake (Hopper) - Age 38. UK national, UK tax payer. Currently living in Devon in the UK. Degree from Cambridge University. Professional experience 1993 – 2005: Goldman Sachs, of which 1993 – 1997 Mergers & Acquisitions (in UK & US), 1997 – 2000 Equities (Capital Markets, Structured Trades, Derivatives, UK, Europe & Nordic Regions), 2000 – 2005 Financing Group (Managing Director 2004 and Joint Head of UK Financing Business for Goldman Sachs). Extensive financial and legal experience working with both corporate and Governments. 2005 – present: Devon (change of lifestyle). Owns two farms in Devon, one equestrian and one under development. Chairman of local Parish Council. Trustees of a 640 acre private estate. Also own & help run two limited companies, both of which represent family businesses.
Mira Davidovski - Independent Legal Consultant, (Legal Services industry) February 2008 — Present (1 year 4 months). Partner at Salans (Partnership; Law Practice industry), June 1992 — December 2007 (15 years 7 months). London 2001-2007; New York 2000-2001; Paris 1996-2000; Moscow 1994-1996. CIS & Russian Practice Group; Head of CIS & Russian Banking Practice Group 2002-2007; Chair of Global Legal Opinions Committee 2002-2006; Global Financial Institutions Practice Group facilitator 1998-2001; Client Team Head 2001-2007. Advice to multinational corporate clients, banks, and international financial institutions in finance, securities, telecommunications, media, pharmaceuticals, luxury goods, and natural resource sectors in Russia and the CIS. Education - University of Maryland School of Law, J.D., Law, 1982 — 1985. Activities and Societies: Joseph Bernstein Prize (for publication); Moot Court Board 1983-1985; Jessup International Moot Court Competition, Best Brief Award (Mid-Atlantic Region) 1984-1985; Maryland Journal of International Law & Trade, Articles Editor. Harvard University , A.B. cum laude, Government, 1977 — 1981
Alistair Lees (BC) - Retired Barrister, Barbados. Lives in Barbados where his full time job is bringing up his twin daughters who are 3. Hold with partner 440,000 GBP in KSFIOM/previously Derbyshire IOM for last 8 years. Trained as a barrister but worked for 16 years as an oil/energy trader, setting up trading/marketing teams in Europe, South America and the USA. Heavily involved in large mergers and acquisitions activity. Down shifted in 2005 to take a lead role in the charity SOS Children's Village (SOS Kinderdorf) with responsibility for the FIFA 2006 World Cup of which SOS was the official charity. Previously one of the founders of the Shareholders United (now MUST) that fought and won the battle against BSkyB to take over Manchester United and fought and lost the Glazer family's similar takeover.
Adrienne Liebenberg (Liebenk) - Global Head of Products - the Linde group, based in UK. Have worked at Afrox / BOC / Linde (the Linde group) since 1996. BSc Engineering University of Witwatersrand, Johannesburg, South Africa. Post-graduate education at Chicago Business School, Wits Business School and Oxford Said. Acting on behalf of her parents who are retired and have their life savings in Kaupthing. Her parents are large retail depositors. Adrienne and Alastair Lees set up the HNW group in February.
Nigel Smith (Frog) - Age, 47. Occupation: Chief Marketing Officer of Hi-Tech European company of 3,800 people (for last 2 years). Qualifications: MSC Software Engineering, BSc Computer Science. Based in Surrey UK. Have experience in large value sales negotiations and has also actively participated in the DAG even prior to its founding and has $600,000 at risk in the bank. Nigel is the questioner in the regular calls with Mike Simpson, LP of the bank and the summaries of the calls can be seen in his blog.
Stephen Thomas (expat) - Qualifications BA Architecture (Oxon) Oxford School of Architecture. Politics, Philosophy and Economics BA (Oxon). Professional 2007-present Director, Hot Data, Project Strategies. 2005-2007 Head of Moscow City Project. 2002-2005 General Director Davis Langdon, Russia. 2001-2002 Project Manager, Samsung Corporation, Russia. 1999-2001 Director, HOK, Moscow Russia. 1995-1999 Director, Hot Data Project Strategies. 1984-1995 Director, Beaton-Thomas Partnership, UK. 1977-1984Regional Manager, Scott, Brownrigg and Turner Middle East.
Dipika Shah - A large private depositor, but her background is as follows: Qualified chartered accountant and been involved in M&A since 1995, previously with Kleinwort Benson (now known as Dresdner Bank) and more recently (2000-2008) with Merrill Lynch (now part of Bank of America). Previously a Director at Merrill Lynch, leaving the firm in early 2008 to work in a related financial role.
Peter Wakeham – Retired. Most recently, late developer entrepreneur. In 1989 founded WILink (now PrecisionIR) a leading investor relations and communications firm, listed on AIM in 2000 and then sold to USA based Private Equity Fund in 2006. At its peak WILink had 4,200 corporate and mutual fund clients across 14 countries in Europe and North America. Formerly blue chip multinational executive. Senior international marketing and general management positions in UK, Sweden, Japan and USA with Mars Inc and PepsiCo Inc. Management consultancy with McKinsey & Company and self employed, working for clients in UK, Denmark, Sweden, Australia and Middle East. Founder member of buy-out team which acquired Bricom, a business services conglomerate, from British and Commonwealth Holdings Plc in 1987. Divisional Director, Business Services Europe for BET Plc until its acquisition by Rentokil-Initial Plc in 1996, after which full-time role with his own company WILink.

[ng: edited for privacy on request of liebenk

Your rating: None Average: 2.9 (11 votes)