BDOgate: Pressure mounts for BDO to resign as administrators

Investors in the Connaught Income Fund Series 1 were not impressed by the lengthy and self-serving statement read out to them at the meeting in Birmingham on 13 August. BDO pointedly declined to attend the meeting in person.

BDO as administrators of Tiuta International could have answered investors’ questions about where money invested in the Fund had disappeared.

Investors are fearful that monies misappropriated by Tiuta International have been misused to:

(a)  lend approximately £5.9 million to a brother of a director of Tiuta and may be difficult to recover;

(b) buy a property in the West End of London which Connaught declined to confirm or deny;

(c)  pay “interest” on the fictitious loans which appeared in the books of the Fund and that therefore the Fund is indeed nothing more than a Ponzi scheme;

(d) pay Tiuta’s outgoings such as salaries, bonuses and pension contributions, suppliers such as White Dragon, etc;

(e)  repay part of the RBS loan to Tiuta.

Duff and Phelps indicated that BDO had not been helpful in providing information about the misappropriation of cash by Tiuta. We suggest that BDO has apparently neglected to recognise that approximately 90 per cent of the monies owed by Tiuta International are owed to the Fund and that it should therefore respect legitimate requests from Duff & Phelps. At present, it is wholly unclear whether the worst fears of investors are indeed correct. Investors at the meeting expressed the view that they want an independent and untainted party (not BDO) to present a clear picture about the current assets of the Fund and an account of where and how money has disappeared at Tiuta International.  

Some anger was expressed at the meeting that BDO had appointed Connaught to manage the Tiuta mortgage portfolio. Investors expressed no confidence in Connaught. Investors stated that it seemed too cosy that Connaught had appointed BDO and then BDO had appointed Connaught to its role. It was alleged that BDO had failed to exercise professional judgment in engaging a party widely held to be at fault. We cannot possibly comment on how Connaught was selected and whether any other party could have done a better job for less money.

Many investors are hoping that BDO can be persuaded voluntarily to step down as administrators of Tiuta International. It is clear from the meeting held near Birmingham that BDO did not have the confidence of investors who spoke at the meeting. Some investors are inclined to believe that BDO is party to a cover up over the state of its knowledge about the recycled loans and the insolvency of Tiuta in January 2011. This is a matter of particular importance to persons who had invested in the Fund after January 2011.  It is thought by some investors that BDO should have blown the whistle on the recycling fraud and wrongful/fraudulent trading at Tiuta. BDO, we suggest that you need to investigate the allegations about the events of January 2011 and specifically address them. Ultimately, BDO, we would like you to stand aside. The Action Group would like the same firm of independent insolvency practitioners to deal with the Fund, Tiuta International and Connaught if at all possible as the enterprises were mutually dependent on investors’ cash. May be Connaught can be persuaded to transfer ownership of Tiuta International to the Fund.