Returns to creditors from litigation against associates of the business are often a lucrative way of getting funds into an administration after a corporate failure. Claims are often made against banks, lawyers and accountants associated with the failure. In some cases, those claims may involve chasing other parties for the proceeds of a fraud. Often these claims provide a greater return than chasing down any remaining assets.
The panelists in the “Swelling the insolvent estate” breakout session fleshed out some of the ways in which investigations supporting such claims are conducted in an international context. They discussed the balancing act struck in some jurisdictions between claims for privacy against the need for transparency in the event of fraudulent behaviour.
The session was chaired by Ian Mann (Harneys), with panelists Martin Kenny (Martin Kenney & Co.), Alex Moglia (Moglia Advisors) and Marie Rowbothan (PwC). Key practical observations and reminders made by the panel were:
- Securing information when an investigation commences (for example, by way of a forensic scan of hard drives and servers) can be critical. If not secured, it can be lost. When it comes to securing this information, “Day 1 of your appointment only happens once”. Get it while you can.
- There is a tendency in international investigations to demonise offshore jurisdictions as being secretive, and as not striking the right balance between privacy and transparency. Many of these jurisdictions sit in the common law legal tradition, where the Courts are willing to make Norwich Pharmacal orders enabling access to bank and other records in the case of a fraud. These orders, often coupled with confidentiality orders gagging those who receive them from revealing their existence, remain a valuable tool in identifying information on which to base a claim.
- It is a mistake to assume that it is more difficult to extract information in such jurisdictions than in many onshore jurisdictions.
- Despite the significant publicity about the Panama Papers, the information available in them when chasing assets is limited, and limited to a specific set of clients. They are often not enormously helpful.
- Notwithstanding the many technological tools available, and information on the internet, speaking to people within an organisation remains an important way of getting information. Its significance as an investigation tool should not be ignored.
The session was a good reminder to avoid making assumptions about the difficulties in extracting information from some jurisdictions, and not to ignore all of the information resources available to you when conducting an investigation into corporate failure.
