PwC Gibraltar: Reclaim Limited Liquidation

Edgar Lavarello and Charles Bottaro were appointed Joint Liquidator of Reclaim Limited on 31 March 2014.

Background

A number of companies including Reclaim Limited, Hyprafund Limited and Transpacific Insurance Corporation appear to be linked to Club Class Holidays Limited. Most of these companies appear to be based in Mijas in the Province of Málaga, Spain, but we understand that they have more recently been using offices and bank accounts in Tangier, Morocco.

Club Class Holidays, was a Gibraltar-registered company which operated from Spain, providing timeshare products and, through related companies such as Reclaim Limited, cashback incentives linked to timeshare or holiday club membership purchases.

In October 2002, Officers of the Royal Gibraltar Police’s Financial Crime Unit commenced an investigation into the possible commission in Gibraltar of alleged money laundering offences by Club Class Holidays and persons associated with that company. In January 2003 the police obtained search warrants authorising them to enter and search premises in Gibraltar occupied by Portland Services and Club Class Holidays as well as the residence of the membership manager of Club Class Holidays, in Gibraltar. A number of documents were removed from the premises and at the same time four persons were arrested on the charge of conspiracy to launder the proceeds of criminal conduct. In April 2003 the defendants filed for Judicial Review and claimed that the searches and arrests were unlawful and they sort compensation from the courts. The claim was upheld in the Supreme Court but overturned on Appeal, nevertheless, no charges were brought and the case was ultimately dropped, although the Royal Gibraltar Police were given leave to continue their investigation should they wish to do so. The case was finally referred to the Privy Council in the United Kingdom, which upheld the appeal decision and the police investigation has continued to this day but as three of the four persons originally arrested reside and work in Spain, the Royal Gibraltar Police was unable to take further action against them.

The fourth person has always been adamant that he had no knowledge of any incriminating evidence of money laundering and ceased working for the company at the end of May 2006. He has offered the Royal Gibraltar Police alleged evidence of criminal conduct by Club Class Holidays. He posted the alleged evidence on a website, www.scambusters.gb.com but the website has since been substantially revamped and the evidence no longer appears to be online.

One such example of alleged evidence posted on this website was a letter from Morgan Stanley Card Services Ltd in the UK dated 12 February 2006, which stated:

“After review of the contents of your letter of 11 December 2006, our Legal and Compliance Department confirmed that cardholders had been victims of fraudulent misrepresentation by Etoo. Consequently we have now settled Mr …’s claim, and all other Etoo claims.”

Etoo (European Timeshare Owners Organisation), like Reclaim Limited, is one of the many entities that form part of the Club Class group.

In November 2006 the Gibraltar Financial Services Commission also issued a warning with respect to Transpacific Insurance Corporation, which also claimed to have its head office at Suite 1 Garrison House, 3 Library Ramp, P.O. Box 847 Gibraltar, the same PO Box address as Reclaim Limited.

Portland Services Limited another related company appeared to conduct a variety of activities centred around company formation and management. They originally operated from Portland House in Gibraltar, but moved to La Línea in Spain after the police raid of 2003 and after they were denied a licence to carry on business as a company formation agent when this activity became licensable following a change in Gibraltar legislation.

In the case of Portland Services, the company has never been licensed by the Gibraltar Financial Services Commission to carry out company formation and management activities. Yet it appears to have allegedly been doing so without a licence as evidenced by the fact that they placed an advertisement in April 2009 of the ‘Sur in English’ newspaper offering precisely such services:

“We can organise a suitable structure which gives protection to the client and confidential banking without intrusive due diligence.”

Again they used a Gibraltar address, Suite 1, Garrison House, 3 Library Ramp, P.O. Box 847 Gibraltar to give the impression that they were operating from here when, in fact, all these activities were clearly undertaken outside Gibraltar. This advertising and promotion of unlicensed activities was brought to the attention of the Financial Services Commission, who  conducted an investigation with a view to taking appropriate measures. The action was initiated in May 2009 and the FSC issued a public warning regarding Portland Services Limited:

“a company incorporated in the Republic of the Seychelles, believed to be operating from offices in Spain, yet using a Gibraltar office address, PO Box, telephone and fax numbers as its only contact details”.

The FSC warned that whilst the website operated by this company gave visitors to the site the impression that it was a licensed Company Manager it was never authorised to conduct such business in Gibraltar.

Another company that used the P.O.Box 847 address was Hyprafund Limited although it was not a Gibraltar company and had no connection with Gibraltar. In October 2003 The Observer reported that Hyprafund is “supposedly a means of benefiting from a huge investment portfolio controlled by a firm called 'Hyprafund,' which within three years would pay back all the costs of the club membership plus a big profit." Other open-source news items indicate that Hyprafund may have been linked to suspected British / Lebanese fraudsters based in Tenerife. Hyprafund itself seems to have had some sort of base in Marbella in the past and one source links it to Reclaim Limited, alleging that the funds invested in Hyprafund were placed in “euro certificates” issued by Reclaim. Hyprafund appears to be registered in Belize but we have been unable to confirm this.

Somewhat ironically, the Club Class / Reclaim group were sued by their own lawyers in 2007. A petition for the winding up of Club Class Holidays was presented by Marrache & Co in November 2006 and was heard in February 2007. We understand that the petition arose from a claim by Marrache & Co that fees owed by their former client, Club Class Holidays, allegedly remained unpaid or, more accurately, remained in Marrache & Co’s client account on an indemnity basis pending completion / resolution of the original case. The hearing was adjourned to an unspecified date.

In November 2008 the FSC issued a further public warning regarding Suite1, Garrison House, 3 Library Ramp, Gibraltar the address used by the Club Class group. The FSC’s public warning followed repeated references to this address in advertisements on the internet. The FSC's investigations revealed that the majority of entities that claim to be at this address “are not incorporated in Gibraltar and often have no discernible presence in any other jurisdiction and may well be bogus. Their sole link to this address appears to be as recipients of a mail-forwarding service”. The FSC’s investigations indicated that there were several 'Suite 1s' at that location, but that the offices in question were on the second floor.

In addition to the above general public warning on all companies that are linked to this address, the FSC has issued, and continues to issue, specific warnings on any activities that appear to have a link to this address, however tenuous. One such example is a company by the name of Core Market Research, which had been selling shares in a company called Global Immune Technologies Inc, which purchasers allegedly never received. A website operated by Core Market Research only shows a contact form, with no contact details, however an investor was informed that the contact address was Suite 1, Garrison House, 3 Library Ramp, Gibraltar.

In the case of Core Market Research, as in so many other similar cases, the FSC yet again urged the public to exercise appropriate caution. An interesting development in the activities of companies linked to Suite 1, Garrison House, is that purchasers of shares were being asked to remit payments to a bank account in Tangier, Morocco, which in the apparent absence of bank accounts in Gibraltar or elsewhere in Europe is increasingly being used to receive customer funds.

Global Vacations is yet another company with links to the Club Class / Reclaim / Etoo group. According to an article on 30 January 2009 in the Daily Mirror, Global Vacations was raided by Spanish police. The Mirror reported that the company trades in Spain as Vacation Services SL and that sixteen British employees were “arrested on suspicion of fraud, including the company administrator Sandra Maynard.”

The article gave an insight into the tactics employed:

“One client - Janine Greaves, from Marlow, Bucks - paid Etoo nearly £2,000 last year to sell her timeshare. They told her they had a "corporate buyer" offering £19,000 and urged her to fly to Malaga to close the deal.

“Janine, who has twice beaten cancer, was reluctant to travel but Etoo insisted. There, a Global Vacations rep persuaded her - after a gruelling five-hour sales pitch - to spend another £2,000 on a deposit to join holiday network Club Class Concierge.

“She was offered £9,500 for her timeshare but only after three years on a "cashback" deal. As soon as she got back to the UK, Janine had second thoughts but Global Vacations then demanded the remaining £9,000.

“Eventually, after providing her medical history, she was told she could pay £3,000 for a cheaper membership. Since the raid, Janine has been told the company has "no objection" to her credit card firm giving her the refund.”

The Daily Mirror urged any readers with grievances about these firms to write to the European Consumer Centre, 54 Principe de Vergara, 28006, Madrid or email cec@consumo-inc.es.

The Financial Services Commission issued a further warning to the public in January 2011 regarding 'Reclaim Investment Bank, Gibraltar' and 'Cashback Investment Bank, Gibraltar'. Members of the public had reported to the FSC that they had been contacted by persons claiming to act on behalf of these 'banks' in Gibraltar, with 'Reclaim Investment Bank' purportedly operating from Garrison House, Library Ramp. The FSC warned the general public that 'Reclaim Investment Bank, Gibraltar' and 'Cashback Investment Bank, Gibraltar' are not regulated by the FSC, or licensed under the Financial Services (Banking) Act or any other supervisory Act to carry on deposit-taking or any other financial services business in or from within Gibraltar.

Searches of the Register of Companies at Companies House (Gibraltar) confirmed to the FSC that these entities are not incorporated as companies in Gibraltar or registered as business names under the Business Names Registration Act. The FSC urged the public to exercise appropriate caution in respect of these entities, or those using similar names, whilst it continues its investigations.

The public was also urged to verify whether a firm is licensed and regulated by the FSC by checking the ‘Regulated Entities’ pages of the regulator’s website, http://www.fsc.gi/fsclists/categorysearch.asp and to contact the Manager, Enforcement on +350 200 40283 or by e-mail to enforcement@fsc.gi if they were already involved in any dealings with the above-named entities.

In April 2011 the Office of Fair Trading (“OFT”) commenced civil enforcement proceedings in the High Court of England and Wales against Incentive Leisure Group Limited, Personal Travel Group Limited and Geo Demographic Market Research Limited (previously known as Direct Marketing Partnership Group Limited) amongst others. In the final order issued other parties were named by the English Court, including, Reclaim Limited and Designer Way Vacation Club, as well as several companies using the name Timelinx or ProTravel.

The OFT considered that Incentive Leisure Group Limited’s activities breached consumer protection laws but no further action was taken against this company as it had already been placed into liquidation.

Interim enforcement orders were obtained against Personal Travel Group Limited and Geo Demographic Market Research Limited as well as Keith Barker and Kimberley Bambroffe, two individuals who were directors of Personal Travel Group Limited and Incentive Leisure Group Limited. In addition final orders were made against Martin White, Jonathan Daniels, Mark Gales, Robert Knight and Lily Anderson.

The OFT considered that the defendants used unfair commercial practises to persuade consumers that the only way to sell their timeshare was to purchase their ‘product’ by falsely or misleadingly claiming that the consumer would be able to get the value of their timeshare back after 15 months by making a claim against a ‘reclaim certificate’. Consumers subsequently discover that the defendants have not taken over ownership of their timeshare, that they remain liable for the maintenance fees and that the reclaim certificate does not have the value claimed for it.

Reclaim Limited

Reclaim customers are promised some form of ‘cashback’ or repayment of part of their investment at the time that they purchase a timeshare. The claim process requires customers to make their claim 51 months after their investment and the form must be posted, or more accurately, postmarked, within a narrow window of ten days. It appears that most customers either forget to post it 51 months later or miss the window for posting. A small number apply successfully but many complain that they do not receive their cheques.

Customers of Reclaim do not appear to be defrauded per se, in the sense that what they are missing out on is a potential ‘cashback’ on monies paid, upon certain conditions being met within narrow parameters, and not a promised guaranteed return on an investment as such. Nevertheless the scheme generates many complaints from dissatisfied customers who feel that they have been misled or defrauded.

In December 2012 the Minister for Financial Services instructed the law firm of Hassans to file for the winding-up of Reclaim Limited on “public interest” grounds. The order was contested by Reclaim Limited. Malcolm Willis a director of Reclaim and Luis Fernandez of Law Abogados Patrimonial SL (“LAP”) filed affidavits claiming that Reclaim had now ceased trading and that the funds are no longer held by Reclaim but by LAP as the “Spanish trustees” of Reclaim. They claimed that as a result of the freezing order on the funds by the Gibraltar Courts they had been unable to pay the Reclaim certificates resulting in a multitude of complaints and for this reason Reclaim should not be placed into liquidation and the freezing order should be lifted.

After a two day trial the arguments put forward by Reclaim were rejected by the Gibraltar Courts which found that Reclaim should be wound up. Reclaim was eventually wound up on 31 March 2014 and Edgar Lavarello (PwC) and Charles Bottaro (formerly of PwC) were appointed Joint Liquidators.

Initially the directors appealed against the Supreme Court’s decision but this appeal has now been withdrawn. The Supreme Court Judge, in finding that the company ought to be put into liquidation, stopped short from declaring that the scheme was fraudulent but he did say that the way it was being operated in practice was tantamount to dishonest manipulation.  

The directors of Reclaim are Malcolm Willis and three corporate directors registered in the BVI. The statement of affairs provided by Malcolm Willis shows that the company has no assets and no liabilities and he explains that all of the funds have been transferred to LAP and accordingly Reclaim had ceased trading several months prior to it being placed into liquidation.

Luis Fernandez and LAP have some problem in understanding the Order of 31 March 2014 appointing the Joint Liquidators of Reclaim Limited and what this in fact means and, at present, refuse to accept the terms / consequences of our appointment as Liquidators. Hassans (representing the Liquidators) are in correspondence with LAP who have acknowledged that they hold certain funds but assert that such funds are held for the benefit of the successfully redeeming scheme participants, not Reclaim, but LAP, as noted, refuses to accept the authority of the Gibraltar Courts’ appointment of PwC as Liquidators and / or the implications of the same in LAP’s subsequent obligation to transfer all monies to the care of the Liquidators.

In the meantime we have written to Societe General, Tangiers (SG) where we believe the monies are retained. Preliminary investigations seemed to indicate that the assets held by SG could be in the region of €1.5million to €7.5million but that it is uncertain whether such funds are held in the name of Reclaim or in the name of LAP (or some other company related to LAP).

Since Reclaim has been placed into liquidation we have received a number of complaints from creditors informing us that they are being contacted by a number of other parties, including Victoria Marketing and Bordella Liquidators, claiming to be the liquidators of Reclaim Limited or acting on behalf of the liquidators of Reclaim limited.

These companies all have the very similar methods of operation. Initially they may invite you to a meeting or try to gain your trust by providing you with information and stating that they are here to help you and that you do not need to pay them any money. Once they think that they have earned your trust they will throw in a complication, like an administrative charge or a tax which has to be paid before your funds are released.

None of these companies act for or represent the Liquidators of Reclaim and you should accordingly refrain from dealing with them in any such capacity. If you have any concerns please contact us at the address provided as these companies have no intention of legitimately returning your monies so please do not pay them as they cannot help you in respect to any matters relating to Reclaim.

In recent weeks we have received many emails asking us when we are going to return your monies. This process may take some time and depends entirely on our ability, as Liquidators, to successfully gain access to, and control over, Reclaim’s monies / assets either directly through SG or through the instigation of Court action against Luis Fernandez and LAP to compel them to deliver Reclaim’s monies / assets to us as Liquidators. This process will likely take many months if, indeed, we are at all successful.

Update as at 18 March 2015

The Spanish press reported this week that 60 people had been arrested on the Costa del Sol in Spain by the Spanish Policia Nacional for running a major timeshare scam which has effected over 500 victims. The victims are in the main retired and elderly British citizens who had been promised substantial sums of money for selling their time share properties. Those arrested had posed as lawyers, tax advisors and accountants.

The scam had been in operation since 2009 and the Policia Nacional estimate that in the region of €5 million to €6 million was defrauded from unsuspecting victims every year.

Amongst those arrested in the police raid named "operación Tormenta" ("operation Storm") were the three alleged ring leaders two of whom have been remanded in custody and refused bail. None of them have yet been named. In addition there were many others who were employed as telephone operators and marketing and sales personnel who contacted the victims directly, as well as those who opened numerous bank accounts in their own names in order to be able to launder the money stolen so that it could not be traced. The police reported that the scam operated at three different levels: firstly victims were contacted and offered a very favourable price for the sale of their timeshare for which they had to pay an administrative charge or a fake notarial fee; secondly when the sale did not materialise, they were contacted by the fraudsters purporting to be lawyers offering them an opportunity to sue the time share company and recover their money, naturally there were legal fees to pay; and thirdly they were contacted by the fraudsters pretending to represent the Spanish courts claiming that they had recovered their money but that they had to pay court fees or taxes before the funds could be transferred to them.

So far around 500 victims have been identified but the Spanish police believe that the number of victims could be in the thousands.

The police operation was set up after numerous complains had been made by victims of the scam to the British police and Europol. The properties effected were spread throughout the Costa del Sol in places such as Mijas, Fuengirola and Marbella.

Those arrested are also British citizens but they were resident in Spain. The ring leader lived in Mijas where their offices were also situated. They operated through 11 different companies and the crimes they have been charged with include falsification of documents, money laundering and being members of a criminal organisation.  Those arrested had previous criminal records for similar crimes. The police say that the raid was a success and that they have frozen 78 bank accounts, repossessed 6 cars, 49 computers, a television, 6 mobile phones, a money counting machine and a telephone exchange. The total assets reposed are estimated to be valued in the region of €1 million.

Over 50 police officers took part in the raid.

Update as at 1 September 2015

Charles Bottaro resigned as liquidator and Colin Vaughan of PwC was appointed in his place.

As from this date the Joint Liquidators are Edgar Lavarello and Colin Vaughan.

Update as at 9 November 2016

On 16 May 2016 the Moroccan Court which heard our application to access information on the funds which may be deposited with SG, Tangiers decided that it did not have sufficient jurisdiction to make such a decision. This has been a major setback to the liquidation and has meant that there has been little progress in the last year. We have recently met with our legal advisors and we are currently considering other potential avenues to recover funds.

The complications that we have encountered and the reluctance of certain parties in complying with the Gibraltar Court Order which they view as a foreign Court and therefore having no jurisdiction over them shows how difficult it will be to make any recoveries in this liquidation. Investors need to be realistic and appreciate that the likelihood of any distribution in this liquidation is very slim, as in the vast majority of cases the monies were lost by creditors several years ago and it is likely that very little, if any of this money can now be recovered.


If you have been involved with Reclaim and you have a valid claim against any assets which remain unsettled, please complete and send us an original Proof of Debt form so that we can formally update our records.