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Investors in a multi-million pound wind farm project are crying foul after the company running the scheme was put into administration and their money lost.
Members of a 100 strong investor group have revealed how many of them bought into the wind turbine investment scheme after receiving cold calls. The clients now stand to suffer substantial losses since its funds were ‘channelled to another source’.
Ruling at the High Court of Justice in Northern Ireland, Judge Burgess said Diamond Global Trading and Investments was unable to pay its debts, including over £3 million to investors, and there was no sign of the wind turbines which investors believed they were funding.
‘Notwithstanding clear assurances and representations in the prospectus in respect of the windfarms, later information showed that some of those, potentially a substantial number of those representations were not founded on fact,’ the judge said.
‘The end result is that no such windfarms have been built and yet the Company is unable to pay its debts. The funds therefore have seemingly been channelled to some other use or source,’ he said.
He appointed chartered accountants Grant Thornton to carry out the administration process.
The prospectus, seen by New Model Adviser® described its products as a ‘£3 million Mini-Bond offering a choice of 8.16% AER to 9% AER return over four years.’
The investor group claims 105 individuals are owed £3.2 million in investment funds and a further £1.2 million in unpaid coupon payments.
The group is for those who invested in the income bond but the prospectus also includes information on an accumulation bond which would pay a compounded rate of return of 41.15% over four years.
The prospectus is a Mini-Bonds Invitation Document and was created by Diamond Construction and Renewables, a subsidiary of Diamond Global Trading and Investments. The document carried a note stating the investment was for certified high net worth individuals or certified sophisticated investors only.
Series 1 bondholders invested in Diamond from January to March 2016 and Series 2 bondholders invested later in the year, May to June 2016. But when coupon payments began to falter in December that year, alarm bells began to ring for investors.
Tony Clarke, a retired construction company director who described himself as a ‘reasonably experienced but not sophisticated investor’ said he was cold called by an introducer who told him about the investment.
‘My experience holds good for about 90% of investors,’ he said. ‘I was cold called in January 2016 by an introducer firm.
‘They explained it was about windfarms, an area in which I have some experience, and I listened.
‘In the technical specifications of the turbines the numbers actually stacked up,’ he said.
Clarke contacted the security trustee and the solicitor for Diamond Construction and Renewables to check they were legitimate before deciding to invest £20,000.
From that point he dealt with Diamond Construction and Renewables head of investor relations, Iain Richardson, and directors, Paul Dougan and Liam Ward.
When Clarke questioned why he had been asked to pay the lump sum to Diamond Global Trading and Investments rather than Diamond Construction and Renewables he was told it was because the latter was a start-up company with no banking facilities.
The former was described to Clarke as a holding company for the whole Diamond group of companies.
Judge Burgess also noted there was unusual financial set-up for the Diamond group which shared a bank account with a subsidiary, Domicilium Limited.
‘The Company… had also issued at least one other prospectus in respect of an entirely different project, the development of property in Manchester by Domicilium Limited. Again, subscribers to that prospectus made payment to the Company but, in circumstances which the court finds difficult to understand, only one bank account was operated into which all funds from both subscriptions were lodged, and out of which payments were then made,’ he said.
Clarke said the first payments, due in June 2016, were delayed. At which point he spoke to the company and was told everything was going well with the wind farm project and three turbines were already up.
When the second coupon payment, due in December 2016, was delayed, Diamond Construction and Renewables said there had been a typo in the prospectus and it would be paid in January 2017.
After the second deadline was missed, the investor looked deeper into the background of the company- something he said he ‘should have done sooner.’
‘I looked at the planning application references for the three wind turbine sites and was horrified to find there were no valid planning consents for the wind farm sites.
‘For all three sites they were completely fettered by restrictions which meant none of them would get planning consent. That was all on file before the bond was launched,’ he said.
‘It was at that point I thought “oh Christ”‘.
Clarke threatened to sue Diamond Construction and Renewables for breach of contract but said he was informed by the directors that would be useless as the company had no assets. His money was with Diamond Global Trading and Investments. Clarke had no contract with Diamond Global Trading and Investments and therefore no course of action.
The second issue brought to Clarke’s attention by Diamond was the fact the companies were registered in Northern Ireland and as such, any investor attempting to sue them would have to do so there.
Clarke set up the investor group in May 2017 which now numbers 105 members. Individually, he and other investors have made complaints to Action Fraud about the scheme Clarke said there is now a civil action under way against Diamond Construction and Renewables and Diamond Global Trading and Investments.
Diamond Construction and Renewables director, Liam Ward, did not respond directly to questions from New Model Adviser® about whether there was planning consent for or work under way on the proposed wind turbines and whether the scheme had misled investors.
Members of the investor group have contributed a percentage of their investment to a fighting fund which is used to meet the legal fees for solicitors Edwards and Co.
One of the members of the investor group told New Model Adviser®, she had lost money she could not afford to lose.
She invested a divorce settlement pay-out of £50,000 because she said she ‘really needed to make the money work’ for her.
She invested in April 2016, received a pro rata coupon payment in June of that year, half of the next half-yearly payment in January 2017 and has received nothing since. She said the experience has taken its toll.
‘I am a single mum with my own business. I have lost £50,000 I didn’t have to lose. It has made me ill worrying about it. Having the voice of the investment group has been a god send for me,’ she said.
Seasoned private investors sometimes sniff at the idea of paying for advice, but there is a clear case in this story to show how a second opinion, indeed just a second pair of eyes, would have been worthwhile. And as with the latter case we mention, inexperienced investors can end up putting more at stake than they can afford.
This story is also reminder why there was so much support for a ban on investment cold calling. The government agreed to ban cold calling back in November 2016, at almost exactly the same time that Diamond’s wind farm scheme ran into problems. But it has taken almost two years for the ban to come into force and it was only in March this year that the required legislation entered into the machinery of state.
When it comes to explain how these schemes are still able to operate, hopefully the regulator will use a version of the well-known advert: should have gone to an adviser.