The liquidators of Weavering launched a civil case against Peterson and other Weavering staff last year after the UK’s Serious Fraud Office dropped its probe into the 2009 collapse.
The case centred on more than $600 million of interest rate swap agreements between the Weavering’s Macro fund and a British Virgin Islands company called Weavering Capital Fund (WCF), which was related to Weavering. In addition Weavering also inflated the NAV of various investments including a £50 investment MVM Limited, a music and video technology company which Peterson valued at $37.25 million, and an £810,000 investment in a firm called Lobo Gris valued at $4.47 million. Lobo Gris was owned by one of Peterson’s friends and was going to make a documentary about Adolf Hitler if he had survived World War II, but went into administration in 2010.
Throughout the case Peterson denied lying to investors. However, Madam Justice Proudman did not agree and said that Peterson, who represented himself throughout the case, may have committed the fraud “out of a sense of invincibility, self-belief, and a gambler’s mentality.”
The court concluded that the swaps were never intended to be enforceable instruments but were a “sham” used to manipulate net asset value (NAV) figures to give investors the impression that the Macro Fund was successful. WCF had made a number of investments at the end of 2008 to try and bolster its balance sheet in case questions were raised about its ability to honour swap agreements it entered into with the Macro fund.
Mrs Proudman said that Peterson, who represented himself throughout the case, may have committed the fraud “out of a sense of invincibility, self-belief, and a gambler’s mentality.”
Mrs Justice Proudman concluded that WFC had no possibility of meeting its liabilities. The swaps with WCF enabled Mr Peterson to present steady, consistent and ultimately bogus returns to investors – and, perhaps more controversially, to Weavering’s third-party auditors, administrators and brokers.
Three other directors at the fund firm – Edward Platt, Charanpreet Dabhia and Amanda Peterson – were also found guilty of negligently permitting fraud to happen.
Mr Peterson maintains he is innocent. “The judgment is simply wrong,” he said in a statement on Wednesday. “Even if this is just a civil case, the judgment shows a very limited understanding of the financial and trading aspects of the management of the fund. This, which is the central part of the case, has just been glossed over.”
Jones Day partner Barnaby Stueck, who represented the liquidators, said in a statement after the judgment that Weavering’s investors believed Peterson should not be allowed to escape with mere bankruptcy.
“They will be asking the Serious Fraud Office to reconsider its decision not to proceed with the criminal investigation given these very clear findings,” he said.
It remains to be seen if legal action will now be sought against Ernst & Young, Weavering’s auditor. PNC, Weavering’s administrator, is already the target of legal action in Ireland. The Irish High Court decision in WEAVERING MACRO FIXED INCOME FUND LIMITED (IN LIQUIDATION) v. PNC GLOBAL INVESTMENT SERVICING (EUROPE) LIMITED is available by following this link to BAILII
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