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Advisers_Report by wanghonghx

VIEWS: 21 PAGES: 6

									                                    Without Prejudice

Dear All,

Directors Responsibilities

We establish offshore companies for many clients and frequently use “Nominee Directors” for
many reasons, one of which is to establish the tax residence of a company under Double Tax
Agreements and International Law. Nominee Directors are no less responsible in law than anyone
else though they may have no greater requirement than to simply “be” tax resident somewhere.
As such, Nominee’s tend to take no active part in the running of companies other than to ensure
that accounts are kept, that board meetings are attended, that returns are appropriately
completed and filed and to ensure that their integrity cannot be compromised by allowing an
illegal activity to be undertaken. My enquiries were focused on establishing the extent to which
ECCM “acted” as a director of Capital One notwithstanding the self stated tax position of Mr Phill
Crane, the Treasurer, with the Australian Tax Office, and his ongoing problems with the Australian
Securities & Investment Commission.

I have now progressed with my enquiries into this matter at a meeting on Feb 24th with Mr David
Eley of Mentor Group and Capital One. Various issues were discussed, many of which are a
cause for concern and should be addressed by all investors. As such I have prepared this update
for my clients in the belief that it should clarify matters and have forwarded this to Peter Searle,
Phill Crane, Dave Eley and Dave Young for comment.

It should be of note that at the very first meeting that we had with Capital One and EC Trust, it
was stated by Peter Searle that Mr Crane was the Treasurer and ran the fund, that the Barkers
administered the fund and that EC Corporate Management held the shares beneficially for the
investors; a structure that we liked because the management could not do what they wished with
our clients monies without some independent scrutiny, or so we believed. This is a VERY
important safety net for us. Phill Crane was at that meeting and did not dispute this, nor has he
done so to my knowledge until recently. This meeting took place two years ago.

For the record, I have invested my clients’ monies in a licensed and regulated private investment
fund, the shares of which are held in trust for the investors and is audited independently by Moore
Stephens. This has been stated to me and many of my clients on many occasions by the
Treasurer Crane; I feel deeply uncomfortable that this arrangement might be changed without first
allowing my clients an opportunity to withdraw their investment.

Disclosure

I asked on what legal basis did the Treasurer Crane refuse to disclose information to Capital
One’s sole director EC Corporate management, as was the position after the resignation of the
Barkers and the removal of Mentor Group?

This question as yet remains unanswered. This is critical since it will demonstrate whether ECCM
are nominee directors or whether they actually run Capital One.

We have been dealing with Capital One for 2 years now and we know absolutely and beyond any
doubt that it is Phill Crane who runs, and has run, the Capital One Growth Fund over the period
and it is he who should explain fully to investors where their money has gone in direct contrast to
what is stated in the Managing Directors Report.

The report obviously highlights and confirms EC Corporate Managements’ concerns that there
have been many wrong doings within the fund which require further investigation, and it is of note
that the Trustees Supplementary report as yet remains unanswered by the management of
Capital One Ltd.

Authority to Act
I asked whether given the terms of the Power of Attorney given to Mr Crane, how could Mr Crane
possibly claim to Orion International that he knew of any investments owned by Capital One Ltd
that the Board of Directors did not?

This could only be possible if Crane actually ran the fund and ECCM was a Nominee Director.
The actual answer given is of the gravest concern. Eley disclosed that NO other investments exist
other than the IRM investments, and possibly “Jaracuma”.

Eley confirmed that the RC valuations are nothing more and never were anything other than a
figment of Cranes vivid imagination, that there is no basis for their calculation other than what
Crane stated from time to time and that there are no other viable investments other than the IRM
investments. There is the possibility that the Jaracuma investment may come good, but that won’t
be known until the end of February.

ECCM states that $24 million has been sent to accounts nominated by Crane, and that Crane has
declared returns to date totaling around $12 million (the Capital One complaint to LOFSA
confirms that the fund is valued at $36 million), but the entire investment in IRM totals less than
$5 million. We can only deduce from this that $29.2million of investors cash is either lost, missing
or remains unaccounted for by any independent third party, and that includes the recoverable
monies. (The Managing Directors Announcement states that US$1.8 million is recoverable from
Swift Securities and a collapsed US Bank). Since these investments have not been verified by
any independent body, it is entirely possible that they may well have been stolen, and this must
be investigated immediately by an independent third party or reported to the Police.

Verification

I enquired which external agencies have been involved so far in establishing the independent
valuations to which the managing director refers in his report?

Eley confirmed that no other outside agencies were involved.

Investigation

I asked for clarification whether since the Global Bullion Services (GBS) investment, to which the
managing Director refers in his report is now declared as a scam, had this matter been reported
to the Police?

Eley confirmed that the matter has not been reported to any police force, only to the regulators in
Vanuatu and I believe in Labuan, as well. This is not good enough. Clients’ monies are missing
and this requires a full investigation.

Secure One

Taken from the Managing Directors Announcement

“One of the most disturbing discoveries that we did make as part of our due diligence into Capital
One Limited and its directors, was that in May 2004 Peter Kent Searle and Neal Barker took steps
to disassociate the Secure One investors from Capital One Limited and any of its assets,
including all the oil and gas assets, which constituted the bulk of the Growth Fund assets.
Supposedly this step was taken to make the Audit easier for the benefit of ECCM and Barker, the
directors of Capital One Limited.”

Eley confirmed that the assets of Secure One will be combined with the assets of Capital one
even though the stated assets of Secure One have NOT been audited by any external auditor to
verify that they even exist. It would be extremely difficult to incorporate an un-audited fund into an
audited one, and still pass the audit.
I was not made aware of the existence of any Secure One Investments. I was informed that the
only viable investments were the IRM oil & gas investments, which I believe are owned by Capital
One Ltd, not Secure One.
The discussion painted a picture of a fund that has at best been badly run, and at worst,
potentially defrauded of millions of dollars; that no external body has yet been appointed or even
requested to investigate, and that the auditors are not being informed. It is my concern that
Secure One may have few if any investments at all, and that its incorporation into Capital One
may well dilute Growth Fund returns to our investors.

On behalf of my investors, I would like a full explanation as to where the missing $30million has
gone, all of it?

As investors, we hopefully should understand that not all investments are profitable; some lose
and some lose badly. This is acceptable. What is not acceptable is to simply do nothing when an
investment fails. If a genuine investment is bad, then there must be a full report to the board of
directors detailing what went wrong. If it is, or appears to be fraudulent, then this MUST be
reported to the Police for further investigation. It is imperative that this is done otherwise the
managers that we trust to manage our monies can be tainted with allegations of foul play. It
appears that the Treasurer Crane has refused to give this information to the directors. Even if the
shareholding is disputed, ECCM were clearly registered as a director of Capital One Ltd and the
Treasurer MUST answer to the directors on this matter. If he refuses to disclose where this
money has gone, then the directors should simply refer the matter to the Police. This is of
particular relevance since Crane visited our office last year suggesting fictitious and fraudulent
investment losses as a means of reducing Tax liabilities. Needless to say it was explained to him
that we would not entertain it and that the tax office were on the lookout for this practice; however
the concern here is “Has this occurred; are these fraudulent losses?”

This matter can only be satisfied by a full disclosure of all the relevant facts and documents to an
independent body. This is not the time to be seen to be trying to hide behind confidentiality laws!

I was particularly interested in Neil Barker.

Extract from the Managing Directors Announcement
“Soon after Mentor’s appointment, the previous Managing Director, Neal Barker and his and co-
director wife Margaret Barker resigned. Their resignation coincided with a run on the Growth
Fund assets involving them, their families and persons associated with them, which consumed
the Growth Funds entire liquid assets. The mass withdrawals from the Growth Fund by Barker,
their family and friends, were authorised by ECCM and the Barkers, as the directors of Capital
One Limited.”

I asked has Barker taken any monies that he is not absolutely entitled to from the Growth Fund?

Eley confirmed that Barker had NOT taken anything from the fund that was not in keeping with the
valuations posted on the RC by Crane, but that he, (Barker) was aware that they are only
provisional valuations and that he may have to pay some money back if the valuations come in
lower than stated.

Eley confirmed that there was no indication that Barker had committed fraud at Capital One.

Extract from the Managing Directors Announcement
“In addition to that, the bulk of the records of the business had apparently been either destroyed
or removed by the former Managing Director and/or his co-director Margaret Barker. Of particular
concern was the removal of all records concerning placements in GBS, which we all now know
was a scam and one that was brought to Capital One Limited by Neal Barker through his friend
and associate Keith Knight. This destruction of records has made the matter of arranging for
GBS compensations very difficult. It is of note that amongst the few records left behind, was a
post-it note sitting in an empty file that had written on it “scan to web and destroy”.

Extract from the Former Directors Report
All supposed destroyed or lost paperwork was actually sealed in a filing cabinet with the key being
given to Mr. Crane personally by the Manager of Beta Apartments in Labuan. If Mr. Young knows
what paperwork is missing then he can ask Mr. Crane to supply the contact person and he can
obtain a copy. If it is an investment or a contract then there should be no problem in obtaining
these copies……

”At no stage has Mentor ever bothered to contact us to reconcile outstanding investments or ask
for any clarification or ask about any past investments that we may know about.”

One wonders precisely what due diligence the current Directors have been doing, though it is now
clear that Crane is their associate and business partner?

I am astonished that the Managing Directors Report has no reference to Crane as a manager and
procurer of investments when his role thus far has been clear. The Power of Attorney details
precisely what Crane’s role is. It is apparent from the report that the current Directors, Young and
Eley appear intent on shielding Crane, the actual fund manager, from further scrutiny. Crane has
taken investors money and “invested” it, he knows where it has gone, and he knows the answers
now. As such I believe the Directors stated intention to carry out due diligence checks on the
assets of Capital One lacks sincerity and that the Managing Directors Announcement has been
written with the intent to deflect criticism and scrutiny from the individual who bears the greatest
responsibility; Phillip Gary Crane.

Extract from the Managing Directors Announcement
Another investment that was also of no realisable value was Sentinel Investments & Securities
Limited, which was another Labuan registered company established and paid for by Capital One
Limited to develop unique trading software. That company was again set up by ECCM (more
fees paid) and ECCM were a director of that Company as well (more fees again paid by Capital
One Limited). The software that was developed did not provide the necessary results under live
testing and the project was terminated. Again, ECCM was a director of Sentinel Investments &
Securities Limited and Capital One Limited at the same time and ECCM approved and allowed all
payments to be made.

Extract from the Former Directors Report
Sentinel Investments & Securities Limited is a company that was set up under the instructions of
Mr. Crane. Mr. Young as a representative of Mentor should know this as Mentor is on the Board
of Sentinel.

If this is true, then it would appear that Mr Young has been less than honest about is involvement
with these investments and companies to date. It appears that the current management have
been a bit economical with the truth.

It would be folly to appoint Protector Incorporated as investment adviser when there is absolutely
nothing in the public domain which will demonstrate that the principle characters behind this
company have had no involvement so far. Barkers report states that Young has taken an active
role for nearly three years now and his involvement is, and has been, far greater than he states in
his Managing Directors Announcement.

Extract from the Former Directors Report - “Mr. Young was introduced to the payroll of Capital
One by Mr. Crane in February 2002 as the International Business Co-coordinator (IBC) of the
Sovereign International Association (SIA).”

Beneficiaries and Interested Parties should be aware that to appoint an entity (Protector
Incorporated) with clear ties to the fund manager (Cruising Yacht Club of Labuan), as the
investment adviser to the trust is clearly a conflict of interest because the manager need never
account properly for his performance. If the assets were illegally taken and the manager was
involved, there would be no one to call them to account; the situation could persist until the fund
collapsed.

My advice to you is that it is not therefore in your best interest to appoint Protector Incorporated
as investment adviser to your trusts since this is a company controlled by the managers of the
investment fund who are unlikely to publicise financial irregularities or move investments from
their own fund, even if it were appropriate to do so.
We now appear to be in the position where:

1.      The Treasurer Crane refuses to disclose financial information to the company’s directors
when a possible 30 million dollars is lost or missing,
2.      We have an admission from the Director/Legal compliance that many of the company’s
        stated assets do not exist, but only AFTER this matter has been brought to our attention
        by the Trustee, ECCM
3.      That capital one has still not yet complied with the 2003 audit, and is unlikely to do so in
future,
4.      That investors in the un-audited and un-verified Secure One fund are about to be given
access to our clients investment monies.

Crane has lied to my clients in order to procure investment in that he has stated that Capital One
has submitted to 2 audits. For this we have witnesses.
The following chart was supplied to us as the actual investment make up. However, there is no
diversified investment split; Crane has lied to us about assets held and thus the risks associated
with the fund.




It is now clear that there has been inadequate disclosure, both to the directors and the auditors
thus far and that fees have been taken by past managers when non existent returns have been
declared. It is simply not acceptable that Mentor Group should sign an “unbreakable” 5 ½ year
management agreement on this performance, when in reality it is now debatable whether anyone
is, or ever was, actually entitled to deduct any fees at all.

To date we have tolerated Cranes secrecy about his investment strategy but we have only done
this on the basis that Crane HAD to answer to the directors AND to a reputable external auditor,
Moore Stephens. This is clearly not the case and we have been misled, possibly even conned.
We have yet to receive any information that would confirm that we have not been robbed, and yet
more than 400 Independent Parties have now endorsed the current management of Capital One
on the basis of a Managing Directors report which is clearly misleading and a gross distortion of
the facts; the same individuals who are now proposing themselves as investment advisers to their
Trusts.
IP’s should be made aware that the only reason that we are aware of these wrong doings in the
first instance is because of the willingness of EC Corporate Management to bring these matters to
light and suffer the adverse publicity that this will undoubtedly cause. It would undoubtedly have
been easier to allow these trusts and the fund to be transferred quietly and with the minimum of
fuss.

It is absolutely imperative that the shares are not transferred from ECCM until such time as my
clients have been granted an opportunity to withdraw their investments from this fund.

At the end of the meeting I was asked to keep this information in confidence. Confidentiality
cannot be kept when doing so could potentially allow a serious crime to perpetuate, and sufficient
information has been made available to me which leads me to believe that this may well be the
case with Capital One Ltd.

I am now also advising you to vote to have the disputed shareholding remain firmly in trust at
ECCM, and that ECCM remain as a director for the foreseeable future. It is also my belief that the
directors should consider instigating a police investigation into possible financial irregularities in
the management of the Capital One Growth Fund to ascertain that fraud has not taken place
internally.

This is my opinion and does not necessarily reflect the views of Orion International Ltd.

If you wish to discuss this further, please do not hesitate to contact me

I will leave you with this:

Extract from the Managing Directors Announcement
“The simple reality is that the Growth Fund was a Fund with assets placed in a range of non-
traditional and diversified investments. The actual success of any one investment is not critical to
the success of the Growth Fund, so long as other investments that were made created sufficient
growth to realise the necessary returns required by the Growth Fund. With the assets that are in
the Growth Fund, comprising mainly oil and gas assets, private placements and real property
interests, so long as those assets remain funded, they will realise sufficient growth to satisfy the
required returns of the Growth Fund and most likely a greater return than that allowed for.”

As we now know those private placements and real property interests do not exist; it is simply not
acceptable to state that $5 million of investment will realise $40-100 million in returns and
therefore everything is alright. Our investors have a right to know that the other $30 million has
been legally and truthfully lost, and that it hasn’t been invested in other companies owned or
related to the managers, or simply wired to an account and then written off to investors. All this
money needs to be properly accounted for independently of the current management, and the
best way to do that is to supply all the relevant documents to the auditor. To the best of my
knowledge, this is all that ECCM have required of the current management to date.

Throughout all of this, the one thing of which we can be certain is that both parties agree that the
IRM investment is worth a lot of money. Eley indicated to us that he is confident that those assets
alone could return between two and three times current fund valuations to investors. Whether that
should be shared with Secure One investors is another matter.

Rob Brown
Consultant.

0060 12 269 4832
robbrown@orioninternational.net

                                                       Without Prejudice

								
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