Lexi Holdings

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'Lexi Holdings' plc was a United Kingdom based finance, property management and property development company, that collapsed into administration in October 2006 with debts of over £100M.[1]

Background[edit]

The company was formed by Shaid Luqman, a British-born ethnic-Pakistani student at the University of Manchester, who studied finance. He bought his first house during his studies, striking a deal with the university's accommodation agency.[2] This enabled him to approach banks re financing, and by the time of his graduation in 1991 owned a portfolio of 24 flats and houses, which he rented out to fellow students.[1]

History[edit]

In 2000 Luqman secured a loan of £2.5m from Barclays Bank to form Pearl Holdings.[2] The company provided bridging loan-finance to high-net-worth individuals to build property portfolios, focusing mainly on projects which converted offices and hotels into flats. Providing agreed finance against a surveyor-agreed valuation of the final project, the company would lend within 24 hours. The loan would remain in place until project financing could be provided by a long-term lender.[2]

Renamed Lexi Holdings plc in 2003,[2] clients included MP's and footballers. The firm grew so well and quickly - in 2003 it was reported to be making profits of £21.4m on a turnover of £36m - that in 2004 Luqman was named Entrepreneur of the Year by Ernst and Young.[1]

At its peak, the company was worth £300M and owned a Gulfstream IV business jet, while Luqman had a personal estimated wealth of £250m personal wealth, placing him 238th on the Sunday Times Rich List. In iterview in 2005, Luqman commented: "Overall, we are a billion-pound company. In 10 or 20 years, I want us to be as big as a high street bank."[1][2]

If clients defaulted on loans, Luqman would buy the development at a pre-agreed rate, via another property development company he owned. This company at the time of collapse owned the derelict Mansfield Brewery, a retail park in Leeds, a development site near Halifax, two hotels in the Lake District; and the former Pound store and head office on Piccadilly Gardens, with approved plans to develop it into an eight storey residential development called "Lexi Towers."[2] Many of these projects were designed by architects Hodder Associates, with whom Lexi had partnered into projects in Pakistan, Saudi Arabia and a £3.5Bn consortia leading a retail development in Cricklewood.[2]

Collapse[edit]

In 2005, Luqman appointed publicist Max Clifford to defend his companies, who claimed in mid-2006 that Lexi Holdings had raised £245m from the sale of the European division to "a Middle Eastern Bank", which it declined to name.[3]

But in late 2006 in relation to furnishings business Modern Living Ltd which collapsed with debts of £1.1M, Manchester-based High Court judge Mr Justice Patten called Luqman "completely dishonest."[2] Luqman and his brother Waheed were both banned from running a company for 15 years, and business associate Kasa Fallah gave an undertaking not to act as a company director for 10 years.[4]

Creditors immediately appointed administrators to all of his companies, and his business assets were seized, including Lexi Holdings. At this time Lexi employed 18 people in Manchester and 6 in its Mayfair office.[3] Max Clifford was among over 100 unsecured creditors, owed £15,000.[5]

Lexi's major creditor Barclays Bank, which headed a consortia of banks providing various forms of finance, appointed administrators KPMG. In their initial report, they commented:[2]

On investigation, KPMG stated that its attempts to realise value from Lexi were held back because "in many cases the borrower is subject to insolvency proceedings, while numerous properties are in a poor state of repair or are vacant and have been subject to fly tipping or squatters."[2] In a two-year investigation, they could only find £12.5M of assests, including £910,000 raised from the sale of No Man's Land Fort in the Solent in March 2009, valued originally at £14M.[6] The difficulty in recovering assets resulted in a further court case being brought by KPMG/Lexi against Luqman, who was resultantly sentenced to serve a 21-month jail term for failing to tell the judge where Lexi's assets had gone.[5]

Subsequent investigation showed that the company took part in organised fraud, valuing property above its market value, in an arrangement with valuers, mainly including Ian McGarry, the former head of valuations for surveyors Dunlop Haywards.[2] After his assets were restrained under the Proceeds of Crime Act 2002,[7] the Serious Fraud Office brought a case against McGarry on behalf of Lexi.[8] Court cases were also issued against DTZ, with one revolving around the valuation of No Man's Land Fort.[9]

Present[edit]

As a result of the case against Luqman, Lexi was liquidated. Further cases against Luqman resulted in a second period in jail, since which he has suffered medically diagnosed psychological issues. Banned from travelling abroad and with a court order both holding his existing passport and banning him from applying for a replacement, in April 2011 he was sentenced to 10 months suspended for 18 months and ordered to wear an electronic tag for three months, after applying for a replacement passport.[1]

In October 2010, Luqman's brother Waheed was jailed for 18 months for contempt after he attempted to conceal bank accounts, retained company documents and breached passport orders in relation to the failure of Lexi.[1]

A claim by KPMG/Lexi against Manchester-based law firm Pannone for £50M with regards alleged breach of contract and professional negligence, was settled out of court in February 2011.[10]

References[edit]

  1. ^ a b c d e f "£300m tycoon 'tried to pull off passport scam' in attempt to flee Britain after business empire collapsed". Daily Mail. 28 April 2011. Retrieved 28 April 2011. 
  2. ^ a b c d e f g h i j k Dan Thomas (16 March 2007). "Desperately seeking Luqman". Property Week. Retrieved 28 April 2011. 
  3. ^ a b Chris Barry (October 17, 2006). "Luqman property company crashes". Manchester Evening News. Retrieved 28 April 2011. 
  4. ^ "Empire struck down". Manchester Evening News. 30 October 2006. Retrieved 28 April 2011. 
  5. ^ a b Jeff Prestridge (12 November 2007). "The new accountancy fees gold rush". Daily Mail. Retrieved 28 April 2011. 
  6. ^ "'Bargain' sale of £14m Victorian seafort". BBC News. 2009-07-03. Retrieved 2010-05-20. 
  7. ^ "Bad news for creditors under the Proceeds of Crime Act". Blake lapthorn. 2008. Retrieved 28 April 2011. 
  8. ^ "Restraint order should not benefit unsecured creditor". The Times. 18 August 2008. Retrieved 28 April 2011. 
  9. ^ Christian Metcalfe (1 June 2009). "Curse of Lexi threatens DTZ". Estates Gazette. Retrieved 28 April 2011. 
  10. ^ "Lexi drops £50m claim against Pannone". Manchester Evening News. 27 February 2011. Retrieved 28 April 2011.