Lexi Holdings

'Lexi Holdings' plc was a United Kingdom based finance, property management and property development company established in 2000 that went into Administration in 2006. At it’s height it was one of the largest and fastest growing independent short-term finance companies in the UK. It entered Administration after a failure to reach terms on a new facility with it’s Bank Barclays and it’s Corporate Banking Director, Dale Sellers. Sellers has since been involved in a scandal involving the withholding of information from the regulator the Financial Services Authority in respect of miss-selling banking products [ ‘Barclays apologises to FSA after imposing swaps secrecy clause on customers’ ; Richard Tyler,The Telegraph 17 March 2012 ]1

Background

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. 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.

History

In 2000 Luqman secured a loan of £2.5m from Barclays Bank to form Pearl Holdings. 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.

Renamed Lexi Holdings plc in 2003, 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.

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 an interview 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."

If clients defaulted on loans with Barclays Bank’s assistance developments would be placed in separate holding companies. The company at the time of administration owned 47 acres of prime residential development land at Ten Acres Lane Newton Heath Manchester worth an estimated GBP 50m, the site of the former Mansfield Brewery in Nottingham worth an estimated GBP 18.5m, a retail park in Leeds worth over GBP 20m a development site near Huddersfield worth in excess of GBP 15m, two hotels in the Lake District and a prominent development site in Piccadilly Gardens, Manchester. Many of these projects were partnered by were designed by prominent English architect Stephen Hodder MBE, who won the RIBA’s Stirling Proze in 1996 and is the current President of the Royal Institute of British Architects, as were Lexi partnered projects in Saudi Arabia and a GBP 3.5bn consortia leading a retail development in Cricklewood, London.

Collapse

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.

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." 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.

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. Max Clifford was among over 100 unsecured creditors, owed £15,000.

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:

Immediately upon appointment, the administrators attended the company’s premises in Manchester to secure the site and take control of the business. Upon arrival it was clear that the premises had been vacated and that none of the books and records remained. The company’s loan book comprises 53 outstanding loans and has a book value of around £112m. But, it is difficult to evaluate the realisations from the loans at this stage

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." 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. 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.

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. After his assets were restrained under the Proceeds of Crime Act 2002, the Serious Fraud Office brought a case against McGarry on behalf of Lexi. Court cases were also issued against DTZ, with one revolving around the valuation of No Man's Land Fort.

Aftermath

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.

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.

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.