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Langbar International is a limited company that was listed on the Alternative Investment Market of the London Stock Exchange as Crown Corporation Limited in 2003 and was subsequently the biggest share fraud on the AIM to date. It was investigated by the Serious Fraud Office,[1][2][3][4][5][6] the City of London Police, the Accountancy Investigation and Disciplinary Board[7] and the subject of many civil legal actions in the High Court.[8][9][10][11][12][13]

Crown Corporation, which changed its name to Langbar International Limited in 2005, was a pump and dump fraud, in that the company did not possess the assets that it declared at listing.[14][15][16]

History

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Created as Crown Corporation Limited (CCL) in Bermuda,[17] the company was listed on the Alternative Investment Market (AIM) in London in October 2003.[18] Its purpose was purportedly buying companies that were not living up to their economic potentials and improving them before selling them at a profit.[19] 59% of the shares in the company were purchased by Lambert Financial Investments for a total of $570 million, with $275 million presented as certificate of deposit from Banco do Brasil and $295 million to be paid later, but CCL was notified that the certificate was fraudulent and the funds were never paid.[17][19] Other stockholders failed to pay for their shares. In spite of being aware of the serious financial shortcomings, CCL misled investors as to the state of its finances, including making increasingly extravagant claims about its financial activities.[19][20]

In June 2005, Stuart Pearson, head of Langbar Capital.[17][21] A British business executive, Pearson was brought to Brazil and presented with an elaborate deception meant to convince Pearson that the company's financial value was legitimate.[20] The company merged with Pearson's investment firm, taking its name of Langbar International.

The value of Langbar International rose with Pearson's declarations to the market that the funds had been released from Brazil, which encouraged further investment. However, trading was suspended in October when the company's value was questioned, and in short order the company collapsed altogether.[17][22]

Investors, most of whom purchased after Pearson came aboard, lost as much 100 million.[17][20] Nabarro Wells, a London firm that had advised Langbar, was fined £250,000 for due diligence failures in 2007.[20] In 2008, shareholders in Langbar International sued Rybak and his family, receiving a settlement of £30 million after 56 days of evidence.[17]

The Serious Fraud Office was aggressively pursuing conspirators in the fraud with seven arrests in Spain and Switzerland when the man The Guardian characterized as the central conspirator, Lambert head Avi Arad, died of a heart attack.[20] According to the Guardian, "the prospect of other potential defendants blaming Arad for the fraud was now glaring."[20]

Given the death of Arad, the disposition of Pearson was the final stage in the investigation by the SFO.[20] Charged with 13 counts of fraud, Pearson faced trial to determine the question of how much he knew of the fraud and when he had discovered it.[20] Evidence was presented that Pearson had overlooked warnings, including a phone call from a banker at the London branch of Banco do Brasil informing him that there was no record of the money from Lambert. With a jury convinced of at least criminal negligence, Pearson was found guilty in 2011 on three counts, for making "misleading, false or deceptive or reckless" claims about the existence of the money.[17][20][21] Barred from being a director for five years, he was also sentenced to a year in jail,[17] but the SFO determined that confiscation of assets from Pearson could not be made because he had been acquitted of dishonesty, had been sentenced for recklessness, and had lost money himself.[19]

The blatant fraud contributed to a rewriting of company requirements on the AIM.[20]

References

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  1. ^ "Serious Fraud Office Press Releases 29 November 2005". Sfo.gov.uk. Archived from the original on 29 September 2011. Retrieved 1 January 2012.
  2. ^ Simon Bowers (26 November 2005). "Fraud inquiry starts into shell firm's missing millions". The Guardian. UK. Retrieved 1 January 2012.
  3. ^ Blackwell, David (26 November 2005). "Langbar face SFO probe over possible missing cash". Financial Times. Retrieved 1 January 2012.
  4. ^ Robert Miller (26 November 2005). "SFO inquiry on way into fall of Langbar". The Daily Telegraph. UK. Retrieved 1 January 2012.[dead link]
  5. ^ Simon Bowers (30 November 2005). "Fraud office launches inquiry into Langbar". The Guardian. UK. Retrieved 1 January 2012.
  6. ^ Eric Barkas (29 November 2005). "Langbar: The SFO are called in". The Yorkshire Post. Retrieved 1 January 2012.
  7. ^ "Accountancy Investigation & Disciplinary Board Press Release 23 June 2006". Frc.org.uk. 23 June 2006. Archived from the original on 4 January 2012. Retrieved 1 January 2012.
  8. ^ "Langbar sues over missing £365m". BBC News. 13 March 2006. Retrieved 1 January 2012.
  9. ^ Simon Bowers (14 March 2006). "Langbar accuses two ex-directors of 'conspiracy to defraud'". The Guardian. Retrieved 1 January 2012.
  10. ^ James Bagnall (14 March 2006). "Langbar launches $477m". The Ottawa Citizen. Archived from the original on 10 November 2012. Retrieved 1 January 2012.
  11. ^ Nicholas Neveling (14 March 2006). "Langbar launches action against former directors". Accountancy Age. Retrieved 1 January 2012.
  12. ^ "Langbar launches legal challenges" Investors Chronicle 17 March 2006 Archived 25 July 2011 at the Wayback Machine
  13. ^ Tait, Nikki (22 December 2006). "Holders launch Langbar claim". Financial Times. Retrieved 1 January 2012.
  14. ^ Greg Hurst; Caroline Merrell (1 December 2005). "Langbar chief in investor talks over 'missing £365m'". The Times. UK. Archived from the original on 12 June 2011. Retrieved 1 January 2012.
  15. ^ Greg Hurst; Paul Durman and Louise Armistead (4 December 2005). "A Crown farce: how Langbar mislaid £365m". The Sunday Times. Archived from the original on 12 June 2011. Retrieved 1 January 2012.
  16. ^ Jivkov, Michael (26 November 2005). "AIM becomes victim of £365m fraud". The Independent. UK. Archived from the original on 27 April 2006. Retrieved 1 January 2012.
  17. ^ a b c d e f g h Rowena Mason (21 June 2011). "Langbar chief Stuart Pearson jailed over 'grand scale' AIM fraud". The Daily Telegraph. UK. Retrieved 1 January 2012.
  18. ^ "Admitted Formal Complaint". Financial Reporting Council. 26 December 2011. Retrieved 8 February 2014.
  19. ^ a b c d "Langbar chief executive jailed for misleading the market". Serious Fraud Office. 20 June 2011. Archived from the original on 22 February 2014. Retrieved 8 February 2014.
  20. ^ a b c d e f g h i j Bower, Simon (24 June 2011). "Langbar International: the greatest stock market heist of all?". The Guardian. Retrieved 8 February 2014.
  21. ^ a b Kollewe, Julia (20 June 2011). "Former Langbar chief jailed over fraud". The Guardian. Retrieved 8 February 2011.
  22. ^ Lumley, James (10 May 2011). "Former Langbar CEO made false statements to sell worthless shares, court hears". The Royal Gazette. Retrieved 1 January 2012.
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