A Commercial Court case involving an allegation of the misappropriation of some of a multimillion dollar investment fund has been delayed until the end of the month amid allegations of “ambush” and “sham” tactics.
The defendant, disbarred former Morgan Stanley broker Jeffrey Leo, of Tullamaine Castle in Tipperary, is alleged to have misappropriated some of the $60 million (€58 million) given to him by an American couple to invest in Ireland.
Mary and James Wenning, who operate a chicken farming business in Ohio, USA, along with Wenning Holdings Ltd, which is in voluntary liquidation, brought proceedings alleging deceit or fraudulent misrepresentation, or both, against Mr Leo and a number of companies he is involved in.
Mr Leo, who was disbarred by the US financial regulatory authority in 2010, has denied the claims.
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Further proceedings were brought by liquidator Kieran Wallace seeking a number of orders in relation to the transfer of shares in Wenning Holdings from the Wennings to a company controlled by Mr Leo.
Mary Wenning said in an affidavit she and her husband only recently learned that Mr Leo was disbarred.
Over the years, she said, the couple transferred around $60 million to him to acquire investments on their behalf.
The case centres on whether the money was advanced as a loan or in exchange for equity.
The investments include the Dundrum House Hotel; the Pillo Hotel in Ashbourne, Co Meath; Tullamaine Castle; the Golden Vale Hotel; Drumonna House; Celbridge Manor; and the Powerscourt Arms Hotel.
At the Commercial Court on Wednesday, David Kennedy SC, described a move by the plaintiffs’ lawyers to remove Wenning Holdings from the proceedings as pulling “a rabbit out of a hat”, that it was a “severely prejudicial ambush” and a “sham”.
Mr Kennedy said Mr Leo’s legal team would now have to amend its defence at “this late hour” regarding a letter on the matter received last night.
The case had been listed to hear an application from lawyers for the liquidator to cross examine Mr Leo.
However, before matters could begin, Kelley Smith SC, for Mr Wallace, said that Wenning Holdings was to be removed as a plaintiff.
Ms Smith said that the defence’s objection to the amendment in the case was a way of “putting off the evil day” and was “procedural smoke”.
Ms Smith said that the removal of the company was part of a “narrowing” of proceedings that did not prejudice the defence. She said that Mr Leo “fears what is behind this because the liquidator has concerns fraud is at play”.
Ms Smith said it was the first time she had ever come across a defendant who said that they did not want a claim against them withdrawn.
Mr Kennedy said the liquidator was trying to be a “stalking horse” for the Wennings in that any advance cross examination of Mr Leo by him could lead to information the Wennings could use in a “pincer movement”.
Mr Justice Max Barrett adjourned the matter to the end of the month.
Mr Wallace, MD of Interpath Advisory, wants a number of orders from the court including making Mr Leo personally liable for the debts of Wenning Holdings.
He also seeks orders against the former auditor of Wenning Holdings, Colm Malone of Rush Malone & Co, and against two companies, Leo Financial Investments Ltd and Steelworks Investments Ltd.
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The court was told orders sought against Steelworks company secretary Darrell Penney were no longer being pursued.
The liquidator wants orders under the Companies Act declaring that the purported sale by Wenning Holdings of its beneficial title in Steelworks to Leo Financial had the effect of perpetrating a fraud on the company or its creditors or both.
Mr Wallace has said in his affidavit that despite his efforts he has been unable to obtain a complete set of books and records. The information the respondents have provided has “often been vague, incomplete and in some cases entirely contradictory” it is claimed.
Mr Leo has asserted, the liquidator says, that the Wennings provided loans of around €40 million which were borrowed by Steelworks for the purpose of property investments.
Mr Leo also claimed some €25 million was repaid to the Wennings and €17 million to €18 millon remains owing.
