Firm at centre of mini-bond scandal ‘overstated’ value of holdings

A firm at the centre of the London Capital & Finance (LCF) scandal was found to have “overvalued” a major asset on its balance sheet by a court today, meaning it was unlikely it could have paid back the money it owed LCF.

London Oil & Gas was the biggest recipient of cash from LCF, which collapsed a year ago owing £236m to more than 11,000 investors, sparking an official investigation into high-risk “mini bonds” and numerous acrimonious court battles.

Today’s judgment was a section of a bigger ruling by Judge Clive Jones that rejected the attempt by London Oil & Gas’s (LOG) former director Elten Barker to remove the administrators from his old company. He and his fellow directors put LOG into administration last year.

But Barker then took administrator Smith & Williamson to court after it lodged an application to question him, arguing the accountancy firm should be stripped of its role.

Barker’s lawyers said London Oil & Gas should not be in administration since it could sell its shares in London-listed Independent Oil & Gas and pay off its debts.

However, Judge Jones said London Oil & Gas’s valuation of the shares of £135.65m was “unsustainable on the evidence before me”.

Jones said the valuation was based on an “unfounded” share price of 59.05p, despite its 2019 share price never having gone higher than 21.75p.

The judge said this meant London Oil & Gas had a roughly £81m hole in its accounts, and therefore “was or was likely to become unable to pay its debts”. The bulk of these debts were to LCF.

The judge rejected Barker’s attempts to remove Smith & WIlliamson as London Oil & Gas’s administrator.

Smith & Williamson partner and London Oil & Gas joint administrator Finbarr O’Connell said the “judgment makes clear that Mr Barker had no ‘legitimate interest’ in bringing his application” to have the administrators removed.

“The court has now made clear that he must cooperate with the administration and that he must attend such an interview very soon.”

Lawyers for Barker were contacted for comment.