Falcon Funds sue advisers over feared loss in investment value

Falcon Funds are accusing Temple Asset Management of acting in bad faith and of hiding a serious conflict of interest

matthew_vella
Matthew Vella
21 December 2016, 8:22am
Emil Ingmanson attempted to become investment manager of Falcon Funds in what was clear conflict of interest
Emil Ingmanson attempted to become investment manager of Falcon Funds in what was clear conflict of interest
The Maltese pension fund that was kicked off Sweden’s private pension platform, is suing a mysterious Swedish businessman and a Maltese investment firm after a criminal investigation was launched in Stockholm.

Falcon Funds, whose directors include Nationalist MP and former finance minister Tonio Fenech, have told the Maltese courts that Temple Asset Management (TAM) invested over €10 million of savers’ cash in what turned out to be an ‘advance’ to Emil Ingmanson and his London company.

They now accuse TAM, the investment managers for the pension fund, of acting in bad faith and of hiding a serious conflict of interest.

The accusation seems to confirm the very same accusations of the Swedish Pensions Authority (SPA) when it kicked Falcon Funds out of its private pension platform. At the time, Tonio Fenech had defended Ingmanson, saying he was the subject of an unfair press in Sweden.

“The claims made of the links with Ingmanson are at the least speculative,” Fenech said in June, describing him as a “person of repute” and even declaring that he had “no involvement in the selling or investments decisions of the fund.”

Now, Falcon Funds are accusing TAM of investing money in financial instruments to directly benefit Ingmanson’s business, without having been informed of this conflict of interest.

But when the SPA pointed out this conflict, Fenech was adamant that there was nothing to back up these allegations.

Falcon Funds are now saying they were unaware that Ingmanson was connected to Solid Venture, when the money from its €276 million pension fund was used to invest in the instrument Solid Venture P2P. “Falcon was assured by TAM that this connection did not exist at the time the investment was made. Ingmanson procured the Solid Venture P2P investment to use for his Solid Venture [company], which interest was not declared to Falcon.”

Falcon Funds are also now backing up Swedish press reports that Solid Venture could have used €3 million of this cash in an emergency loan to a beleaguered payday loan company, Trustbuddy, in the summer of 2015. Ingmanson’s ‘kickback’ was supposed to have been 10%. Trustbuddy went bankrupt soon after. 

Falcon’s directors said that when TAM demanded the cash back on the Solid Venture P2P investment, Ingmanson said that redemption would come at a loss of €2.7 million.

They added that TAM’s collusion with Ingmanson took place on other financial investments. “TAM was well aware, or should have been, of Ingmanson’s interests in the investments he was proposing, and invested monies [from the pension fund] without revealing his conflict of interest to Falcon Funds, deceiving the company with a lack of full, honest, transparent information.”

Criminal investigation

Falcon Funds, a pension fund licensed by the Malta Financial Services Authority, stands accused by the SPA of being unable, or unwilling, to pay back a total of €247 million (2.4 billion Swedish kroner) in savings to 22,000 investors.

The SPA said that while the MFSA has directed Falcon Funds to start paying back the cash, “millions are still missing. This raises a strong suspicion that the events that have transpired are part of a major investment fraud”.

Prosecutor Arne Fors has told Expressen the police have requested information about the companies and their representatives, from the Malta Financial Services Authority and the Attorney General. “We want to know who the responsible persons for Falcon and Temple Asset Management are.”

Fors said that Falcon Funds still have to pay out €112 million in savers’ cash. “We have requested fresh updates from the MFSA as to how Falcon is paying back the cash.”

Fors said Swedish investigators are also focusing on the role of Bank of Valletta, as the bank acting for Falcon Funds. “We want to know what money is in the accounts, and statements must be analysed to be able to see cash flows.”

Falcon Funds has told the SPA that it wants to disburse the cash “in an orderly fashion to safeguard the value of the pension savers’ investments.”

But the SPA fears that the value of savings will “in all likelihood” have a lower value than originally invested because of “harmful investments” that inflated the value of the savings.

Ingmanson’s conflict of interest

In Malta, Ingmanson attempted to become the investment manager of Falcon Funds, namely to decide where the money of pension savers goes.

This was highly irregular, given that Temple Asset Management had already invested money from Falcon Funds into instruments suspected of benefiting Ingmanson.

Now it was also assisting Ingmanson to take over as investment manager of the same fund, by helping him obtain an MFSA licence for Falcon Asset Management.

TAM used €31 million from the Falcon Funds pension and invested them in three financial instruments (exchange traded instruments) that the SPA believes will not be easily redeemable.

Two of these ETIs indeed have names – Solid Venture P2P and Boardwalk Real Estate – associated with Ingmanson. In Malta, Ingmanson set up Solid Venture Capital back in 2012. He transferred its ownership in 2013 to an Isle of Man company called Roxy Tiger Limited (the names of his two children, Roxy and Tiger). This company and another Isle of Man company called Boardwalk Limited are officers of the company Metropolitan Venture Capital LLP. So far, so coincidental.

Secondly, the SPA suspects Ingmanson used the money invested in these ETIs to extend loans to companies at high rates of interest, such as the €3 million emergency loan to now defunct Trustbuddy.

Ingmanson has also used a falconfunds.eu domain and TAM letterhead in correspondence, and leaked emails show a TAM executive saying that Ingmanson would “be soon taking over as Falcon Funds’ investment manager”.

In August 2016, after MaltaToday’s reports, Falcon Asset Management – whose address was the same as TAM’s – ceased operations when it failed to obtain an MFSA licence to become a UCITS manager. 

Misled savers

The Falcon Funds SICAV is not owned by Tonio Fenech, but as one of its three directors, he runs the fund, which is essentially owned by the savers themselves.

The money is invested in blue chip stocks like BMW, Allianz and Michelin by an investment management company, in this case Temple Asset Management.

The reason Falcon Funds turned into a national scandal in Sweden is because it is believed the pension fund benefited from an irregular transfer of savers’ cash during a merger of funds.

An investigation by the SPA found a trail of breadcrumbs leading to Emil Ingmanson, who in November 2013 represented Falcon Funds in talks with the authority to market its pension funds.

The SPA suspects that client IDs of pension savers in the Optimus High Yield fund – which merged with Falcon Funds in March 2015 – were obtained illegally in the first place.

Tonio Fenech - Falcon Funds is now suing its investment managers
Tonio Fenech - Falcon Funds is now suing its investment managers
It suspects the clients were originally investors of Insider Fonda, which were moved to another pension fund, Positiv Pension Aktiv, without their consent. When Positiv Pension went into bankruptcy in August 2013, the customer register was transferred to an insurance intermediary called Strategi Placering – a subsidiary of Solid Equity Nordic, on whose board Emil Ingmanson sat between 2012 and 2014.

That same August, approximately 21,000 clients’ savings were moved from PP Aktiv to the Optimus High Yield fund, again without their knowledge. A call centre company, Astartes, was responsible for carrying out the transfers. Ingmanson was a board member on Astartes too, between 2012 and 2013.

The SPA also suspects Ingmanson facilitated the merger of Optimus with Falcon. The result was that 12,000 pension savers and €127 million in savings were added to Falcon Funds.

TV programme Kalla Fakta (Cold Facts) then reported the claims from savers that they were misled into switching their private pension accounts, by operators of the call centre Konsumentkraft, who would identify themselves as members of the pensions authority, to encourage them to switch over to Falcon.

matthew_vella
Matthew Vella is executive editor at MaltaToday.