Kellermann and Cosgrove take Guernsey regulator to court

The two want to see a report that appears central in the investigation into them.
The FSCA engaged in an extensive investigation of its own based on a request from the Guernsey regulator – and has also been denied permission to see the report. Image: Shutterstock

Cobus Kellermann and David Cosgrove, who were the subjects of an investigation by the Guernsey Financial Services Commission (GFSC) between 2015 and 2017, have filed an application for a judicial review of their treatment by the regulator.

The investigation into Kellermann and Cosgrove was launched after allegations arose in March 2015 that they were the masterminds behind a massive fraudulent enterprise, which they were supposedly running under the ‘Belvedere Group’. However, the GFSC ended its investigation in September 2017 having made no findings and taken no action against them.

Read: The world’s greatest Ponzi scheme that never was

While the main application in the case brought by Kellermann and Cosgrove will be heard later this year, they are asking the court this week to rule that they can receive copies of a report that appears central to the GFSC’s decision to end the investigation.

The report was compiled by an independent counsel from the UK, Nicholas Peacock QC, who acted as ‘Senior Decision Maker’ in the matter.

Peacock’s role was to adjudicate on the case presented by the regulator. Although his decision has never been released, the GFSC announced an end to its investigation shortly after he was expected to make his decision.

Since that point, Kellermann and Cosgrove have tried to determine whether Peacock ever submitted a report to the GFSC, and to obtain a copy of it if he did. However, they argue in their court papers, the regulator would not even acknowledge to them whether such a report even existed.

The GFSC also declined a request for the report from the South African Financial Sector Conduct Authority (FSCA). This is despite the FSCA engaging in an extensive multi-year investigation of its own based on a request from the Guernsey regulator.

That investigation finally concluded last year, with the local regulator declaring that it could find no wrongdoing by Kellermann.

Read: SA regulator clears Cobus Kellermann of any wrongdoing

Complexity

The FSCA’s Caroline da Silva told Moneyweb that:

“We would have preferred it if our colleagues in Guernsey had shared the reasons of the Decision Maker with us, but it is their prerogative not to do so.”

She pointed out that there may be a number of issues involved, including that Peacock is an independent party.

“The authority cannot be blamed for the decision not to disclose,” Da Silva noted. “In fact, as we understand it, the Guernsey authority themselves have requested reasons from the Decision Maker on our behalf and are themselves still waiting for a reply.

“The reasons for the decision were and remain confidential,” she added. “As a general point, the Decision Maker may have good reason not to disclose, and it may have weighed up disclosure against bigger issues.”

Moneyweb requested an explanation from Peacock himself as to whether it was his decision not to disclose the report and if so what his reasons were. He however declined to make any comment.

The GFSC has also refused to comment. In its most recent response to Moneyweb, the commission secretary Dale Holmes noted that: “The commission has no comment to make and will not respond to any further enquiries about this matter.”

Court papers

However, the Senior Decision Maker’s report has now become a central part of Kellermann and Cosgrove’s court application, as the regulator quoted from it in its own filings in the main case. Under the rules of both the Guernsey court and the GFSC’s duty of candour, Kellermann and Cosgrove believe this gives them the right to see it.

They argue that if a document is mentioned in a party’s affidavit, both the court and the opposing party must have the opportunity to inspect it so that nobody is at a disadvantage for not having access to all the information to be used in the case. They also contend that a public authority has a duty to provide the court with ‘candid disclosure’ of all the relevant facts in a judicial review application.

Kellermann and Cosgrove have also pointed out that the GFSC can no longer argue that the Senior Decision Maker’s report is confidential if they have referred to it in their own court papers.

The GFSC has, however, opposed the request to see the report.

It has argued that it does not have a duty of candour at this stage, as the court has not yet ruled on whether the application for a judicial review will go ahead. It also believes that part of Kellermann and Cosgrove’s main application is in effect an attempt to see the report. Making it available before that case is even heard would therefore be premature.

The matter will be heard in Guernsey on Thursday, February 6.

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Thanks Patrick, for your continued fact-based and level-headed reporting in the face of Trump-like vitriol and trolling. You and your employers have my respect for it.

As to this saga, what a ride!

Many people have been sent to jail for crimes they did not commit. Many more walk free in spite of the crimes they committed. Our legal and regulatory processes sometimes fail under what is basically fair weather conditions. This is the case even in criminal trials where the burden of proof has to be beyond reasonable doubt, since the sanction for the guilty is usually a severe one. The burden of proof is a lot lower in civil cases since the sanction here is less severe, e.g. usually a fine. So there’s even a greater opportunity of a miscarriage of justice to happen.

There is ample evidence going back almost 300 years with many many recent examples that secret evidence is a powerful tool in the hands of the unscrupulous, rapacious and venal, and a mechanism for inept bureaucrats to hide from accountability.

Any verdict, regulatory or judicial, based on secret evidence should automatically be suspect.
9 out of 10 times the public interest is harmed by the secrecy.

The sad thing is that it is public knowledge that this was started by deVere/Nigel Green (it is even on their website). Yet, in the last five years Cosgrove & Kellermann has suffered, but NOBODY from deVere or the regulators that won’t come clean…although it is public knowledge who they are.

Why don’t you let David Marchant comment on these articles anymore? His posts made this story far more interesting to follow.

Because the truth is inconvenient.

End of comments.

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