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Cornerstone says it offered to reverse Humphries-Lewin’s $2b shares purchase

Investment company Cornerstone says “out of deep respect” for Rita Humphries-Lewin, it offered to reverse her $2-billion purchase of shares in the company.

The private firm made the assertion in a media statement dated September 26, in which it also challenged claims by Humphries-Lewin’s husband, Karl, that his wife was not mentally competent and did not have legal representation when she negotiated and signed off on two deals in September 2021.

“Lewin in his affidavit is now asking the court to set aside the transaction even though he was aware that Cornerstone’s attorneys during discussions with Deborah Mordecai Edwards’ attorneys in 2022 offered, out of deep respect for Humphries-Lewin, to, in good faith, unwind the transaction if there was buyer’s remorse,” said Cornerstone.

“Mordecai Edwards’ response was to reject the return of Barita shares and to attempt enforcement of a cash payment of US$20 million amounting to 30 per cent more than the US$15 million transaction value,” the company alleged. Humphries-Lewin sold her majority stake in Barita in 2018 in a $3-billion deal, but retained a minority holding.

Cornerstone, its founder and president Paul Simpson and Chief Investment Officer Jason Chambers applied to the Supreme Court in May for a declaration that the transactions involving Humphries-Lewin, Cornerstone and the publicly listed Barita Investments were legal. The hearing of the application is set to begin on Monday.

They took action following accusations by Mordecai Edwards, Humphries-Lewin’s niece, that the deals involved “some level of deception, coercion and/or fraud”, that they knew Humphries-Lewin had dementia, and that her aunt did not get independent legal advice.

Cornerstone and its executives have rejected the allegations.

In Tuesday’s statement, Cornerstone pointed to acknowledgements from Karl that he signed some of the transaction documents as a witness and that he had wanted his wife’s attorney to review the paperwork before signing.

In an affidavit, Karl claimed that he was “unable” to convince his wife to delay signing until legal advice was obtained. He did not state whether he had explicitly disclosed to the Cornerstone officials that his wife was diagnosed with dementia in January 2019.

“At no point did Lewin advise the Cornerstone officers or the Barita Investment Limited’s (Barita) Board, on which Humphries-Lewin remained a director until January 2021, that Humphries-Lewin had dementia or mental incapacity at all,” Cornerstone said.

A nurse who led homecare for Humphries-Lewin between October 2019 and December 2021 has suggested that Cornerstone and particularly Simpson and Barita executive Sonia Owens were aware of Humphries-Lewin’s memory problems.

But Cornerstone is insisting that its officers “had no reason to believe from their transitory interactions with Humphries-Lewin that she did”.

Meanwhile, the investment company has responded to an opinion from chartered accountant John Bell, who alleged that Cornerstone’s “flawed” accounting caused Humphries-Lewin to ‘waste’ US$6 million (J$900 million) on “overpriced” shares. His opinion was sought by the court-approved committee managing Humphries-Lewin’s affairs.

Bell, who retired in 2004 after 24 years as a partner in accounting giant PricewaterhouseCoopers, claimed the market value of the Cornerstone shares at the date of the transaction in September 2021 was US$6.45 per unit and not the US$10.80 at which Cornerstone said it sold the shares to the 87-year-old woman.

He said the market value of Cornerstone companies’ investment in Barita was already reflected in its balance sheet and the book value of the Cornerstone companies’ shares and so the share price calculation was “double counting, flawed and a departure from established principles”.

But Cornerstone has dismissed Bell’s opinion as “flawed”.

“The accountant assumes that the fair value of Cornerstone is equivalent to its book value. That is a flawed/erroneous assumption as is evidenced by the fact that the vast majority of companies on the Jamaica Stock Exchange (JSE) frequently trade above their book values,” it said.

Cornerstone said Bell appeared to presume that Barita’s trading price at any given point in time is equivalent to its fair value.

“This is also unsubstantiated and inaccurate as opinions on fair value, which differ from their actual trading prices for many stocks listed on the JSE, are routinely provided by local brokerage houses,” the company said.

Cornerstone also argued that Bell reached his conclusions “without any insight or knowledge of future plans, strategies or other pertinent factors for Cornerstone, typically crucial to determining valuation with respect to any company”.

Mordecai Edwards has also questioned the share price offered to her aunt because around the same time of the transaction, Cornerstone had a rights issue at US$1.40. But the company said this was a separate transaction that involved existing shareholders.

“Cornerstone remains confident in the integrity of its share price valuation and of its ethical conduct in the undertaking of the transaction and stands by the price at which the Cornerstone shares were sold to Humphries-Lewin,” the company said Tuesday.

Between the period April 2021 to September 2021 Humphries-Lewin negotiated and bought 1.4 million Cornerstone shares and sold 28.2 million shares in Barita worth J$2 billion to pay for the acquisition.

Jamaica’s financial crimes agency, the Financial Investigations Division, is probing the allegations. Last month it said while there may be “some merit” to the complaint, its investigation was “nowhere near the stage of saying that the allegations are valid and whether anyone will be charged criminally”.

EDITOR’S NOTE: Cornerstone, its senior executives Paul Simpson and Jason Chambers, along with Barita, have filed a lawsuit against The Gleaner alleging defamation associated with the coverage of the matters filed in court.