Jamaica
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Simpson rejects claims of fraud in Barita deal

Businessman Paul Simpson has rejected claims that he used fraud and deceit to get a reportedly unwell Rita Humphries-Lewin to sell over $2 billion worth of shares in her former company Barita to his investment firm, Cornerstone Group.

Simpson is the CEO and founder of Cornerstone United and Cornerstone Financial Holdings Limited.

The Cornerstone companies, their Chief Investment Officer Jason Chambers, and Simpson have filed a claim in the Supreme Court seeking declarations that the arrangements and the transactions involving Humphries-Lewin are “legally justified, valid and enforceable”.

The claim was filed on May 22 and the first hearing is set for October 2, 2023.

Michael Hylton, KC, confirmed last Friday that his firm, Hylton Powell, is representing the Cornerstone applicants.

Attorney Bert Samuels said his firm, Knight, Junor & Samuels, is leading the case for Humphries-Lewin and her niece, Deborah Ann Mordecai-Edwards. Their initial response to the claim has not yet been filed.

The court action was triggered by allegations levelled against Cornerstone and the two top executives by Mordecai-Edwards, who is also an attorney.

The 86-year-old Humphries-Lewin, the first female chairman of the Jamaica Stock Exchange and the first woman to establish a stockbrokerage (Barita Investments Limited) in the Western Hemisphere, sold most of her stake in Barita to Cornerstone in August 2018, maintaining a substantial minority shareholding. That deal involved over $3 billion.

About April 2021, to fulfil an alleged promise Simpson made to Humphries-Lewin, he and Chambers reportedly “caused” Cornerstone to make a private offer to Humphries-Lewin to acquire shares in Cornerstone Jamaica, according to the court documents.

Between April and September that year, through various “undated transaction documents”, the former Barita boss agreed to accept the offer and acquired approximately 1.4 million Cornerstone shares at US$10.80 per share for a total sum of US$15 million (about J$2 billion).

According to the claim, Humphries-Lewin signed a document setting out the terms of the deal in April 2021.

In June of that year, she is said to have signed an undated memorandum of offer, which was later dated September 20, 2021.

Also in June, Humphries-Lewin reportedly signed two letters of authorisation, which were later dated September 24, 2021 and addressed to Barita.

An excerpt said to be in both letters was shared by Simpson, Chambers and the Cornerstone companies in the claim form. It quoted Humphries-Lewin telling Barita to arrange the sale of her shares because the proceeds are required for the settlement of her acquisition of shares in the private offer.

“Further, I hereby confirm and advise that I fully understand and appreciate the nature of this authorization and have had the opportunity to or have voluntarily agreed to waive my right to seek, and be independently advised in respect of the effect and implications of this authorisation,” stated a line reportedly in Humphries-Lewin’s letter to Barita.

The transactions were completed on September 29, 2021.

CALL FOR PROBE

In a March 2022 letter to the Bank of Jamaica, Mordecai-Edwards requested an investigation into the circumstances surrounding her aunt’s acquisition of additional shares in Cornerstone and selling of her remaining stocks in Barita.

A request was also made of the Financial Investigations Division and the regulator of the securities industry, the Financial Services Commission.

Cornerstone said it got a copy of the letter in September 2022.

Mordecai-Edwards alleged that the transactions done in 2021 “involve some level of deception, coercion and/or fraud” of Humphries-Lewin, according to the fixed-date claim form obtained by The Sunday Gleaner.

Mordecai-Edwards, who reportedly has limited power of attorney to act on her aunt’s behalf, raised numerous grounds, including that in 2019, Humphries-Lewin was diagnosed with dementia, which is the loss of cognitive functioning such as thinking, remembering, and reasoning.

She argued that while her aunt experienced “lucid moments”, the diagnosis was allegedly known to Simpson and Chambers and, therefore, Humphries-Lewin ought to have had legal advice before entering the transactions.

Mordecai-Edwards also questioned the documentation used in the transactions and suggested that her aunt did not sign the letters of authorisation.

The attorney contended that the letters had a total sale price of US$15 million for the Cornerstone transaction, but shares of a value up to approximately US$18.9 million were sold, resulting in a difference of close to US$4 million.

She also alleged that Humphries-Lewin was taken advantage of in the Cornerstone deal, claiming that her aunt paid US$10.80 per share at a time when existing shareholders paid US$1.40 per share.

But Simpson, his companies, and Chambers have hit back, asserting that the allegations of deception, coercion or fraud are “unfounded and untrue”.

“Throughout their dealings with Humphries-Lewin, the applicants, whether individually or collectively, did not commit any criminal act. The transactions are genuine and were properly entered into and completed by Humphries-Lewin,” said the court document, which is signed by Simpson and Chambers.

The Cornerstone team argued that before and up to the completion of the transactions, Humphries-Lewin was “of sound mind and/or did not exhibit or indicate any mental illness or mental incapacity”.

They insisted that the retired businesswoman signed the documents and that some of them were witnessed by her husband, Karl, who they say was physically present at each visit.

“Both the Cornerstone transaction and the Barita transaction were financially beneficial to her and the applicants did not seek to or take advantage of Humphries-Lewin,” they said.

They also explained that Mordecai-Edwards’ comparison with the US$1.40 share price was wrong as that price was involved in a “separate and unrelated” transaction with existing shareholders of Cornerstone Barbados in a bid to raise money for the company.

Simpson and the other applicants said all of Cornerstone’s previous rights issues, where shareholders get to buy new shares at a discount, were done between a price of US$1 and US$1.40.

“There was never any intention for the price in the rights issues to reflect the true value of the shares being issued,” they argued.

Regarding Humphries-Lewin’s Barita shares, they explained, among other things, that the negotiated price of J$80 was based on the trading price of Barita at the time the transactions were done.

They are urging the court to treat the case with “urgency” because the allegations and Mordecai-Edwards’ “ongoing threat” of civil and criminal proceedings are “inimical to the applicants’ business and personal interests”.

jovan.johnson@gleanerjm.com