Weavering employees lose appeal on £290m fund loss repayment

Charanpreet Dabhia and Edward Platt were respectively a director and a senior employee of WCUK and were appealing the 2012 decision that their salary and bonus was paid to them in breach of their fiduciary duties to WCUK and that they were liable to account to WCUK for those payments.

The judgement said that Mr Platt’s and Mr Dhabia’s roles “in negligently enabling this business to continue, caused the loss claimed,” reaffirming the previous ruling that they should have investigated Weavering’s trades more fully.

WCUK went into administration in March 2009. The company was advisor to a Cayman Islands incorporated hedge fund called Weavering Macro Fixed Income Fund Ltd. The judgement said that in the advisory agreement between the two, WCUK agreed to indemnify the Macro against losses to and claims on the Macro arising from the fraud, negligence or wilful default of WCUK.

In his defense, Mr Dabhia said he was not an investment manager and had no knowledge or experience in trade execution; his prime responsibility was establishing and implementing marketing strategy.

He said he reasonably and honestly relied upon directors Magnus and Amanda Peterson for such matters and his information was derived from attending meetings with Mr Peterson, where Mr Peterson described to him the Macro’s investments and gave him information to provide in turn to investors. He did not know of the flaws in the swaps transactions and he said that, when he did find out, he was instrumental in calling in the accountants in March 2009.

The Judge rejected Mr Dabhia’s defence. She found that he failed to apply his mind to the identity of the counterparty to the swaps and that he should have realised that the requirements of the Offering Memorandum were not being observed.

Mr Platt was accused by WCUK of dishonestly assisting in the fraud perpetrated by Mr Peterson in setting up the “sham transactions” to fool investors and to attract and/or maintain investment for the Macro. It was alleged that he knew or suspected that the swaps were worthless and deliberately refrained from making enquiries about them and assisted Mr Peterson in perpetuating the Macro’s business by these means.

The Judge rejected the “dishonest assistance in fraud” claim made against Mr Platt, but found him liable in negligence.

Mr Dabhia and Mr Platt are among 10 employees, including fund founder Mr Peterson, who were ordered last year to repay a total of $450m but these are the only two appealing the 2012 decision.

In December 2012, the Serious Fraud Office launched criminal proceedings against Mr Peterson and he was charged with six offences including two of false accounting, two of forgery, and one count each of fraudulent trading and fraud by abuse of position.