A London jury has found two Balli Steel executives guilty on multiple counts of fraud, after they used fake documents to deceive banks into providing trade finance facilities worth hundreds of millions of dollars.
Louise Worsell, managing director of the since-collapsed company’s Middle East business, and Melis Erda, its group treasurer and an executive committee member, were each convicted at Southwark Crown Court on February 2. They are due to be sentenced in early April.
Balli Steel’s former finance director, David Spriddell, was found not guilty of fraudulent trading. Former director and chief executive Nasser Alaghband pleaded guilty prior to the start of the trial in September, while his brother and fellow director Vahid Alaghband was removed from the case in November.
Lisa Osofsky, director of the Serious Fraud Office (SFO), which brought the case against the five executives, hails her team’s work in “exposing such a complex case of international fraud, and for bringing the company’s top executives to justice”.
“This group of individuals intentionally defrauded multiple international finance houses as they attempted to keep their fraudulent business afloat, using increasingly audacious methods as the scale of their debt spiralled,” she says.
The SFO initially launched an investigation into Balli Steel when it went into administration in April 2013, with debts of US$500mn to more than 20 creditors, including 18 trade finance banks.
It found that executives had provided banks with “misleading information, false shipping documents and forged signatures on fake sales contracts” in order to obtain trade finance facilities.
“This allowed Balli to obtain a string of loans to bolster the company’s finances and continue trading, while avoiding the repayment of many of these loans,” the SFO says.
During the trial, prosecutors said Balli sometimes used proceeds from letters of credit to repay other unrelated debts, comparing the practice to “robbing Peter to pay Paul”.
The SFO also found that falsified documents were produced by Cayman Islands-registered Trans Ocean Navigation (TON). Although TON was operated from Balli’s London offices, the company concealed this information from creditors, giving the impression it was an independent shipping company.
Former treasury chief Erda told the jury in January she had no knowledge of the company’s dire financial situation, nor of the fact TON was operated by Balli.
But the jury sided with SFO prosecutor Jane Bewsey, who said it was only the “fraudulent clinching of further trade finance [that] kept the company going” and that it was a “widespread and systemic” practice.
At the time of Balli’s collapse, five banks – ABC International Bank, DBS, KBC Bank, Rabobank and The Economy Bank, a former subsidiary of BNP Paribas – were left with losses totalling US$150mn. Around US$100mn was owed to DBS.
The SFO says almost none of that total was returned to creditors.
Court reporting by Jacob Atkins.