The director of collapsed commodity trader Vincom has been ordered to pay US$13.3mn to UBS, after a London court ruled he fabricated transactions and unjustifiably wrote off debts from a company controlled by a relative. 

Zürich-headquartered UBS had extended trade finance facilities to Vincom from 2014 onwards, but was left out of pocket when the company was wound up in November 2017.  

In a trial that began in March, the bank took issue with eight back-to-back nickel trades Vincom entered into between 2014 and 2017. Rather than taking payment from the buyer, Donald McArthy Trading (DMT), Vincom director Anil Kumar issued credit notes, claiming the cargoes had been contaminated during transit. 

UBS argued there was no evidence the nickel had been damaged by seawater or exposure to acid, as claimed by Kumar, and that the credit notes were actually issued later on to give preference to DMT, whose directors include one of Kumar’s brothers and his sister-in-law. 

The bank also disputed payments totalling US$5.5mn made to AST Metals, one of Vincom’s suppliers, and controlled by another of Kumar’s brothers.  

The payments were made the same day that Kumar received a winding-up petition from another creditor. UBS argued there was no evidence the invoices related to genuine trades and that prices were “artificially inflated in order to justify the draining of Vincom’s current account”. 

Kumar, representing himself in court, had argued that the credit notes issued to DMT represented only a tiny proportion of the trades between the two companies, and that he had no reason to disbelieve that the cargoes had been contaminated. 

He also told the court the payments to AST Metals were authorised before the winding-up petition was received, and that he had been advised the company could pay off existing debts as long as it did not enter into new business. 

The London High Court of Justice ruled in favour of UBS on May 3. 

Justice Parfitt found Kumar was in breach of his duties as a company director when issuing the credit notes to DMT. 

He ruled the credit notes were likely created in late 2017 or early 2018, rather than at the time the transactions took place, and in reality were issued “to protect DMT from claims made on Vincom’s behalf in the imminent liquidation”. 

Justice Parfitt agreed with evidence submitted by an expert witness, who said it would be “extremely unlikely” nickel shipments could be damaged by exposure to seawater, acid or atmospheric corrosion, and “inconceivable” that such contamination would reduce the value of the cargoes to zero. 

He dismissed Kumar’s claim UBS was “cherry-picking” transactions to dispute. He found Vincom’s profit margin on trade transactions was around 0.45% during the period in question, which would mean issuing eight credit notes could conceivably wipe out three years’ worth of profits. 

Kumar had argued that UBS and Vincom’s liquidator “had been dishonest: hiding emails that would assist the defendant and lying in their evidence about what documents existed and what discussions were had”, Justice Parfitt added. 

But the judge said those claims “are not supported by the slightest shred of evidence”. 

The judge also ruled that two of three payments to AST Metals were fraudulent, saying Kumar “fabricated transactions in order to justify paying away Vincom’s assets”. 

He said invoices presented as evidence were “wholly unreliable” because of apparent duplications, inconsistent numbering, inflated prices and a lack of supporting evidence. 

The fact the payments were made to a company owned or controlled by family members also raises concerns, he said, adding that the true purpose of the payments was likely to ensure Vincom’s assets could not be claimed by other creditors. 

Justice Parfitt dismissed Kumar’s claim that the payments were authorised before the winding-up petition had been received, saying there is no evidence supporting that claim, and that it appeared to be Kumar “cobbling together a narrative which he considers might be a plausible explanation”. 

He pointed to inconsistencies in Kumar’s defence filings and witness statements around when the winding-up petition was actually received, and concluded: “The defendant lied to try and undermine what he knew to be a truthful case.” 

The judge ruled that the third payment to AST Metals was not fraudulent, but still represented a breach of Kumar’s duties to Vincom as the company effectively increased its indebtedness to another financing bank without gaining any benefit. 

UBS declined to comment when contacted by GTR. Kumar had not responded as of press time.