Finance CEO granted gagging order

Monday 04 March 2019

A finance company CEO subject to regulatory investigation by US authorities has been granted a gagging order to protect his identity by Jersey’s Royal Court.

The man, who is not named, is the head of a company that acts as adviser to a hedge fund, which is seeking to unfreeze bank accounts of another company in which it has a financial interest.

In a written ruling dealing with the principle of open access to justice, Royal Court Commissioner Julian Clyde-Smith agreed to maintain an existing privacy order which prevents either the individual who is challenging the decision, or his company, from being named.

Commissioner Clyde-Smith directed that a Judicial Review of a Police decision effectively freezing the bank accounts should be held in private but that “the wider public interest will be met by a judgment which addresses and explains the relevant legal issues by reference to the necessary factual background”. 

Pictured: The man is currently subject to legal proceedings in the US.

The case involves a decision by the States Police in July 2018 to withhold consent to the operation of bank accounts held a company based in the British Virgin Islands following a suspicious transactions report by Jersey administrators. 

They had been alerted by civil actions launched in the US Courts in which both the Chief Executive and his company are named as defendants. 

In written submissions, Advocate Howard Sharp, on behalf of the Chief of Police, had argued that the gagging order should be removed both because of previous publicity in the USA and also because the Judicial Review could be the first step in trying to move assets suspected of being the proceeds of crime.

He also submitted that there was a strong public interest in the public knowing about the accusations, “particularly in the context of Jersey’s efforts to be regarded as a well-regulated offshore finance centre”.

However, Advocate WIlliam Redgrave, for the CEO, had argued that the disputed funds were derived from the business of the hedge fund whose activities were the subject of the civil actions in the US courts.  

Pictured: The CEO argued that being named might cause him to face more scrutiny from regulators.

In his written submissions, Advocate Redgrave drew attention to the fact that US lawsuits of this kind were commonplace and very rarely went to trial.  Consequently, any publicity generated in the US would have minimal impact but the reputational damage that would be caused by publicity in Jersey would be disproportionate.

His client had stated in an affidavit to the Court: “My ability to conduct business…would be severely prejudiced, as suggestions of criminality are likely to be picked up by the media, public companies with which I engage in business, other institutional colleagues and competitors, and financial institutions.   

“It is one thing to be the subject of speculative lawsuits or regulatory investigations, but to be alleged to be a suspect in relation to a crime is considerably more serious.  Any publication of a report linking me to suspected criminal behaviour would be potentially searchable by all internet search engines and thus have the capacity to cause me reputational damage for years, if not decades ahead.”  

He added that any publicity “could provoke additional baseless lawsuits” and “more intense scrutiny” by the financial regulator, and would also harm his family and community.

Even if the court proceedings concluded in his favour, the CEO argued that there would likely be “catastrophic consequences” to his business “and losses from which I would be unlikely to recover.”

Advocate Redgrave had also argued that there was no evidence that his client was trying to move the funds, nor that they were the proceeds of criminal activity. However, the result of the accounts being effectively frozen was that they could not be used for legitimate investment.  

In his judgment, Commissioner Clyde-Smith acknowledged that “the principle that legal proceedings should be heard in public and freely reported is deeply entrenched”. But he also accepted that recent cases like the one involving the BBC and Sir Cliff Richard had increased reasonable expectations of privacy. 

In this case before the Royal Court, where there had been no criminal investigations, the Commissioner found that the adverse consequences for the individual “justified the displacement of the principle of open justice.” 

“I accept the applicant’s evidence both as to the serious damage that could be done to the applicant’s financial business in which confidence is key, and that without anonymity in these proceedings, the applicant is effectively left without a remedy under a statutory regime where the informal freeze can last indefinitely.   

“I am satisfied that we are not concerned here with the avoidance of embarrassment on the part of the applicant, and certainly not with convenience or expedience,” Commissioner Clyde-Smith said.