Investor in Irish firm linked to censure

THE INVESTOR behind the move to oust the McInerney plc board was the principal of a firm fined £250,000 (€282,000) and censured by the London stock exchange for its role in a fraud that has since resulted in a criminal conviction.

Last week it emerged that David Nabarro, who owns 21.45 per cent of McInerney plc, proposed that shareholders sack the existing board and replace it with himself and two colleagues, Kevin Lynch and John Garratt, in a bid to recover value for equity holders in the troubled housebuilding group.

Mr Nabarro was managing director of broker Nabarro Wells, which in 2007 the London stock exchange fined £250,000 and publicly censured for failing to properly scrutinise companies that it was helping to launch on the exchange’s alternative investment market (AIM).

The sanction arose out of the flotation, collapse and subsequent investigation of Langbar, to which Nabarro Wells was appointed nominated adviser in 2003, when it floated on AIM.

The company misled the market about cash deposits that were supposedly due to the company from a US investor via a Brazilian bank. On Monday an English court jailed Langbar’s former chief executive, Stuart Pearson, for a year after convicting him of making misleading statements in stock market announcements.

Before the flotation of Langbar, originally called Crown Corporation Ltd, its chairman, Mariusz Rybak, said a Swiss bank would subscribe for €207 million of its shares.

At the last minute, the subscriber was changed to a US firm, Lambert Financial Investments, which never paid for the stock, but instead produced a certificate from a Brazilian bank which was supposedly holding the cash in an account in the company’s name.

Mr Nabarro pointed out yesterday that neither he nor his firm were involved in the fraud, and were in fact duped, along with Langbar’s auditors and lawyers.

The scandal resulted in a police investigation. Following its own review, the London stock exchange fined the broker in 2007 for failing to carry out the necessary due diligence on companies that it was bringing to market.

Mr Nabarro acknowledged yesterday that, with hindsight, it could be argued that the firm should have identified a problem.

He added that while he was managing director, he was not personally involved in advising Langbar. “It was not my client,” he said.

Mr Nabarro subsequently sold the firm and now works as a corporate financier. He said yesterday that his business is fully licensed and authorised by Britain’s Financial Services Authority.

It is understood he acquired his McInerney shares as a result of the unwinding of Seán Quinn’s contracts for difference position in the company. Its stock has been suspended since last year.

McInerney’s Irish business is awaiting the outcome of an appeal against the High Court’s refusal to sanction a rescue plan drawn up by examiner Billy O’Riordan of Pricewaterhousecoopers and backed by investor Oaktree Capital, which is prepared to put up to €48 million into the plan.

The scheme revolves around settling a €113 million bank debt with a final €25 million payment.

Mr Nabarro claims it could be possible to offer the banks a better deal, restructure the company and recover value.