Embattled funds management group MFS (now known as Octaviar) is facing more legal action, after allegations that $147.5 million was siphoned from MFS’s Premium Income Fund and lent to seven parties just months before the fund was frozen.
Octaviar confirmed yesterday that Wellington Investment Management, the new manager of the frozen Premium Income Fund, has launched legal action to recover the cash.
According to The Australian Financial Review, Wellington director Jenny Hutson – a close associate of new Octaviar executive director and major shareholder Chris Scott – claims $37.5 million of the money was lent to a joint venture between MFS and Ray Group, the property development group founded by the late Gold Coast developer Brian Ray and now run by his son Tom.
The Ray family – who were valued at $130 million on BRW’s Rich 200 in 2006 – was involved with several projects with MFS, including the developments at Port Douglas and the ski resort of Mount Hotham in Victoria.
A spokesman for the Ray Group declined to comment and referred all inquiries to Octaviar, as responsible entity for the Octaviar/Ray Group joint venture.
Octaviar’s company secretary David Anderson did not return calls before SmartCompany’s deadline. However, one source close to Octaviar has suggested that the company’s initial investigations into Hutton’s claims of a loan to the Octaviar/Ray joint venture has failed to find any record of the transaction.
MFS’ debt-ridden business model unravelled earlier this year as global credit markets as a result of the sub-prime crisis.
A creditors’ update released by the company yesterday reveals a queue of organisations lining up to claim cash from Octaviar. The tax office wants $60 million, OPI Pacific Finance (a company associated with Octaviar) has claimed $270 million, and National Australia Bank is demanding $40 million.
In addition, the Public Trustee of Queensland (PTQ) is seeking winding up orders against Octaviar and three subsidiaries in relation to unsecured notes and interest totalling approximately $351 million, with that claim to go before the Queensland Supreme Court on 9 September. Financial services company Challenger is also owed $100 million.
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