The Financial Gleaner on Friday presented the second in a five-part series, 'Anatomy of a crisis', an examination of the 1990s financial sector crisis. The Friday article outlined developments at Don Crawford's Century National Bank and Paul Chen-Young's Eagle Financial Network. The following is a companion piece, with recent developments regarding the legal standing of both men.
DONOVAN CRAWFORD
AN APPEAL against the judgment of the Jamaican Supreme Court is to be heard by the UK Privy Council, and apart from the hearing of special leave by Crawford to appeal, nothing else has happened in that case so far. The time lag may be significant to the eventual outcome, however, as the Supreme Court judgment is valued at some $703.3 million, with interest of $105,443.78 per day, starting from September 21, 1998.
PAUL CHEN-YOUNG
A case against former Eagle group boss Paul Chen-Young is now in its early stages in the Jamaican Supreme Court. According to court documents obtained by the Financial Gleaner, among the claims against Chen-Young are that:
Under his instructions, the Eagle Group purchased 88 per cent of the shares in First Equity Corporation (FEC), a United States securities broker incorporated in Florida, a venture outside the group's core business that eventually generated losses of some US$5.5 million.
Under his instructions, Eagle, through the aforementioned FEC, invested extensively in IBM shares. Trading in these shares was done on "margin", meaning that the group invested 50 per cent of the purchase cost of these shares and borrowed the remaining 50 per cent from the broker, Paine Webber, with interest accruing on sums so borrowed. On July 27, 1995, the board of Eagle instructed Chen-Young to sell the IBM shares and cease trading activities. The lawsuit claims that Chen-Young first sold the shares, but then, one day later, had Eagle purchased a further 190,000 shares at some US$108.69 per share. These shares were eventually sold at some US$87.10 per share, and as a result, the Eagle Group lost some US$4.1 million on the shares alone, plus some US$416,404 on the Paine Webber margin account.
Between March and April 1995, US$995,000 was transferred by the Eagle Group, on the instructions of Paul Chen-Young, to the personal trading account of Paul Chen- Young at FEC. Of this amount, the lawsuit claims that Chen-Young converted US$580,724 of Eagle's money to his own use to cover losses incurred by him on his personal trading account that he used to trade stocks on the New York Stock Exchange.
There are also several claims relating to property-related transactions, and also a claim relating to hundreds of pieces of art that the lawsuit claims belongs to Eagle, and is wrongfully in the possession of Chen- Young and related parties.
IN HIS DEFENCE
Chen-Young's lawyers have denied that he had the authority to cause Eagle to carry out these transactions without the authority of the board, that he was in fact subject to instructions from the board and therefore cannot, by law, be held accountable.
As to the charges relating to his personal account, Chen-Young's lawyers argue that the transaction is "properly documented" and the US$580,724 was money belonging or owed to Chen-Young and/or related companies.
In relation to the art, the defence state that the art has since been handed over and they had not been in wrongful possession of the art, since at all times they were prepared to hand them over.
It gets better.
Chen-Young has tendered a counter claim, charging that he is due, among other things, some 10 years worth of vacation leave with expenses, and damages for the termination of his management contract, calculated on the basis of one month per year for 14 years. This all adds up to a counter claim of some $23.2 million.
In addition, Chen-Young is also claiming that some of the art in question belongs to him and it is Eagle that is in wrongful possession of this art. Chen-Young's claim includes three years rental of paintings owned by him and used by the bank, at a rate of 10 per cent of the purchase price, plus insurance premiums. This, Chen-Young charges, is due to him by the terms of a management contract dated November 12, 1993.
