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Black might face fraud charge

Date: Thursday, November 26, 2009
Author: Paul Delean, Montreal Gazette

Case involves Bermuda fund. Swiss investors have filed two lawsuits

Montreal money manager Hans Black is in hot water in Bermuda.

Bermuda newspaper The Royal Gazette reported that police in the tax haven have recommended he be prosecuted for allegedly defrauding a client of $6 million. The decision to proceed or not is now in the hands of the director of public prosecutions.

The case involves a hedge fund managed by Interinvest Bermuda Ltd., the Bermuda office of the global management company of which Black is chairman and chief investment strategist.

Client Regula Dobie, a Swiss national living in Kenya, sent Interinvest's Bermuda office $6 million to invest in the fund in 2004 and 2005, and attempted to withdraw it, without success, in 2007. She obtained a summary judgment this summer in the Supreme Court of Bermuda for $5 million, plus damages and interest.

The court said Black's company had no defence for failing to repay the money Interinvest maintained the money was sent "without prior notice or sufficient instruction," thus invalidating an investment agreement Dobie signed in 2004, the Royal Gazette reported.

The case is still before the courts and there has not yet been a "final determination," Interinvest Consulting Corp. of Canada Ltd. said yesterday in a statement.

Black, who has a doctorate in medicine from McGill University, also faces a civil suit in Quebec from another Swiss client claiming to be owed $2 million.

"The lawsuits arose from a commercial disagreement in the normal course of business and Interinvest Bermuda will continue to argue its case vigorously," the company said.

In a telephone message yesterday, Black called the situation "very unfortunate" and said the two cases involve long-term investors and hedge funds in the process of being wound down that contained both liquid securities and private-equity positions.

"Both of these individuals have obviously tried absolutely everything they can to get what they believe is their investment back, claiming they didn't know about the private equity," said Black, an oft-quoted media source and board member for several community organizations including the Montreal Symphony Orchestra, Montreal Cardiology Institute Foundation and Fondation Jeunesses Musicales du Canada.

Founded in 1974, Interinvest has offices in Montreal, Zurich, Boston and Bermuda. It describes its management style as conservative and risk-averse, and said all assets managed by Interinvest Consulting Corp. of Canada Ltd. are held by reputable, independent third-party custodians.

"Interinvest has a 20-plus-year track record of providing prudent financial advice to clients who have, in general, expressed a high degree of satisfaction with our advice and performance. Our average account is up 40 per cent this year," the company said.