Oil, shares and anger: One man vs the company he founded
Peter Garnham knew he was on to a good deal when he set up a company to drill in Cameroon. But now he's living in a council flat in Berkhamstead. Does the firm owe him anything? Mark Leftly investigates the strange history of Bowleven
Sunday 28 June 2009
In the British Legion club in Berkhamsted, a 29-minute train journey from London, a 73-year-old nurses a pint of Guinness. Peter Garnham jokes about his ankylosing spondylitis, a hereditary condition that causes severe curvature of the spine. "It adds to my Chuchillian look," says Garnham, who does indeed bear a passing resemblance to the great man.
Garnham, who lives in a two-bedroom council flat, recently suffered a bowel condition that has caused him to lose considerable weight. His 72-year-old wife works for minimum wage to support them, as they are all but penniless. He describes it as "a miserable existence".
But Garnham believes that he should be a multimillionaire. Rightly or wrongly, he is angered, embittered. Even those close to him laugh that his feeling of injustice is "probably what keeps him going". Many a true word is spoken in jest.
His is an extraordinary story that strikes at the very origins of one of the most successful companies on the Alternative Investment Market (AIM), the junior stock exchange.
The story focuses on a range of locations, from the exotic to the mundane, from Cameroon and Cyprus to Dumbarton and Tring. Prime ministers, current and former, have been drawn into what boils down to a dispute involving just a handful of seemingly obscure gentlemen.
Even more surprising is that the dispute surrounds an oil and gas producer, Bowleven, which, though worth £56m as of last Thursday, has not as yet sold even a drop of crude.
The loose cannon
Garnham was one of the original founders of EurOil, a company incorporated in 1996 that is today the main subsidiary of Bowleven. By the end of 1997, two alleged mistakes meant that Garnham was stripped of his directorship and his 19 per cent shareholding in EurOil. This stake would probably have earned him a few million pounds when Bowleven listed in December 2004. For nearly 12 years, Garnham has been fighting to get back that stake, hiring lawyers, a forensic accountant and even a PR specialist – people willing to work for no fee.
To Bowleven, there is no substance to Garnham's claims. Even if there were, the argument comes to nought: the claim is from long enough ago to be time barred. Bowleven is also known to possess legal opinions that suggest any claim would, today, account for less than 5 per cent of the company, meaning it does not have to be announced to the stock exchange.
And the company did acknowledge and detail the dispute in its Aim admission document five years ago.
However, Garnham's increasingly erratic actions could be of interest to Bowleven shareholders. Earlier this year, the company was in talks with an unnamed bidder to be sold for £130m, a big premium on shares that had tumbled as commodity prices sunk. The talks terminated in April, but only after Noble Energy was identified by the press as a likely bidder. And only after Garnham had fired off an email to Charles Davidson, Noble's chief executive.
The email described Garnham's long relationship with senior figures in the Cameroon government to whom he had promoted British exports, from designer shirts to spare parts for tractors. He claims that this work helped lead to the West African country joining the Commonwealth in 1995.
It also detailed a complaint, naming Bowleven, that Garnham had filed in Douala High Court in Cameroon. That case was thrown out in 2007, when Garnham's lawyer failed to turn up. It is still not certain that Noble was the interested purchaser, and even if it were, Garnham's fairly unstructured rant could look little more than the work of a crackpot. However, Garnham's erratic actions would surely put at risk any future negotiations.
Even Caroline Crawford, Garnham's solicitor, admits: "Peter is a loose cannon, but only as a result of his absolute belief that he has been wronged."
And what can now be revealed is that at least one of EurOil's founders, John Kennedy, a man who went on to become a Bowleven director and whose wife held 19 per cent of EurOil's shares, believes that Garnham deserves compensation.
Others fervently disagree, though it is also known that the board discussed compensation as recently as December 2005. However, Terence Heneaghan, the then chairman, and fellow directors are understood to have ruled out the move, arguing that the company owed Garnham nothing.
This is quite some dispute, and one in which every side believes that it is 100 per cent in the right.
Paphos leads to bathos
Bowleven investors passed a resolution on Friday that will see the company raise $114m to be used to appraise a recent oil discovery in Cameroon. By 2011, Bowleven could at long last be in the business that EurOil was founded for 15 years previously: producing oil.
It was late 1995 and Garnham contacted Chief Ephraim Inoni, now the Cameroon Prime Minister, to congratulate him on the country joining the Commonwealth. There was a second reason for the call: Garnham wanted to know the chances of winning an oil concession – essentially offshore sites for exploration and drilling – in the Gulf of Guinea if he formed an indigenous company. The World Bank had called on Cameroon to develop its oil assets and the then 60-year-old spied a money-making opportunity. Inoni responded that it was a good idea.
A remarkably disparate group of characters then went about creating a company to take advantage of Cameroon's oil wealth. In 1976, Garnham had got chatting to a Cameroon lawyer by the name of Chief Tabetando at a bar in Tring, Hertfordshire. Essentially they became business partners, and Tabetando would set up Euro-Cam-ba Oil, the predecessor to EurOil, in November 1995.
About a year earlier, the Garnhams had met a Scottish doctor and his wife while holidaying in Paphos, west Cyprus. They struck up a friendship and Garnham went to visit the couple in their home in Dumbarton. The doctor introduced Garnham to John Kennedy, a former bricklayer who had become something of an entrepreneur.
Kennedy essentially put teams of people together to develop projects, and worked out of the offices of Glasgow architect Cobban & Lironi. For example, Kennedy and Mark Lironi, who was then a scratch golfer, worked together on building a Holiday Inn hotel in Glasgow.
Kennedy and Garnham discussed the Cameroon opportunity. Well connected, Kennedy knew a petroleum engineer in Calgary, Don Vandergrift. Together, Garnham, Tabetando, Lironi and Vandergrift would become directors of EurOil when it was formed in early 1996. Kennedy decided against becoming a director, but continued to be involved.
The company's share structure meant that Garnham held a 51 per cent stake while Tabetando and his Cameroon contingent had 49 per cent. Later, this was reorganised so that the shares were divvied out equally.
Lironi, Tabetando and Vandergrift got 19 per cent stakes, as did Kennedy's wife. Another 19 per cent was acquired and registered in the name of a Jersey trust known as the Luxembourg Settlement, of which Garnham is the main beneficiary. Cantrust (CI), today known as Vistra (CI), is the trustee of that settlement. A further 5 per cent was given to Roger Brewster in lieu of balance of interest Garnham owed him for a loan on another venture.
The costs were tremendous. "Underdogs" – civil servants – had to be paid "tips", a common practice in Cameroon, for their help on issues such as geology and research. Telephone bills could reach £1,500 a quarter due to the calls to Cameroon, while flights were expensive. The company had still not been awarded an oil concession, and wouldn't win a permit until 1998, after Garnham had left EurOil. The company was struggling to meet its expenses and this is where the problems began.
The classic share
Kennedy estimated that EurOil needed £20,000 to keep operational. Garnham came up with £25,000, but he had done this by arranging the sale of one of his own shares for £50,000.
Garnham's landlord, the late Theodore Meyer, bought the share through his Classic Investments vehicle. The purchase was made even though it was difficult to attach any real value to the share given that the company had no assets. The other half of the money covered some of Garnham's debts and expenses. However, the other directors were not informed of the sale. Lironi says this meant that Garnham "broke the rules", and a spokesman for Bowleven adds that the sale was "made without the other directors'/shareholders' agreement".
McClure Naismith, the legal adviser to EurOil, is understood to have argued that should the company come under due diligence, Garnham's actions would be thoroughly reviewed – and dimly looked upon – by any potential joint-venture partner.
As a result, at a board meeting in Tring on 6 March 1997, Garnham resigned as a director. The minutes of the meeting record: "Peter Garnham does not wish to continue on the board due to the rigorous financial scrutiny which will be required by our funding partners."
In a statement, Kennedy, whose voice since has been badly damaged by throat cancer, says: "The punishment Peter received for selling one £50,000 share to Classic Investments was far too severe considering that EurOil received more than half the money."
EurOil was advised to find a chairman who was recognised internationally for work in the oil sector. This was to be Terry Heneaghan, another old acquaintance of Kennedy's, who was chief executive at listed oil exploration and production company Pittencrieff Resources. Heneaghan left Pittencrieff in June, and soon after started as a consultant to EurOil before becoming chairman in 1998.
Garnham says that from the March meeting onwards, he was provided with limited information on the company as he was no longer a director. For example, he claims to have been unaware of Heneaghan's involvement in 1997. He also recalls being told off by some of the other main characters for "talking too much" about EurOil's plans and prospects.
The cash call
At 8pm on a Friday night in November 1997, Garnham received a fax giving Cantrust 14 days to pay for a portion of his shares. Under the company's articles of association, directors could ask shareholders to pay for up to a quarter of their share holdings within two weeks.
Cantrust and the other four main shareholders would have to pay £24,325 each, while Brewster needed to find £6,400. Strapped for cash, Garnham could not pay for Cantrust's shares. However, he believed – and still believes – that these shares were already fully paid up. Indeed, he has in his possession a series of share certificates that state these shares were fully paid up. Garnham says that they were essentially granted to him as paid up in exchange for his work at EurOil.
The problem for Garnham is that the company's legal firm, McClure Naismith, found that a series of fully paid up shares were, in fact, issued incorrectly. Brewster thought his shares were also fully paid up and he even challenged the cash call before forking out the £6,400. Share certificates belonging to others, such as Lironi and Kennedy's wife, were also recognised as being nil paid up even if they stated otherwise.
A spokesman for Bowleven says: "The error [of shares being issued incorrectly] was established by McClure Naismith between June 1997 and November 1997, and formally corrected. The correction procedure is noted in Board Minutes dated 4 November 1997. McClure Naismith provided advice and assistance to the Board of EurOil on the procedure and liaised with local Cameroon solicitors to check that everything was correct under Cameroonian law. The company has obtained a number of opinions since then which have confirmed that to be the case."
The other directors and shareholders "capitalised loan notes" to pay off their portions of the cash call. In essence, this meant that the other shareholders did not have to stump up any cash. The expenses they had incurred were considered loans to the company and were recompensed out of share capital, covering the cash call. For example, Vandergrift had spent £37,899 in "directors and consultants expenses" as well as £62,500 in "technical expenses".
Garnham/Cantrust's failure to pay up meant his 19 per cent shareholding was deemed forfeit. The Bowleven spokesman says: "Whether there was any indebtedness due to Peter Garnham, who was no longer a director, is irrelevant; there was no indebtedness due to Cantrust and they were the registered shareholder. Presumably, Mr Garnham could have assigned his interest in any monies due to him at that time to Cantrust and thus paid up the shares that way. But he did not do so and Cantrust's shareholding was accordingly forfeited."
Heneaghan adds: "The company did everything according to law and Garnham had every chance to stump up for his shares."
In minutes dated 4 December 1997, the board did award Cantrust options on 85 shares that could be bought at £1,000 a pop at any time over the next five years, "in recognition of Cantrust's contribution to the company".
The Bowleven spokesman says that the award was made "on the basis of representations by Chief Tabetando on behalf of Mr Garnham and in recognition of his long standing personal friendship with Mr Garnham". In accepting the options, the EurOil directors believed that the situation was resolved. Charles Malet de Carteret, the Cantrust trustee, wrote to the board on 4 December acknowledging that the options were "granted in substitution for the nil paid company shares which have been forfeited".
However, that same day, Garnham sent a letter of his own stating the options were accepted "under protest". Garnham says: "I was confronted by a situation where I had to make a quick decision. I asked my solicitor what to do and he said 'You haven't got any money, accept the options, if only to stay in the game'."
Yet another dispute emerged, this time over expenses owed, with Garnham claiming £27,549.62. He later received about £5,000.
In 1999, Garnham was declared bankrupt as a result of unrelated work in Cameroon, two months after the investors had exchanged their EurOil stakes for Bowleven shares. The new company's name came from the Bow River, which runs through Calgary, and the River Leven, which runs close to Kennedy's home in Dumbarton.
A year later, Garnham was stripped of his share options. He had hired a forensic accountant, John Papi, to look into his claims. At a board meeting on 13 November, minutes show it was resolved that Cantrust would have the options cancelled from 5pm two days later unless there was "written confirmation that they [Cantrust] accept that the forfeiture of their EurOil shareholding (190 nil paid shares) was done properly and in accordance with the articles of EurOil".
Tabetando did not agree to the cancellation of the options. In a note to the board, Tabetando said: "I have a strong moral obligation to object to the cancellation of the Certificate of Share Options."
A Bowleven spokesman points out that Garnham didn't challenge the cancellation. Garnham says that by this stage, he was only interested in recovering the original shareholding.
Since then, Garnham has remained vocal, taking, and failing in, a court action in Cameroon.
In a further blow, Papi issued a deposition to the court backing the board's version of events. Papi says: "I feel extremely sorry for Peter. He's worked hard pursuing the case, but it's on the wrong premise. It's a Cantrust matter, not a Peter Garnham issue."
Garnham counters that he is the representative of Cantrust. It is also true that he is authorised by the trustees to act on this matter.
His British solicitors contacted Bowleven for information in 2003, by and large getting short shrift. Just last month, his public relations man wrote to Joe Clark, a former Canadian prime minister who is now a Commonwealth special envoy to Cameroon, asking if "he might be able to help".
Most of the main characters have left Bowleven, even if they retain a stakeholding. Kennedy, for example, resigned after falling out with other members of the board, while Heneaghan left in December 2006. Heneaghan was involved in a massive bust-up with Philip Rhind, a South African who was chief executive from 2004 to 2006. Rhind was dismissed for alleged gross misconduct. Shortly after his dismissal, he claimed to have a "red button" dossier which he passed to the Bowleven board. More than 50 pages long, the dossier is believed to have referred to the Garnham-Cantrust situation. Bowleven and Rhind eventually settled out of court.
Tabetando is the chairman of EurOil, which is listed as a 100 per cent owned subsidiary of Bowleven. A senior tribal leader, Tabetando's words carry weight in Cameroon, and he is patron of the Cameroon Association of English Speaking Journalists. Lironi's golf handicap has slipped to five, while Vandergrift, who declined to comment for this article, lives in Calgary.
Bowleven is essentially in the hands of a very different group of people. The current chief executive, Kevin Hart, admitted earlier this year that the company "was in need of resuscitation" when he took over in 2006.
Garnham continues to work on what he alleges was an unfair loss of his shares. Kennedy, who remains in his beloved Dumbarton, now openly backs him: "Peter deserves compensation for being deprived of his shares."
The Bowleven spokesman says: "The  share call was validly made. The point is that the shares were not paid up and that position was accepted at the time by all of the shareholders, including Cantrust."
But Garnham is determined to fight on. He has more letters, emails and allegations to fire off. Garnham is still around, ready to cause trouble.
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