Morgan Grenfell `was aware of Young's activities'

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The Independent Online
Executives at Morgan Grenfell Asset Management failed to spot irregularities in the activities of Peter Young, the disgraced fund manager, despite knowing about the trades involved more than a year ago.

This failure to act is understood to be the reason why the parent company, Deutsche Morgan Grenfell, decided last week to sack five senior directors in the asset management arm, including its chief executive, Keith Percy. It may also lead to the industry regulator, Imro, taking a tougher disciplinary line with Morgan Grenfell.

The disclosure that Mr Young's activities were known to executives in the company's compliance department in 1995 comes as Morgan Grenfell directly accused him of fraud for the first time.

Mr Young is said by DMG to have diverted money for his personal benefit through Russ Oil & Technology, a Luxembourg "brass plate" company which he set up in December 1995.

In a document filed by DMG last week to the Securities and Exchange Commission in Washington, Mr Young is said to have received a pounds 350,000 loan from Russ Oil to help him buy his pounds 450,000 home in Amersham, Buckinghamshire.

DMG's mandatory filing to the US regulator follows the company's discovery that it owns 12 per cent of Solv-Ex, an American venture extracting oil from tar sands. Mr Young is said to have bought shares in the company with cash supposedly earmarked for the European market.

Investigators believe that at least one of the five executives sacked last week knew as long as a year ago that Mr Young was investing heavily in unlisted securities. It is understood that this is the main reason why Mr Percy and Michael Wheatley, compliance director at Morgan Grenfell Asset Management, were sacked last week.

Graham Kane, managing director of Morgan Grenfell Unit Trust Managers, Glyn Owen, chief investment officer for the international division of Morgan Grenfell Asset Management, and Paul Ebling, one of the firm's compliance officers, were also dismissed.

Two funds managed by Mr Young and a third run by another fund manager were suspended for three days in early September while Morgan Grenfell began the process of unravelling the investments made by Mr Young.

They established that in July 1995 he had started setting up a series of Luxembourg shell companies, apparently to hide the extent of his investments in unlisted securities. According to regulations, funds cannot hold more than 10 per cent of their assets in such securities. Morgan Grenfell said it became aware in April 1996 he had broken these rules and he was ordered to reduce his holdings.

Imro did not become involved until August when the Securities and Futures Authority, another regulator, alerted Imro after an investigation into a broking firm which dealt with Mr Young.

Morgan Grenfell kept selling the funds to investors up to their suspension and is now working with Imro to establish if compensation is due to the 90,000 investors who had stakes in the funds. The company's continuing investigation has revealed that it owns such large stakes in a number of high-technology companies that it may be forced to mount takeover bids for them.

Mr Young, who has had his assets frozen, said he gave details of his investments to Morgan Grenfell and his managers did not scrutinise his work.

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