Banned bosses 'continued to run' Imperial

Administrators of the failed finance group claim that its struck-off founders stayed in overall control and defrauded creditors

Banned directors Lincoln Fraser and Jared Brook controlled the Imperial Consolidated financial services group until its £200m collapse in June this year and long after they were struck off as directors, according to the Imperial's administrators, Mazars Neville Russell. The administrators also claim that those running Imperial Consolidated defrauded the company's creditors.

Already mired in controversy, Mr Fraser and Mr Brook, the two founders of Imperial, had officially resigned as directors from the UK-based offshore finance group in April 2001. Three months later a court order was made in favour of the Department of Trade and Industry banning the two men from acting as directors of any UK company for four years, as a result of their role in an earlier failed business venture. The disqualification came into effect on 11 February this year.

The Independent on Sunday has closely reported the accident-prone antics of the Imperial Consolidated management over the last two years. Spokesmen for Lincolnshire-based Imperial Consolidated repeatedly told us that Mr Fraser and Mr Brook had nothing to do with managing the group after they resigned. Yet a report by Mazars, now filed at Companies House, reveals that The Fraser-Brook Partnership was in overall control of Imperial Consolidated until June 2002. In addition the report shows that Imperial Consolidated loaned large sums of money to other companies under the control of Mr Fraser and Mr Brook.

As disqualified directors, Mr Fraser, 31, and Mr Brook, 32, are not allowed to participate in the management of any company registered in the UK but can operate unincorporated businesses.

Asked whether Fraser-Brook exerted control over Imperial Consolidated companies up to administration, Phillip Lyon of Mazars said last week: "Yes. But if you are asking me whether I think they acted as shadow directors, I cannot reply in case that prejudices any investigation by the DTI." A DTI spokesman confirmed that "inquiries are continuing in relation to various allegations about Jared Brook and Lincoln Fraser".

If it were to be proved that Mr Fraser and Mr Brook continued to manage Imperial Consolidated despite their bans, they would face criminal prosecution by the DTI.

The Mazars report finally clarifies the complex web of companies surrounding Lincoln Fraser, Jared Brook and Imperial Consolidated. A detailed flow chart shows The Fraser-Brook Partnership at the top of a pyramid of a large number of companies worldwide.

The largest asset recorded on the failed Imperial Consolidated books is a loan of £151m to Tucaman Land Holdings, which "is part of The Fraser-Brook Partnership", states the Mazars report. There are also loans of at least £11m issued by Imperial to other "companies or organisations associated with The Fraser-Brook Partnership".

"We are not able, at this time, to comment on the detailed steps we are taking," the administrators say in their report. This discloses that lawsuits alleging fraud, breach of fiduciary duty and other causes have been filed against Mr Fraser, Mr Brook and several related parties in an effort to meet the outstanding £200m. "However, we have initiated legal proceedings against some directors, previous directors and associated organisations for the recovery of various sums. It is not appropriate to comment on the details of that litigation but it has included the making of a number of Anton Pillar orders and Mareva injunctions."

Mazars is claiming breach of duty against various officers of Imperial.

"In particular, a claim is made under Section 423 of the Insolvency Act 1986 ('Transactions Defrauding Creditors'). In addition they are claiming the misappropriation of an aircraft by Mr Fraser and Mr Brook... The eventual level of recovery for creditors will be significantly dependent on recoveries from the Tucaman loan and from associated companies," adds the report.

Neither Mr Fraser nor Mr Brook was available for comment.