SFO investigates missing millions at Total Asset Finance

THE Serious Fraud Office is investigating the collapse of  Warrington-based lender Total Asset Finance which has gone out of business owing Belgian bank KBC more than £130m.

Details of the investigation are contained in a new report filed by three partners from the restructuring arm of Deloitte into the collapse of Total Asset Ltd, which traded as Total Asset Finance.

It shows that the company, which traded as Total Asset Finance, owed £133m to its principal funder, KBC Capital.

Concerns at the Belgian-owned bank led to an investigation during the third quarter of 2010 into contracts held between Total Asset Finance and H20 Networks, which at the time was part of Haydock-based i3 Group.

Total Asset Finance was the principal funder of H20 Networks and had forwarded loans provided by KBC Lease UK worth more than £91m to the company. The loans were issued through a receivables funding agreement on contracts which it was claimed had been issued between H20 and third party customers.

Following KBC’s investigations, the administrators’ report states that it obtained an injunction to freeze assets worth £24m belonging to Total Asset Finance and its sole director, Steve Dartnell, in October last year.

“The SFO entered the company’s registered head office on 17 November 2010 and secured various books and records,” the report said. 

i3 Group installed fibre-optic networks providing super-fast broadband networks via sewage systems. 

Until recently, it had been owned and run by founder Elfed Thomas, who was last year named as Technology Entrepreneur of the Year at Ernst & Young’s Entrepreneur of the Year awards for the North & Midlands region. Mr Dartnell had served as a non-executive director of i3 Group, but Companies House records state that he resigned in November 2010.

An announcement on i3 Group’s website states that it recently sold the shares in H20 Networks and sister companies Opencity Media and Wireless Network Solutions to Fibre City Holdings Ltd – a new business owned the former President and COO of i3 Group, Greg Mesch.

i3 Group is still trading, however, and Thomas remains as its chief executive. The Group also retained most of the company’s international assets, including stakes in i3 America, i3 Asia Pacific and i3 Europe.  

The report into Total Asset’s collapse by joint administrators Dan Butters, Neville Kahn and Angus Martin states that the trio will investigate whether there had been any “misfeasance or breach of duty” as part of its role in considering the conduct of directors, and whether the company had entered into any “antecedent transactions”. 
Following their appointment on January 24, administrators laid off 12 of Total Asset Finance’s 15 staff, including Dartnell.

The administrators are also in talks with H20 Network’s new owners regarding the settlement of the money owed to Total Asset Finance.

When contacted by TheBusinessDesk.com yesterday, Dartnell said that “the supplier has caused the problem”. However, he said that legal issues prevented him from going into further detail, other than to say that he resigned from i3 Group in June 2010.

KBC yesterday issued a statement to the Belgian stock exchange stating that it first noticed “irregularities” when it was preparing to sell its UK receivables business last year. 

It added that the issue had been undetected for so long due to actions taken by a former KBC employee. The bank said that it informed the relevant authorities as soon as the irregularities were discovered.

City Fibre Holdings’ chief executive said: “City Fibre Holdings and its management team are not the subject of any investigation. The company is focussed entirely on reorganising the companies and the financial structures that it has inherited. This critical restructuring of these newly purchased businesses will ensure that they can continue to be leaders in fibre-based next generation access networks.” 

The SFO was contacted, but declined to comment.