10/04/2013
NEWS STORY
Last month Pitpass' business editor Christian Sylt broke the news that Andrew Ruhan, one of Britain's wealthiest property developers, had joined the board of the Lotus Formula One team. It was quite a revelation and not only because Ruhan could provide the team's owner Genii Capital with an exit which it is rumoured to be looking for.
The other reason why the news was noteworthy is that little is known about Ruhan with the Sunday Times describing him last year as "the most successful property tycoon you have never heard of." Becoming a director of an F1 team is a quick way to address that perception and, coincidentally, Ruhan has been in the news this week for the first time since Sylt revealed his seat on the board of Lotus F1. This time the coverage wasn't anywhere near as positive.
The article was in London's Evening Standard newspaper and it reported that Ruhan is being sued for £100m in the High Court by the family of Gerald Smith, one of his former business associates who is also one of Britain's most notorious conmen. It concerns a deal which allegedly made Ruhan more than £250m in profits and if that is the case then he could be just the suitor which Lotus is believed to be looking for.
Smith was sentenced to eight years in prison in 2005 for defrauding £35m from IT firm Izoldia and the Standard reported that many of these millions should have gone to City institutions controlling pension funds. Instead it said that £1.8m of the proceeds was used by Smith as a deposit for a yacht with £100,000 spent on refurbishing his Jersey home.
Smith was released after four years but his punishment did not end there. He is reportedly serving a 15-year ban from being a company director and has been ordered to repay £41m under a 2007 court confiscation order. The Standard claims that Smith is banking on the £100m court action against Ruhan to help clear the debt. It adds that the writ against Ruhan has been issued in the name of Orb ARL, a Jersey-based company connected to Smith's wife Dr Gail Cochrane, and their two daughters, since they are the sole beneficiaries of its entire share capital.
They claim that Ruhan was involved in a verbal contract with Smith in a deal to buy 37 hotels, three of which had been earmarked for conversion into flats, with the promise of "very significant profits". In May 2003 Ruhan allegedly made a verbal agreement to pay Orb and others a share of his "development of those assets", some of which were sold on in 2006 and 2008.
According to the Standard, the writ says that "while the deal struck between the parties was later partially recorded and given effect by complex written commercial transactions, the key facet of their deal was agreed orally." It adds that "the claimants would share in the net financial benefits realised from the development and disposal of the assets to be sold by (Orb) to Mr Ruhan. Yet despite now having made profits in excess of £250 million from the project…Mr Ruhan has failed to account to the claimants for their respective share."
In response, Ruhan told the Standard that a verbal contract for such a sum is highly unlikely and no such promise to Smith had been mentioned in any memo, email or letter. It quotes a spokesman saying: "Mr Ruhan asserts the claims against him are spurious and entirely without merit. The legal action will be defended vigorously."
Orb has reportedly agreed that if it is successful, Smith - "in return for his co-operation and assistance with the action" - will receive 50% of whatever the court orders Ruhan to pay, "up to the amount" he owes under the confiscation order. No doubt Lotus will be watching the case closely.