Langbar International

Langbar International originated as Crown Corporation Limited, a Bermuda company listed on London’s Alternative Investment Market in October 2003. Its stated business model was to purchase companies that were underperforming economically, improve their operations, and sell them at a profit. The investment proposition was presented as an acquisition and turnaround strategy rather than as a consumer-facing product business. The company’s financial presentation was built around a purported investment by Lambert Financial Investments. Lambert was said to have purchased 59% of Crown Corporation for $570 million. A $275 million certificate of deposit attributed to Banco do Brasil was presented as part of the consideration, with a further $295 million allegedly payable later. The certificate was fraudulent, and the additional funds were never delivered. Other shareholders also failed to pay for their subscriptions. Nevertheless, Crown Corporation continued to communicate an increasingly substantial financial position to investors. In 2005, Stuart Pearson, the head of Langbar Capital, became involved. Pearson was taken to Brazil and exposed to a carefully arranged presentation intended to make the company’s financial claims appear credible. His investment firm merged with the company, which then changed its name to Langbar International Limited. Pearson subsequently made market statements indicating that the relevant funds had been released from Brazil. Those statements helped support a rise in the company’s market value and encouraged additional investment. The market’s confidence quickly deteriorated. Trading in Langbar shares was suspended in October 2005 when doubts about the company’s assets and funding became public. The company then collapsed, with investor losses reported at approximately £100 million. The case was treated as a pump-and-dump fraud: the company allegedly promoted assets it did not possess in order to support its market valuation and attract buyers. The collapse triggered investigations by the Serious Fraud Office, the City of London Police, and accountancy disciplinary authorities. It also resulted in numerous civil claims in the High Court. Nabarro Wells, an adviser to Langbar, was fined £250,000 in 2007 for due-diligence failures. In 2008, shareholders secured a reported £30 million settlement from Rybak and members of his family after a lengthy evidentiary hearing. The Serious Fraud Office pursued suspected participants across several countries, including arrests in Spain and Switzerland. Avi Arad, described in contemporary reporting as a central alleged conspirator and the head of Lambert Financial Investments, died of a heart attack during the investigation. Pearson became the principal remaining focus of the prosecution. The case examined whether he knew that the funds were fictitious or unavailable and when he learned of the problem. Evidence included a warning from a Banco do Brasil banker at the bank’s London branch that there was no record of the money attributed to Lambert. In 2011, Pearson was convicted on three counts involving misleading, false, deceptive, or reckless statements. He was sentenced to one year in prison and barred from serving as a company director for five years. The SFO determined that confiscation proceedings could not be pursued because the conviction concerned recklessness rather than dishonesty and because Pearson had also lost money in the collapse. The Langbar affair became a significant AIM governance case. It exposed weaknesses in the verification of claimed assets, the assessment of investment funding, and the work of advisers supporting admission to a public market. Its legacy was closely associated with calls for stronger admission and disclosure requirements, even though Langbar itself was not a conventional product or service brand.

• 2011

  Pearson convicted

  [1]Langbar Internationalen.wikipedia.org

  Stuart Pearson is convicted on three counts concerning misleading or reckless statements about the company’s purported funds.

• 2008

  Shareholder litigation settlement

  [1]Langbar Internationalen.wikipedia.org

  Shareholders receive a reported £30 million settlement in claims against Rybak and members of his family.

• 2007

  Adviser disciplined

  [1]Langbar Internationalen.wikipedia.org

  Nabarro Wells is fined £250,000 for failures in due diligence related to its work for Langbar.

• 2005

  Name change to Langbar International

  [1]Langbar Internationalen.wikipedia.org

  Crown Corporation changes its name after merging with the investment firm associated with Stuart Pearson.

• 2005

  Trading suspension and collapse

  [1]Langbar Internationalen.wikipedia.org

  Trading is suspended after questions emerge about the company’s stated assets and funding, followed by the company’s collapse.

• 2003

  Crown Corporation Limited joins AIM

  [1]Langbar Internationalen.wikipedia.org

  The Bermuda-registered predecessor of Langbar International is admitted to the Alternative Investment Market in London.

Presented to investors as an acquisition and turnaround investment company, but later associated with a major public-market fraud.

• 2011

  Criminal conviction of Stuart Pearson

  Pearson was convicted on three counts involving misleading, false, deceptive, or reckless claims about the existence of the company’s funds.

  Source

• 2005

  Purported assets and funding proved fraudulent

  The company’s public-market valuation relied on claimed assets and funding that were not available. The certificate of deposit attributed to Banco do Brasil was fraudulent, and promised shareholder payments were not made.

  Source

• 2005

  AIM share fraud and collapse

  Langbar was described as a pump-and-dump operation in which the company promoted assets it did not possess, leading to a suspension of trading and substantial investor losses.

  Source

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• 2005

  Merger with Pearson-associated investment firm and rebrandingM&A

  Background

  Stuart Pearson’s investment business became involved with Crown Corporation after he was shown material intended to validate the company’s financial claims.

  Action taken

  The investment firm merged with Crown Corporation, which adopted the Langbar International name.

  Aftermath

  Pearson made statements that the purported Brazilian funds had been released. The company’s value rose temporarily before trading was suspended and the business collapsed.

  Source

• 2005

  Expansion of claimed investment activityStrategy

  Background

  Crown Corporation was presented as an acquisition and turnaround vehicle, while its financial communications increasingly emphasized large purported assets and transactions.

  Action taken

  The company continued to promote its claimed financial position despite serious shortcomings in shareholder payments and the authenticity of the certificate of deposit.

  Aftermath

  The disclosures contributed to investor participation and a higher market valuation, followed by regulatory scrutiny, suspension, and collapse.

  Source

1. 1Langbar Internationalen.wikipedia.org