(CMR) Two Kuwait state-owned entities are suing Walkers Law Firm in the Cayman Islands and Dubai for alleged negligence regarding a fund where investors lost hundreds of millions of dollars.
Kuwait Ports Authority and The Public Institution for Social Security reportedly filed against both law firms here in the Cayman Islands Grand Court five months ago, but court documents were kept sealed. However, an amended writ filed nearly seven weeks ago was made publicly available by the Court this week.
According to the amended writ, “The Plaintiffs' claim is a derivative claim on behalf The Port Fund L.P. against the Defendants for inter alia damages arising from the Defendants' negligence and/or breach of contractual and/or common law duties in advising Port Link GP Ltd. in its capacity as the general partner of TPF in relation to the claimed fee entitlement of TPF's former investment manager, Emerging Markets PE Management Ltd., under the investment management agreement entered into between EMPEML and Pork Link dated 28 June 2007.”
“The Defendants did so in circumstances where EMPEML (1) was an existing client of Walkers, and (2) was being advised by the same individuals at Walkers in respect of the same claim.”
Court documents state that the advice given was negligent and/or in breach of the Defendants' contractual and/or common law duties to TPF. It also added that it was contrary to the interests of TPF and has caused loss to TPF and its limited partners because in relying on advice, TPF's funds were paid away to a third party without proper basis or justification.
The Port Fund was reportedly set up in the Cayman Islands in 2007 to invest in port-related assets around the world but has been accused of fraud in litigation filed in the United States and Cayman by investors, OffshoreAlert has reported.
Kuwait Port Authority, the largest limited partner in Port Fund, said it lost hundreds of millions of dollars that rightfully belong to KPA and the Port Fund's other limited partners under mysterious circumstances. The Port Fund made five investments and lost money in three.
Clark Global City, a significant greenfield airport infrastructure site in the Philippines, was one of only two investments that made money. However, the sale of the Clark Asset in November 2017 is at the core of this dispute. According to financial filings in the Philippines, the sale price was nearly USD 1 billion, but the publicly reported exit amount was only USD 496 million.
However, following the sale, the USD 496 million sales proceeds did not correspond to the much smaller sum – USD 305 million – which the Port Fund attempted to distribute.
While the proceeds should have been transferred to the Port Fund's regular bank accounts with HSBC Kuwait or Al Ahli Bank of Kuwait, instead, without KPA's knowledge, they were transferred to an account at Noor Bank in Dubai. The Noor Bank account was in the name of the Port Fund's general partner, Port Link (GP) Limited.
The UAE Central Bank froze the money upon its arrival in Dubai under suspicion of money laundering or other illicit activity until February 2019, when some of the funds were distributed to the Port Fund's limited partners.
Kuwait Ports Authority and the Port Fund's other limited partners are seeking answers regarding the USD 500 million differential between the reported amounts for the sale of the Clark Asset (roughly USD 1 billion) and the amount that was ultimately transferred to Noor Bank (USD 496 million). They also want answers about why the Port Fund has only sought to distribute USD 305 million of the USD 496 million.
The lawsuit is also expected to provide answers to kickback schemes, one of which involved Abdullah Bader Mohammed Al Shamali, a disgraced former KPA Director of Finance.