Financial Times Europe - 06.09.2019

Friday6 September 2019 ★ FINANCIAL TIMES 13

COMPANIES

TA B BY K I N D E R A N D K AT E B E I O L E Y
LONDON

On an overcast October afternoon in
Miami, a text message appeared on the
phone of Daniel Hall, a corporate debt
collector working forBurford Capital.
“Getting what you need on Friday... ”
it read. The next day a second text fol-
lowed: “Do you want to meet up today. I
havetheflashdrive.”
The files on the drive, handed to Mr
Hall at a restaurant in South Beach,
included sexually explicit material fea-
turing oil billionaireHarry Sargeant III
and a “successful businesswoman in a
heavily regulated industry that is repu-
tation sensitive”, as court filings would
laterdescribeher.
The handover in October 2016 has
sparked a legal battle on both sides of
the Atlantic, shining a light on shadowy
work carried out by Burford, whose
£4bn valuation had made it the biggest
stock on the UK’s junior market, Aim,
until a recent skirmish with short-seller
MuddyWaters entitssharesplunging.s
Although best-known for funding liti-
gationinreturnforacutoftheproceeds,
Burfordhasasmallerbusiness,inwhich
it chases assetsof wealthy individuals
who have attempted to shirkfinancial
obligations.
“Wehelpclientsjumpoverthefactual
and legal hurdles that stand in the way
of them recovering money once a judg-
ment or award in their favour has been
made, but the opponent hides assets or
simply fails to pay,” Burford’s website
advertisingtheservicereads.
Mr Hall, who has been co-head of the
asset tracing division since 2015, has
established a reputation for recovering
from delinquent debtors assets such as
polo horses in Argentina, a yacht
dockedinMonaco,awebdomaininCal-

ifornia and a parking space in London.
The trip to Miami was only his latest
attempt to enforce a $28.8m judgment
on Mr Sargeant, a former fighter pilot,
who supplied jet fuel to the US military
during the Iraq War and belongs to the
wealthyfamilybehindSargeantMarine,
alargeasphalttradingcompany.
He had been looking for ways to seize
the money for months. The promising
text had been sent to Mr Hall by a
woman working for Mr Sargeant’s
brother. The brothers have feuded over
the family business, a long-running dis-
pute which has itself spilled over into
court.
“Still cringing after seeing those pho-
tos and videos,” Daniel Sargeant’s asso-
ciate texted Mr Hall five hours after the
handover.
Mr Hall replied: “Yeah, they are
pretty real. Will take a while to scrub
thatfromthememory.”
In litigation in the US, Harry Sargeant
has accused his brother and Mr Hall of
illegally accessing his private material,
which had been stored on a corporate
server belonging to the family business.
A court document filed by Burford said
“merely receiving the material... is
not unlawful”. The court dismissed Mr
Sargeant’s claims in March, stating he
had “not pled a plausible claim that he
retained a reasonable expectation of
privacyinthedigitalfiles”.
That is not Burford’s only legal head-
ache in the case. To get hold of the mate-
rial on Mr Sargeant, Mr Hall exchanged
it for other documents including bank
statements related to Venezuelan busi-
nessmagnateWilmerRuperti.
Mr Ruperti claims that material was

confidential and has suedNovoship, a

Russian shipping company, which had

contracted Mr Hall to investigate Mr

Ruperti. Novoship, in turn, has sued Mr

HallandBurford orupto$91m.f

The complex case raises questions on

thevalueofthebusinesstoBurford.The

potential market for asset recovery is

vast owing to the scale of pending arbi-

trations worldwide and the number of

cases in which defendants refuse to pay

orhideassetstoevadecourtorders.

In his review of the England and

Wales civil courts system in 2016, Lord

Justice Briggs called the enforcement of

civil judgments and orders “the Achilles

heelofthecivilcourts”.

But the business has reputational

risk. Although much of the work is

highly technical, such as tracing third-

party receivables,asset recovery s con-i

troversial because tactics in some

instances can include inducing former

staffers to break confidentiality agree-

ments, mining personal and financial

data,orpayingsourcesforinformation.

Nick Rowles-Davies, a former manag-

ing director of Burford’s UK business

and now vice-chairman of rivalLitiga-

tion Capital Management, said: “You do

get some people peddling judgment

enforcement who say they can get

access to bank accounts and informa-

tion that you just wouldn’t want to

touch.”A former colleague of Mr Hall

said: “He’s got sharp elbows and a lot of

ideas. But the environment of tracing

assetsforalistedcompanywhereyou’re

driven by the bottom line encourages

risk-taking that could blow up in your

face.”

Headded:“Itdidn’tsurprisemewhen

I heard about the sex tape. You use what

information is at your disposal in this

line of work and Dan as much as anyone

would.”

Mr Hall, an Oxford graduate who

joined a corporate law firm in London

before moving into private investiga-

tion, dismissed the legal action against

him, saying hat “often debtors use pub-t

lic slurs and other tools to avoid being

parted from money due under a court

order”.

The spat over the explicit material

could be seen as an inevitable conse-

quence of Burford Capital opting to run

high-stakes and often high-risk investi-

gationservicesinternally.

The sector is dominated by investiga-

tions firms populated by former spies

and intelligence experts. Burford Capi-

tal is the only major litigation funder to

keep an asset tracing and recovery team

in-house, competing with specialists

that includeKroll, which is owned by

professional services firmDuff &

Phelps,Control Risks,GPW nda Pinker-

tons.

Mr Hall’s team, which includes Rob-

ert Capper, a former British intelligence

officer who was based at GCHQ, also

provides its services to law firms on

casesthatBurfordhasnotfinanced.

Aside from reputational risks and

conflicts, the business appears to make

little contribution to Burford’s profits,

partly due to the labour-intensive

nature of the work. The division

accountedfornetrealisedgainsof$1.7m

in 2018 compared with $155m gains

from its core investments business. In

the first half of 2019, Burford booked

just $85,000 in net realised gains from

itsassetrecoverydepartment.

However, the unit has been essential

to securing awards owed to Burford as

part of its core business. That included

wresting $33m from Mr Sargeant on

behalf of his former business partner

MohammadAl-Saleh. urfordbookedaB

$12.1m profit but that sum flowed into

thecorelitigationfinancedivision.

Christopher Bogart, chief executive of

Burford, said: “Enforcing judgments is

corebothtotheintegrityofthelegalsys-

tem and the success of a litigation

finance business. In some cases, scof-

flaws try to evade payment of court

judgmentsandtheirobligations.”

Mr Hall seems undeterred by the

challenges. One of his trickiest out-

standing cases involves Luna, a 380ft

yacht worth $490m and owned by Rus-

sian oligarchFarkhad Akhmedov. Bur-

fordisworkingwithMrAkhmedov’sex-

wife to recover assets from her husband

under a contested £450m divorce rul-

ing, providing financing of £18m for a

sliceofupto30percentofanyresults.

The yacht, which has two helipads

and once belonged to the Chelsea foot-

ball club owner Roman Abramovich,

was impounded in Dubai in an initial

victory for Mrs Akhmedova and Bur-

ford, but in March local courts ordered

itsrelease.

Burford’s Mr Bogart said: “We have

neverhadawinwe’vefailedtocollect.”

Sex tape highlights risks of Burford sideline

Legal battle with US oil tycoon raises questions over value of the litigations funder’s asset recovery activities

Sources: company; Refinitiv

Burford Capital

Asset recovery unit’s realised gains (m)





 

Annualised

Share price performance ()







    

US short-seller Muddy

Waters attack

   

S O N G J U N G - A —SEOUL

Samsungwill start sellingthefirst
foldable smartphone ni Koreatoday,
promising that the screen defects
that marred itsApril launchhave
been fixed.

Thegroup hopes that thephone illw
become part of a family of folding
devices, and is betting that it can revive
slowingsmartphonesales.
Thedevice, priced at just under
$2,000, opens like a book to give users a
screenthesizeofasmalltablet.
Samsung has extended the smart-
phone’s protective layer beyond the
bezel to stop usersremoving it and
added protection caps on the fold’s
hinges to protect the device from
externalparticles.
It said that it had extensively
tested the phone over the past five
months to make sure that initial

problems with breaking screens did

notrecur.

Thelargest smartphone maker is

keen torestore itsbrand image ith thew

Galaxy Fold, hopingthe devicewill be a

driving force or sales growth in a slug-f

gish global smartphone market herew

mostphoneslookthesame.

“Consumers have responded posi-

tively to larger screens, and the Galaxy

Fold’s revolutionary form factor offers a

bigger, more immersive screen without

sacrificing portability,” said DJ Koh,

chiefofSamsung’smobileunit.

ThephonewillbedisplayedattheIFA

consumer electronics trade fairtoday,

ahead of its planned international

launchthismonth.

Samsung will relaunch the Galaxy

Fold smartphone in the US on Septem-

ber27,justdaysbeforeApple ntroducesi

itsnewiPhone.

Huaweilast month delayed its

planned September launch of its own

first foldable phonefor the second time

thisyearamidUStraderestrictions.

Samsung’sphone will feature a large

7.3-inch screen which, when open, will

allow the continuity of an app’s display

betweentheoutsideandinsidescreens.

Samsung had planned to sell about

1m units of the product before the

delayed launch, but analysts now

estimate its production at about

40,000units.

“The redesigned product looks much

better. They seem to have blocked any

chances of defects recurring,” said Kim

Young-woo,ananalystatSKSecurities.

Technology

Samsung pins growth hopes on folding phone

‘Often debtors use public

slurs and other tools to

avoid being parted from

money due’

Daniel Hall, left,

received the sex

tape during his

pursuit of a

settlement from

Harry Sargeant

III. Right,

Burford’s

London office

Rob Stothard/

Alamy/Reuters/FT

Samsung has

redesigned its

Galaxy Fold after

defects halted the

device’s initial

rollout in April

‘Enforcing judgments is

core to... the legal

system and success of a

litigation finance business’

More on ft.com

For the latest news, comment

and analysis on the financial

services sector, go to

ft.com/financials

SEPTEMBER 6 2019 Section:Companies Time: 5/9/2019- 19:03 User:jon.wright Page Name:CONEWS2, Part,Page,Edition:EUR, 13, 1