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Brown and Mitchell left deflated by collapse of airship company

Published: 07:00 Thursday 15 December 2005
By Patrick Sherwen, Deputy Editor

(Exclusive) Former F&C fund managers Bill Brown and Robert Mitchell face losing more than £4 million in Advanced Technologies (ATG), the collapsed airship firm whose shares were involved in an illegal ‘boiler room’ investment scam.

Bluehone, Brown and Mitchell’s investment boutique, is one of the largest shareholders in ATG, which went into administration in July. Despite raising £24 million from investors since 1996 it never completed a single airship and has been in constant financial difficulty since it started. Among other things, it has been unable to pay £1.56 million in PAYE, national insurance and other tax stretching back to April 2002. It has not published accounts since October 2003.

A joint administrator, Nigel Hamilton Smith of Vantis, has been appointed to investigate any potential wrongdoing by management and what happened to the £24 million invested in ATG. He was appointed at the request of a group of creditors who include former ATG chairman Sir John Walker, formerly chairman of the Joint Intelligence Committee, and the Goldsmith family.

Last month Citywire revealed how a boiler room operating out of Spain between August 2000 and September 2001 sold shares in ATG at inflated prices. Solicitor John Martin bought the shares for between £2 and £5 less than the investors agreed to pay for them. The massive returns promised never materialised. Rod Sinclair, former deputy chairman of the Securities & Futures Authority and a director of ATG, told Citywire he knew 'not a dicky bird' about the scam as it was before his time.

In April 2000 Brown and Mitchell invested their own money in the company, trading as Airship Technologies (AT) at that point, alongside that of Friends Ivory & Sime (FIS), where they worked at the time. Brown owns 5,000 shares and Mitchell owns the same. Beneficial ownership of the FIS holding has been transferred to Bluehone. The stake comprises 5.885 million shares.

Documents obtained by Citywire show FIS bought 500,000 of these shares at 500p each and another 500,000 at 200p each but acquired the others at lower prices.

ATG heavily marketed its shares to the City and other fund managers with personal stakes include Alistair Currie, now of Premier Asset Management, with 1,500 shares, and Charles Curtis, of Deutsche Bank, who owns 15,000. In its nine-year history ATG has made a staggering 56 share issues to 600 investors without making them a penny back.

Mitchell was the lead manager on the investment in ATG. Citywire’s sources say he was attracted in by the promise of a deal with a mobile phone company. When this fell through Mitchell was offered a deal whereby FIS could obtain 4 million shares for virtually nothing. FIS is also recorded in the company documents as having lent ATG £500,000, taking its total investment to at least £4 million.

Brown mentioned the company in his Outside In column, which he wrote for Citywire at the time: 'AT is already starting talking to some very serious people about its projects. Various top brass of the US military have been looking at the heavy lifting side of operations, while AT is also in advanced discussions with a base station operator and mobile phone company about the satellite application.

'We’re very excited at the Aim Trust by AT’s prospects; we own about 3% of the company through private financing rounds and will be participating in the float which should happen around the end of the third quarter; keep an eye out for when further details get published closer to the date.'

Like the contracts, the float never materialised.

Mitchell did not return calls but Brown told Citywire Bluehone has made a provision against the potential loss of its investment. ‘It was an interesting story, an interesting opportunity during the techy boom. It all seemed like a good idea at the time.’ Brown intends to keep an eye on the administration process.

The issue of contracts is thorny. After putting the company into administration, Begbies Traynor placed an advert in the Financial Times to attract potential buyers that highlighted the: ‘Opportunity for ongoing defence contract work for the UK MoD [Ministry of Defence] and US DoD [Department of Defense]’. However, when Citywire contacted the MoD we were told that the department had had contact with ATG but was unaware of any contracts, ongoing or otherwise. A spokesman for Begbies Traynor told Citywire the advert had only meant to highlight the potential for such contracts.

Another interesting shareholder in ATG is Jaweed Al-Ghussein, former treasurer of the Palestine Liberation Organisation (PLO). Al-Ghussein, a university friend of the late PLO leader Yasser Arafat, was treasurer for 12 years until 1996 when he fled after accusations that he had borrowed $6.5 million (£3.7 million) from the organisation in 1991 and not repaid it. He denied the claims and found himself embroiled in a battle with the PLO, in which he was kidnapped twice, once from a hospital bed, and placed under house arrest by his former friend.

The Al-Ghussein family appears to be linked to at least two shareholdings in ATG comprising one block of 300,000 shares and another of 100,000.

In July 2003 ATG was offered a £704,500 grant by the East of England Industrial Development Board, which acts as an intermediary between the DTI and local businesses.

A spokesman for the DTI said that it was unaware that Al-Ghussein was a shareholder in the company. On whether it would have made any difference if it had known he said: ‘The Department does not have any record of its stance on this issue.'

Colin Nixon, group leader of the commercial services group within the Defence Procurement Agency, told Citywire he was unable to say whether anyone at the ministry was aware of Al-Ghusshein's holding. He said: 'MoD does not routinely investigate in depth shareholdings. Considering the large number of companies MoD deals with and the trading nature of shareholdings, this is not practicable as a matter of course.' The MoD does endeavour to establish that its potential contractors are financially stable however, before doing business with them.

James Arbuthnot, Conservative MP and chairman of the select committee on defence, said the case raised concerns. He told Citywire: 'The case does raise some general issues of considerable concern to the Defence Committee: the reliability of defence suppliers and the risks of dependence on non-UK-owned companies. These are matters that we expect to be addressed in the Ministry of Defence’s new Defence Industrial Strategy (to be published before Christmas), which we ourselves will be scrutinising in the New Year.'
David Smith’s column will return in March.