Case study: Join venture fraud (InvestControl)


The challenge

A medium size continental company has a J/V in Asia where the partners appear to be working for their own benefit. The local partners are well connected with the local authorities and are represented by a first class lawyer similarly “connected”. They manage the business directly since the foreign majority partner has never delegated one of its own representatives to work locally within the company and they are on the verge of signing a significant contract for a specific project. The client has reasons to believe that the J/V’s reference (hence these of the foreign partners) have been used to procure the project but that, ultimately, said project will be managed through another company belonging to the main local player thus defrauding the J/V of revenue. The foreign partners have tried to no avail to convince the local partner to sell back his shares so as to allow the J/V to be properly managed once again. The local partner refuses. Not being present in-country and not feeling comfortable enough to fight this alone, the client calls upon AGR to assist them.

Our approach

AGR immediately puts in place a multipronged action plan, keeping the client’s lawyer involved in order to coordinate the investigation and the negotiations with possible legal actions to be engaged by our client against its partners. A full due diligence into the activities of the J/V is launched including approaches to the J/V ‘s clients, especially the one with whom a major contract is being negotiated, the J/V’s partner’s activities within the past 1 year, whether he has direct or indirect interest in other companies involved in the same business, etc… Simultaneously, a direct approach to the partner is arranged and he is being advised that signing over his shares to the foreign partner at a reasonable price would be in everybody’s best interest and would avoid any untoward activities of his to be revealed. Contact is also established with the Police since Criminal Breach of Trust is a possible crime having been committed by the local partners. Within 1 month, this dispute which had been going on for more than a year was resolved to the satisfaction of all parties involved. Our client then took back control over his business activities in this country.

The impact

A client cheated by his partner was able to wrest back control of his affairs and is now successfully operating in that country without having to contend with unsavoury partners.

What the client valued

The swift reaction of AGR together with our understanding of the local legislation and our capacity to quickly uncover illegal activities spearheaded by the local partners and going against our client’s interest. Our strong support during the negotiations leading to the client recovering his shares.

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