By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was last night facing serious questions over Grand Bahama’s proposed $5.5 billion oil refinery, after the project’s chief promoter confirmed his involvement in two lawsuits alleging misuse of investor monies.

Peter Krieger, Oban Energies’ non-executive chairman, told The Tribune he was one of three defendants who were accused of misappropriating more than $3.7m of investor monies by US government regulators.

That lawsuit, which was filed by the Securities & Exchange Commission (SEC) in 2005, was settled without going to trial some three years later. Mr Krieger, who challenged the allegations against him, paid a $110,000 civil penalty “without admitting or denying” the claims, and agreed to be bound from committing future securities law violations.

And, following further research by The Tribune, Mr Krieger confirmed he was also named as a defendant in a legal action filed in 2013 by the Bahamas-based judicial manager for a sister company of the insolvent insurer, CLICO (Bahamas).

John Lopez, the KPMG (Bahamas) accountant who took over British American Insurance Company (BAICO) in the wake of its collapse, and that of its CL Financial parent, alleged that Mr Krieger misappropriated $8.7m of the company’s funds for his own personal use.

The case against Mr Krieger, though, was dismissed on a technicality, as it was “time barred” according to the “statute of limitations” that applies in the US.

The Oban Energies principal yesterday said the claim against him had subsequently been defeated in the appeals courts, and added: “They really have no grounds to stand on.”

Mr Krieger argued that he was the injured party, given that BAICO had failed to fully pay him the purchase price for 14,000 acres of land he sold to the insurer prior to its failure.

He alleged that he had obtained a $70m judgment against the company, and that the judge had “scolded them for perjury and making these outrageous claims against me, and dragging my wife into it”.

However, The Tribune could find no record of the case or judgment, which Mr Krieger said he had filed in the middle district Florida court, despite an extensive search of that court’s case database.

The Oban Energies principal, alive to the potential fall-out, said he hoped revelations of his past would “have no effect” for Oban Energies’ $5.5 billion oil refinery/storage terminal project given that it had just signed a Heads of Agreement

for the Minnis administration on Monday.

Promising future announcements about the involvement of “major international energy companies” with the development, Mr Krieger also sought to downplay his role and importance by stressing he was not part of Oban’s executive management team.

He described himself as “more of an ambassador for the company”, and said his role would be “extremely limited” once Oban Energies obtained all the necessary government permits and approvals.

Mr Krieger’s comments, though, will likely fuel further suspicions about the viability of Oban Energies’ proposal, given that its executive team appears to have minimal experience in dealing with major, multi-billion dollar infrastructure projects.

They also give the impression that Oban is seeking to obtain a Heads of Agreement with the Government, then use this as leverage to round-up capital and partners by marketing the project as a ‘go’ to potential industry investors and partners - possibly even ‘flipping’ it to a buyer.

There are likely to be major questions asked as to whether the Minnis administration conducted sufficient due diligence on Oban Energies, given its desire to spark an economic revival on Grand Bahama.

The Government’s normal practice is for the Bahamas Investment Authority (BIA) and National Economic Council to use Interpol and other established sources to conduct background checks on the principals involved in foreign direct investment (FDI) projects, ensuring they have clean records and no criminal past.

When asked by The Tribune whether the Government had been made aware of his involvement as a defendant in the two ‘investor monies misuse’ cases, Mr Krieger did not directly answer but instead sought to switch the conversation to another topic.

He described the SEC action, filed against him and his father, Sheldon Krieger, in April 2005 as “a very embarrassing incident in my life”, but blamed it on the actions of staff in his financial services business that had grown beyond a size he could control.

The US federal regulator had accused the duo, and one of their employees, John Madey, of “misappropriating more than $3.7 million of investor funds” from a “defunct hedge fund” they ran, called the KFSI Equity Fund.

The fund allegedly raised more than $7.5 million from 45 investors between June 1999-December 2000, with capital solicited through their registered broker/dealer, Krieger Financial Services.

The SEC alleged that Mr Krieger and his father “told investors they would generate returns by trading in securities. In the second quarter of 2000, however, the defendants began diverting KFSI Fund investor funds to run Krieger Financial and pay their own personal expenses.

“To conceal their illicit activities, the Kriegers and Madey issued false KFSI Fund investor statements throughout 2000 that materially overstated the value of customer accounts. Numerous investors invested additional money in the KFSI Fund after receiving these inflated account statements,” the SEC claimed.

“When these fraudulently obtained cash infusions failed to cover the defendants’ personal expenses and the operating expenses for the KFSI Fund and Krieger Financial, the Kriegers and Madey defrauded investors again by promoting fictitious bonds and promissory notes. Ultimately, these investments could not sustain the Fund or Krieger Financial, and both ceased operating in January 2001.”

The SEC alleged that Mr Krieger himself used $160,000 of investor monies to pay credit card bills for “dental visits, taking his pets to the veterinarian, designer clothing, jewellery, and high-end home entertainment systems”.

Confirming that he was the defendant in the action, Mr Krieger yesterday told The Tribune that the events targeted by the SEC occurred when he was between 22 to 24 years-old.

“I was both fortunate enough and unfortunate enough in having very quick success in building a very large financial services firm,” he said, explaining that its growth benefited from the ‘dot.com’ bubble of the late 1990s.

“We were able to show incredible returns for high net worth individuals,” he added. “In a year to year-and-a-half we went from starting a company by myself to having 75 employees.”

Describing himself as “extremely immature” at that stage, Mr Krieger said he found the enlarged company hard to manage and supervise. He added that the problems resulting in the SEC lawsuit stemmed from a group of employees “running a fund”, who were “not accounting properly” for the buying and selling of options they were trading, and inflated its actual performance to enjoy improved compensation.

While the SEC lawsuit did not attribute the problems to Mr Krieger’s employees, the Oban principal said he settled quickly with the regulator and ensured that investors affected were made 100 per cent ‘whole’.

“My name was on the papers, my name was on the documents and the buck stops at the top,” he told The Tribune. “I’d never been in trouble before that. It scared the s* out of me.

“I think the SEC found they were dealing with a young, immature kid that really screwed up. That shouldn’t take away from the seriousness of what happened. We really screwed up and resolved it as quickly as possible.

“Success is difficult to handle. An immature kid made a serious mistake, but no one was affected financially. No one felt any harm from it, but that detracts from the mistake I made and I don’t want that to be the case.... It was an embarrassing moment in my life. I’ve never been in trouble before, and never been in trouble since. I’ve never been to the principal’s office as a kid.”

But, when The Tribune immediately brought up his appearance as a defendant in the case brought by BAICO’s Bahamas-based judicial manager in 2013, Mr Krieger replied: “Oh, I’m glad you’ve brought that up.”

Mr Lopez and his attorneys alleged that BAICO had invested a total $10.25 million with a Florida-based investment fund, the Corban Fund, for which Mr Krieger was the director of operations, prior to its collapse.

The monies were never returned to the judicial manager despite repeated requests, and Mr Lopez and his US attorneys subsequently filed a lawsuit alleging that some $8.7 million was transferred from the Corban Fund’s accounts in 23 transactions to accounts belonging to Mr Krieger and his wife, Marla.

Mr Krieger, though, told The Tribune he was the aggrieved party, and had launched litigation against BAICO himself to recover monies he claimed were due to him prior to the company’s collapse.

He said he obtained a $70 million judgment on the balance of a purchase price owed to him for selling a 14,000-acre tract of Florida land to the insurer, and said of the judicial manager’s action: “They really have no grounds to stand on.

“I actually sued them [BAICO]. I agreed to carry some paper from them, and they only partially paid for the transaction. We sued them in federal court and got a $70 million judgment against them, and not only that. The federal judge admonished them and put in the closing documents about how he scolded them for perjury and making these outrageous claims against myself and dragging my wife into it.”

The judicial manager’s claims against Mr Krieger were defeated on the ‘time barred’ technicality, and the Oban principal said he had also won at the appeals court level. However, this newspaper was unable to find the $70 million judgment in his favour.

“The only person harmed and owed money is me,” he added of the BAICO case. “I never got justice. I’m still trying to collect on that.”

Mr Krieger expressed hope that his past would not harm the Oban Energies project, which has been billed as creating 1,200 construction jobs over the build-out’s lifetime, plus 600 direct jobs.

Pointing to the benefits “this could bring to Grand Bahama”, he added: “It’s important to understand I’m a non-executive chairman, so I’m not a part of the executive team and management team. I’m not a shareholder.

“I’m more of an ambassador to the company, and once we get through the approval process my role becomes extremely limited. We really do have a very strong management team.

“I really hope this has no effect on the project, and people can really see it for what it is. There are going to be major announcements dealing with major infrastructure and energy companies involved in this.”

The Minnis government assured the public on Tuesday that full due diligence had been done on Oban Energies before going ahead with a Heads of Agreement signing ceremony for the refinery project.

But The Tribune’s inquiries over the last few days point to the investigation carried out by the Government falling far short of requirements, and raise questions over other members of the Oban Energies team. This includes its president, Satpal Dhunna; senior vice-president, Russell Erickson; and finance chief, Mark Michel.

Mr Erickson’s biography says he has “over 30 years of management experience, in which he brings expertise in the areas of construction operations and staff management”.

It adds: “Mr Erickson also brings a wealth of experience designing, co-ordinating and managing large logistical supply chain strategies. He has a proven history in ensuring efficient cost utilisation and attainment of savings, revenue and profitability goals.”

Simply by putting Erickson’s name into Linkedin – a tool used by business around the world – throws up his profile and his position at Oban Energies.

Beneath this he lists his employment experience as including the role of managing director of R&J Marine Technologies from 2014 to the present day.

Putting R&J Marine into Google throws up its website, where it proudly declares Erickson has more than 25 years’ experience in the boat manufacturing industry, and that in 2000 he joined with naval architect Michael Peters to design a boat together. The R&J website also includes a link for would-be investors to contact Erickson.

On Monday, The Tribune phoned Michael Peters to ask about his involvement with Erickson, and the story he told was one completely different from the information contained on either R&J or Oban’s websites.

“He came to us to design a boat for him which we did,” said Mr Peters. “His intention was to take the boat to market, but I understand he only sold one or two and he then went bankrupt. His assets were bought by Edgewater Boats.

“My understanding is he was involved in car parks before this, laying the surfaces, that sort of thing, and the last I heard 10 years ago was he was selling cars. I remember he was a nice bloke but hit badly by the bankruptcy.”

Another simple query on Facebook confirmed Mr Peters’ memory that Erickson was in the car business.

Erickson details his work experience as managing director at R&J, but also roles as ‘former sales at RENNtech’ and ‘former product specialist’ at Mercedes Benz of North Palm Beach.

The Tribune spoke to Sharon Feyhl, manager at RENNtech, which her husband has owned for almost 30 years.

“I know he had some boat business in the past which fell apart,” said Mrs Feyhl. “He was a salesman for us we but we fired him for lack of performance. He was basically doing nothing – as little as humanly possible to get his nice pay cheque.

“He didn’t come across as the smartest guy around. To think he’s running a billion dollar oil business, I mean, wow. It’s ridiculous.”

Prior to working at RENNtech, The Tribune confirmed Erickson was employed as a floor car salesman at Mercedes Benz in North Palm Beach.

Floor manager Brent Ackerman told us: “He was here for three or four years before he had a difference of opinion with management and left. I thought he was a pretty nice guy and did good work for us in sales.”

The Tribune’s inquiries into Oban’s senior management team threw up several other issues not mentioned on their website.

Listed as the company’s president is Satpal Dhunna, whose biographical details are as glowing as those for Mr Erickson.

Among his achievements was that he was ‘Managing diirector – Africa, Middle East and Asia’ for the company CreditSights.

On Monday, CreditSights told The Tribune Mr Dhunna never held the title of managing director but was simply director at their office in Dubai. Mr Dhunna in an interview insisted to The Tribune he was the managing director.

The company also refused to confirm the details of why Mr Dhunna was dismissed by CreditSights in 2010 for “alleged gross misconduct”. Mr Dhunna confirmed his relationship with CreditSights ended “incredibly negatively”, but said no offence of misconduct was ever established against him.

One further problem surfaced for Oban as a result of The Tribune’s inquiries into its web page.

Among the leadership team is listed Mark Michel – Finance.

Among his details are that he is ‘managing director at a leading private equity securities firm, Drexel Hamilton Investment Bankers, and is a licenced securities representative.”

Drexel Hamilton is involved in structuring the finance for Oban’s refinery project, but the inclusion of Mr Michel’s name as part of the Oban management team and his job title came as a surprise to Drexel’s chief executive, Anthony Felice.

“Mark is not a managing director. He is a director here in what we call our structured project management team, and they have been trying to work with Oban on the finance side,” Mr Felice told The Tribune.

“I am not in love with the fact that Mark is on their management team website. I don’t know why that would be.”

Mr Krieger yesterday admitted that there were “clearly mistakes which need to be clarified” on Oban’s website.

“We did state Mark Michel was managing director, which is not correct,” he conceded.

As regards Russell Erickson’s background, he said : “I believe once we have established he has extensive construction experience it will clarify any confusion we may have caused.”

“We have disclosed everything to both governments (PLP and FNM) in order to get their approval,” said Mr Krieger. “We have been upfront. We have hid nothing from anyone.”

• Additional reporting by Richard Coulson