19 August 2020

Quinn Emanuel and Omni Bridgeway enter Folli Follie accounting fray

UBS is at the centre of a dispute involving a bond sale by Links of London owner Folli Follie

Leading US commercial claimant firm acts against UBS following Greek jeweller's bond collapse

Quinn Emanuel Urquhart & Sullivan and litigation funder Omni Bridgeway are teaming up in proceedings against Swiss investment Bank UBS for its part in the 2017 sale of corporate bonds for a Greek jewellery retailer, the value of which later crashed following the discovery of potentially massive accounting misstatements.   

The claim—and associated litigation funding exercise—arises out of an alleged $1.1bn fraud that led to the restatement of Folli Follie’s revenues, with the accounts alleged to have hidden losses of $44m.

The discovery of the fraud was exposed by hedge fund Quintessential Capital Management, which published a critical report concerning Folli Follie—owner of the jewellery chain Links of London—stating that the Greek-listed company had inflated its financial statements, in particular related to potential sales and sales outlets, revenues, and cash reserves. 

Folli Follie denied the allegations, despite concerns by others—including the Financial Times—as to the veracity of the statements, reaching as far back as 2015

An independent review by Alvarez & Marshal in September 2018 showed significant discrepancies between the quoted figures and reality, leading to a crash in the bond price—which now trades at 8% of the issue price—with the FT noting in 2018 that “prospects for creditors to recover much look bleak.”

Enter Omni Bridgeway and Quinn Emanuel, working with service company Alcimos, to bring an action against UBS to help bondholders recover more. 

Jeremy Marshall, Omni’s senior investment manager, said: “Companies and their advisers are obliged to ensure that bondholders have appropriate information to inform their investment decisions. Something went seriously wrong with the 2017 Folli Follie bond issue and we are pleased that Quinn Emanuel will act for the group to seek appropriate recompense.”

The proceedings are innovative. Volker Rosengarten, a partner at Quinn Emanuel, noted: “Prospectus liability cases are still rare in Switzerland, as are group actions.”

However, Rosengarten, who made partner in 2018, added: “This group’s case is very strong and we are confident that the bondholders will be compensated for their losses. We also expect that this action will set standards for cases going forward and strengthen protection of investors in Switzerland at large.”

UBS declined to comment. It is not known which law firm will defend the claim at the time of going to press. 

Allen & Overy, Swiss law firm Pestalozzi, and Greek law firm Ioannis Tsigounakis and Partners had acted for the bank and Folli Follie on the 2017 bond issuance. Kyriakides Georgopoulos Law Firm acted for Folli Follie on the subsequent restructuring.

Separately, as reported by the Financial Times, Greek criminal prosecutions were brought last year against the family which owns Folli Follie, with the Koutsolioutsos family contesting the allegations. 

Those proceedings are also ongoing, as are Greek civil proceedings being brought by Kyros Law Offices against Folli Follie in a separate class action.

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