Liquidator wants disbarred broker to be examined under oath

High Court Reporters

A liquidator is seeking that a disbarred Ireland-based former Morgan Stanley broker be examined under oath in the Commercial Court over the alleged improper transfer of shares in an investment firm.

Jeffrey Leo, Tullamaine Castle in Tipperary is already alleged to have misappropriated some of the US$60m (€58m) given to him by an American couple to invest here.

Two weeks ago, Mary and James Wenning, who operate a chicken farming business in Ohio, USA, along with the firm Wenning Holdings Ltd (in voluntary liquidation), brought Commercial Court proceedings alleging deceit and/or fraudulent misrepresentation against Mr Leo and a number of companies he is involved in.

Mr Leo, a former Morgan Stanley broker who was disbarred by the US financial regulatory authority in 2010, has denied the claims.

On Monday, further proceedings were brought by liquidator Kieran Wallace seeking a number of orders in relation to the transfer of shares in Wenning Holdings from the Wennings to a company controlled by Mr Leo.

Mr Wallace had replaced a liquidator which had been appointed to the company in September 2023 with the consent of the Wennings. The Wennings say they sought the replacement by Mr Wallace because of concerns about alleged misappropriation.

Mary Wenning said in an affidavit she and her husband only recently learned that Mr Leo was disbarred.

She said they “understood Mr Leo to be a reputable investment advisor and, as a result, did not insist on his role being documented.".

Over the years, she said, they transferred around US$60m to him to acquire investments on their behalf.

The investments, in various entities and structures, including the Dundrum House Hotel, the Pillo Hotel in Ashbourne, Co Meath, and a related business interruption insurance policy, Tullamaine Castle, the Golden Vale Hotel, Drumonna House, Celbridge Manor, and Powerscourt Arms Hotel.

Mr Wallace, MD of Interpath Advisory, now wants a number of orders from the court including making Mr Leo personally liable for the debts of Wenning Holdings.

He also seeks orders against the former auditor of Wenning Holdings, Colm Malone of Rush Malone & Co, and against two companies, Leo Financial Investments Ltd and Steelworks Investments Ltd. He further seeks orders against Steelworks company secretary Darrell Penney.

He is asking that Mr Leo, Mr Malone and Mr Penney appear before the court to be examined on why all books and records of the company have not been produced to the liquidator despite repeated requests.

The liquidator wants orders under the Companies Act declaring that the purported sale by Wenning Holdings of its beneficial title in Steelworks to Leo Financial had the effect of perpetrating a fraud on the company and/or its creditors.

Mr Wallace said, in an affidavit seeking entry of his proceedings to the commercial list, that despite his efforts he has been unable to obtain a complete set of books and records. The information the respondents have provided has "often been vague, incomplete and in some cases entirely contradictory".

No party was able to explain the commercial basis for the decision to sell the Wennings Holdings interest to Leo Financial for a nominal consideration, he said.

Mr Wallace said his investigations to date have revealed that the company received no professional advice regarding the legal, commercial and tax implications of the transactions.

Mr Leo has asserted, the liquidator says, that the Wennings provided loans of around €40m to the company which were then borrowed by Steelworks for the purpose of property investments.

Mr Leo also claimed some €25m was repaid to the Wennings and €17m-€18m remains owing.

Mr Wallace says this is entirely inconsistent with what was claimed when Wenning Holdings was put into voluntary liquidation.

On Monday, the liquidator's case was admitted to the Commercial Court by Mr Justice Mark Sanfey on the application of Kelley Smith SC, for the liquidator, and on consent from David Kennedy SC, for Mr Leo.

Mr Kennedy said his side wanted both the liquidator's case and the Wennings case to travel together. He said the Wennings were seeking rescission of agreement with Mr Leo which provides his client with a defence to the proceedings. It was a complex and weighty matter which should not be rushed, he said.

Mr Justice Sanfey adjourned the case to April when Ms Kelley's application to examine the personal respondents will be heard.