Italian investor alleges BAE fraud over failed carrier NJI

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Italian venture capitalists are suing BAE Systems after accusing the manufacturer of conspiring to defraud them of £6 million ($9.3 million) through an alleged elaborate plan centred on investment in now-defunct British Airways franchise carrier National Jet Italia (NJI).

In a writ, the Italian finance house ABM Venture Capital alleges that BAE hatched the plot with UK company Tolmount – now known as Aviation Partners Worldwide (APW) – after Tolmount agreed to take over NJI in the summer of 2001.

ABM claims that BAE effectively pretended to invest money to fund the takeover when, in reality, the investment was simply an illusion designed to ensure the deal went through.

London-based Tolmount, which was chaired by the late former Cathay Pacific CEO Peter Sutch at the time, intended to fund the takeover of NJI by placing up to 50.6 million new shares with investors.

Tolmount stated in its prospectus to investors that it would need to place at least 35.6 million shares in order to raise the minimum sum of £13 million necessary for the NJI acquisition to proceed. ABM Venture Capital says that it accepted an invitation to invest £6 million, leaving Tolmount needing still to raise a further £7 million.

In its writ ABM alleges that the organisers of the takeover soon became aware that Tolmount was running a “very substantial risk” of not being able to find further major investors and therefore failing to raise the £13 million required.

At a meeting in Rome on 24 July 2001, alleges the Italian company, aviation entrepreneur and NJI founder Warren Seymour explained to representatives of BAE that Tolmount still needed to find £7 million and that he wanted BAE to provide this sum.

ABM claims that this £7 million, instead of being invested in Tolmount as genuine working capital, was arranged to be returned to BAE through a complex transaction.

This alleged transaction included paying this money to a Dutch holding company, majority-owned by Peter Sutch, under the pretence of its being a consultancy fee. The holding company would then appear to invest this £7 million in Tolmount shares, and Tolmount would essentially return the money immediately to BAE, via another company, purportedly as a deposit on four regional aircraft.

ABM is accusing BAE and Tolmount – now Aviation Partners Worldwide – of conspiracy to defraud by falsely giving the impression that Tolmount had raised necessary investment capital to fund the NJI takeover. ABM has taken the matter to the High Court in London and is seeking to recover its losses.

Aviation Partners Worldwide acknowledges that it has received the claim from the Italian company, and states: “[APW] intends to defend the claim, is taking advice from its lawyers, and will respond formally to the claim in due course.”

A spokesman for BAE Systems says: “Our solicitors have been instructed to vigorously defend the claim.”

NJI subsequently ran into problems in October 2001; the airline suspended operations in November of that year while in the process of being transferred to a new owner for the sum of less than £140,000.