By Ian Fraser
Published: The Sunday Times
Date: 19 July 2009
A company that numbers Tom Cross, chief executive of Dana Petroleum and Brian Wilson, the former energy minister, among its non-executive directors has come under fire for creating “false market” in its own shares after putting misleading information into the market.
Ken Olisa, a non-executive director of Thomson Reuters and founder of Restoration Partners, alleges that the Aim-listed boutique investment bank Parkmead Group, which specialises in the oil and gas sector, “has repeatedly failed to properly communicate with the market.”
Olisa, who stepped down as Parkmead’s chairman in February 2006, alleges that the company last year created a “false market” in its own shares. He said this happened because Parkmead issued an RNS statement in November 2007, saying that its former non-executive director David Mills would be making deferred payment of £1.97m to Parkmead by November 8, 2008. This related to Mills’s repurchase of one of Parkmead’s assets, Quayside Corporate Services, a provider of turnaround services, a transaction that was completed in November 2007. However, a year after the original RNS statement was issued, Parkmead released another RNS stating that the £1.97m was not, in fact, due until November 2012.
“It doesn’t matter if that was an error or whether they deliberately set out to mislead. What matters is that the regulatory authorities failed to intervene,” said Olisa. “Parkmead’s shares fell by 20% as a result of the second announcement, so there had clearly been a false market for over a year. There are very clear rules on Aim and in this case they were infringed. The trouble is the Aim regulator is not prepared to do anything about it – nor is the FSA.”
“Everyone who put money into Parkmead, including widows and the orphans, has lost money as a result of this and other corporate governance abuses by the company, but they don’t seem to have any recourse. The people whose job it is to enforce the regulations don’t see enforcement as particularly important. They are too preoccupied with systemic risk.”
Richard Thomson, head of corporate finance at Parkmead’s nominated adviser Charles Stanley Securities, claimed that the date in the initial RNS had been a “typographical error”. “That was an unfortunate error by the board of Parkmead. There was nothing Machiavellian about it.” In a letter to Olisa, he said: “The company accepts it was their error. A cock-up, yes, a conspiracy no.”
Thomson said that Parkmead’s decision to dispose of Quayside in November 2007 has turned out to be “a good call”, given the subsequent controversy over the company. Quayside, which is still owned by Mills but now thought to be dormant, has recently come under scrutiny over alleged malpractice in its handling of “distressed” HBOS assets and its relationship with former director of high-risk at Bank of Scotland Corporate, Lynden Scourfield, who left the bank in April 2007 following “over-generous lending”. Quayside and Scourfield’s activities have been the subject of a File on 4 documentary on Radio 4, and were the subject of a debate in the House of Commons on June 2.
A spokesman for Parkmead, which changed its name from Interregnum in May 2006, said: “An error was made in the initial disposal announcement that was not picked up. As soon as it was identified an announcement about it was made and that all the relevant authorities were made aware.” Thomson said that Olisa’s complaint had been investigated by the Aim regulator and that “the file is now closed”.
An edited version of this article was published in The Sunday Times on July 19th, 2009.