THREE years ago, Credit Suisse sued him over a $US750 million lending deal that the bank described as a ”brazen conspiracy … to cheat and deceive on an unmatched scale”. The case settled.
Just two weeks later, JP Morgan accused him of smuggling a Rembrandt and some other valuable paintings out of the US, artwork that the bank alleged had been put up as collateral for a $US50 million loan.
That case settled too, but not before sheriffs raided his apartment on the 64th floor of Trump Tower on New York’s Central Park and confiscated 29 works of art, including three Picassos, a Monet and three Modiglianis.
There is one case, however, that hasn’t settled. It is a 15-year marathon that has racked up $300 million in legal fees. It is the biggest court case in Australia – the lawsuit between the liquidator and the banks in Bell Resources. And this time he is not a defendant.
Louis Reijtenbagh, the savvy Dutch speculator whose place of residence may be either New York, Monaco, Belgium or the island of Tortola in the northern Caribbean, is poised to make the largest profit from a legal action in Australian history. And his partners in the litigation funding deal with the liquidator of Bell Resources are none other than the state of Western Australia and the Commonwealth government.
When the Supreme Court of WA dismissed the appeal by the Bell banking syndicate in August this year, it left the syndicate of 19 banks liable to pay the liquidator of Bell Resources $2.6 billion.
The lawsuit had been funded by Louis Reijtenbagh and the federal and WA governments. So, these three parties are entitled to 60 per cent of the $2.6 billion pie, and Reijtenbagh’s share is possibly as high as $858 million.
It’s by no means a done deal yet, and the Dutchman is more likely to get about half that amount. The banks have applied to the High Court for special leave to appeal although they now accept liability for about $700 million. It is the compound interest they are fighting about.
Enshrining the grand folly of litigation, the cost of this case has risen tenfold. The original claim hinged on the wrongful transfer of just $265 million in assets to the banks as Bell Resources teetered at the edge of insolvency in 1991.
It was during the depths of the financial crisis in October 2008 that the banks had their thumping setback. Justice Neville Owen found they had been knowing and improper recipients of Bell Resources’ trust assets. He made orders for the syndicate to pay $1.58 billion to the liquidators. The banks appealed. The costs escalated. They lost on appeal three months ago.
The most remarkable thing about the mammoth lawsuit, though, is the involvement of Reijtenbagh himself, and the sheer magnitude of his potential gains.
Bear in mind that the $200 million settlement won by litigation funder IMF Australia in the Centro court case against PricewaterouseCoopers had smashed all records earlier this year. Now, in what appears to be typical of the clever deal for which he is famed, the former family doctor and cardiologist from Holland seems not only assured of a large cut of the $700 million to $2.6 billion pot, it seems he is entitled to a ”free carry” from the Australian taxpayer too.
That is, sources close to the case told BusinessDay last week that the Netherlands Antilles vehicle that Louis Reijtenbagh controls and that is behind the funding deal, Bell Group NV, may have stopped footing its share of the legal bills a few years ago.
This means that his partners – the Commonwealth (which is involved in the claim as a result of Bell’s debt to the Australian Taxation Office) and the Insurance Commission of WA (ICWA is a large bondholder) – have forked out the legal costs of the action in recent years but the Dutchman may still reap the greatest financial reward.
BusinessDay has been unable to ascertain what rights the Dutchman had to share in the final proceeds as the defaulting funder.
What we have been able to piece together, though, is his possible entitlement. Under the agreement struck between the three funders and the liquidator, Tony Woodings, in February 1996, the three were to stump up the costs of the case and take 60 per cent of the return should they win.
According to an application by the liquidators in the judge’s chambers in 2004, ”if a creditor fails to make its contribution [to funding the case] the obligations of the terminating creditor are to be borne by the other creditors”. Hence the free carry.
Sources have confirmed the amounts actually paid by each of the three are Insurance Commission of Western Australia ($159.4 million), Tax Office ($3.1 million) and BGNV (Louis Reijtenbagh’s entity, $22.5 million).
The WA agency paid the lion’s share of the $185 million in costs although the shares in the funding obligation were split BGNV (110), ICWA (75) and ATO (15).
Therefore, Louis Reijtenbagh’s BGNV should have paid 55 per cent of the bill to fund the case. It actually paid less than 13 per cent.
Despite the tortuous Bell case, and his spectacular wins and losses on overseas markets, the Dutchman had gained a taste for litigation funding Down Under.
In about 2000, he was backing John Maconochie’s $50 billion claim against the National Australia Bank for breach of contract. That case was in court for 222 days and reaped Freehills – hitherto on the losing side in the Bell case – $30 million in fees, with total costs said to be far higher. The New South Wales Supreme Court judge dismissed the matter in 2002.
He was also mooted to be the funder behind liquidator Paul Weston in the $244 million OneTel damages case served on James Packer and Lachlan Murdoch.
More lately, he is funding the Great Southern litigation.