A case that began more than a decade ago has reached judgment in the Supreme Court of Bermuda.  The case, Lisa S.A. v Leamington Reinsurance Company Ltd and Avicola Villalobos S.A. 1999: No. 108/2001 No 79, concerned a Guatemalan company, Lisa SA (Lisa), which brought an action against Avicola Villalobos S.A. (AVSA) also a Guatemalan company and Leamington Reinsurance Company Ltd (Leamington) a Bermuda captive reinsurer which reinsured the companies in the Avicola group only.  Lisa alleged that it had been defrauded by the two defendants as a result of funds being diverted through Leamington. Lisa also alleged that AVSA was the de facto parent company of the Avicola group.  The judge first ruled that AVSA was not the de facto parent of the group in question and as it was also not a participant in the Leamington reinsurance program it could not be held liable to Lisa.  However, the position regarding Leamington was different.

Lisa alleged that the Avicola group committed frauds by not officially reporting the income it received from the sale of live chickens, chicken manure and oranges. The group then allegedly sent these funds to Leamington as premium and Leamington then issued dividends to a company called Villamorey of which Lisa was a shareholder. Although the judge refused to rule on whether an offence had taken place under Guatemalan tax law, he stated that there was clear evidence that the Avicola companies had regularly failed to officially record all of the group’s true income. He also found on the evidence that there was a “less than enthusiastic attitude towards paying taxes” and that they had taken “extensive steps to minimise the tax exposure.” The judge also found that the Leamington policies were not genuine. He based this decision on the evidence before him: that no claims had been made on the policies in 13 years, high ranking officials in the Avicola group had admitted in secretly taped conversations that the policies “don’t exist” and that “false premiums…are paid and then Leamington returns them and they’re distributed”, that Leamington were unwilling to put forward a witness defending the policies, and that it was clear that it had never been an intention to claim on the policies.

The question therefore was whether Lisa itself had been defrauded by these actions. The court found that Leamington had, as set out above, issued dividends to Villamorey. It also found that Villamorey had issued dividends to its own shareholders, save Lisa. However, as Villamorey was not a party to the proceedings the court had to determine whether Leamington itself had intended to defraud Lisa. The court found that one of the Avicola group leaders, Mr Rossell, was the key agent and directing mind of Leamington. It also found that Mr Rossell was aware of the scheme involving Leamington and of the intention that Lisa would not be paid a dividend. Therefore, the court found that Leamington had conspired to defraud Lisa and an award was made accordingly.