Senior executives at US-based The Carlyle Group have been cleared of negligence in a seven-year case brought against them by liquidators valued at more than £1bn, making it the largest case in Guernsey’s history.
The action related to the collapse of Guernsey investment fund Carlyle Capital Corp (CCC) in 2008 in the wake of the global financial crash, and relates to US$23bn that the respondents borrowed in mortgage-backed securities, leading to around US$1bn total losses for investors.
The case, specifically for breach of duty and wrongful trading, was brought by liquidators for CCC, and the respondents included Bill Conway, a co-founder of the buy-out behemoth The Carlyle Group.
Most of the residential mortgage -backed securities that CCC purchased had been issued by Fannie Mae and Freddie Mac, and proved to be worthless in the downturn, leading to the insolvency and losses.
The respondents were represented by Guernsey-based Ogier’s global head of dispute resolution Simon Davies (pictured left), who said: “This has been a long and thorough process and the judgment of the court is very clear. The Carlyle Group entities acted entirely properly, and in the interests of Carlyle Capital Corporation and its shareholders.”
And Carlyle general counsel Jeffrey Ferguson added: “We are pleased that the court confirmed that Carlyle and CCC directors acted in a manner they believed to be in the best interests of CCC and its shareholders during the financial crisis.
“We are gratified by the Guernsey court’s decision, and we are deeply appreciative of the time and effort the court and its staff devoted to this case.”
The case sets an important precedent in terms of case law as it offers a judgment on the extent to which directors can be held liable over investment decisions made as the downturn began to bite.