By Kalvin P Chapman
Many people were interested in the recent Alan Shearer case. Shearer sued his former financial advisor and a pension company or £9 million (depending on which newspaper you read). How much is he worth? How much does he claim to have lost? What is life like for one of the most famous UK footballers? What sort of money do they have?
The Financial Litigation Team at Muldoon Britton were interested for another reason. Kevin Neal was the defendant in the case. Kevin Neal has left a trail of financial destruction behind him, closed down his companies and skipped the country. Last we saw he was living in Dubai offering the same sort of financial advice.
For many High Court cases involving novel and complex arguments about financial advice we often know about them in advance because of decision being made by the Court prior to trial. In this case, there were none. That may partially be because Kevin Neal was representing himself.
Who is Kevin Neal?
Kevin Neal was a financial advisor in London. He advised a lot of rich people and a substantial number of footballers on what to do with their money in order to provide for themselves in retirement. Footballers, specifically, have a difficult role. Some have fabulous careers where they make six figure salaries a week followed by football punditry or similar, or alternatively a football manager role. But for the majority there is only a brief few years where they earn money followed by retirement, usually in a role that has little or nothing to do with football and in which they do not earn the fabulous sums of money they commanded in their football careers.
Footballers are some of the biggest victims to bankruptcy. In a surprisingly substantial number of cases the failure in finances goes down to having followed an agent’s advice and invested in one crackpot scheme after another. Yes, football agents are allowed to work as financial managers to their clients. There are scores of stories of footballers being told they will receive back 100, 200, 300, 400% of their money if they just invest in … oh and it’s gone. Three out every five footballers faces bankruptcy after their careers ends – usually within five years of retiring.
They are footballers, so investing their money is not their speciality. They therefore turn to the professionals, the experts. And that is where Kevin Neal played a blinder. He made some early scores (I am sorry, it is just too easy with the puns) for some footballers. They told their friends, who told their friends etc etc. Kevin Neal often invested in schemes that appear on the face of it to have offered substantial commission and which ultimately cost a large number of footballers their retirement funds. It appears that Shearer is one of them, though of course he only lost a substantial portion of his net worth, it was still more money than most people would see in ten lifetimes. The reality is, many other premiership footballers had very little to show for their careers and their pension funds were then lost after following the advice of agents or advisors like Kevin Neal
One such scheme was Death Bonds. EEA Life Settlements Fund was one such Death Bond fund that we have seen time after time after time being sold. Kevin Neal sold a lot of investment into this particular fund. Almost everyone now regrets the decision to follow Mr Neal’s advice.
Death Bonds on the face of it sound great. Individuals (usually in the USA) often get life insurance policies for a purpose then things change and they no longer have a use for the policy. Banks may demand you get a policy when you take a mortgage or loan out. Companies may require you to take one out if you are promoted to director or CEO. Some get them to cover a child’s University costs in the event of an untimely death, but then the child does not intend going to University. There are a multitude of reasons why someone would have a life insurance policy they have no sue for.
In the 2000s a few financial gurus realised that if you buy the policies off people for a fraction of their actual worth and just wait there will be a percentage of people that die during the term of the policy, allowing for a sum fo money to be paid out by the insurance company. The cost of buying the policies had to be measured against the likelihood of buying a policy and it maturing before the insured dies. But they claimed that they had a way of making money using this. And a number of funds blossomed. People were being told that they could make 10, 15 and 20%+ returns if they invested in these funds. EEA put out literature that made these funds sound like cash cows. Literally, there were just eye watering returns for doing nothing other than agreeing to park your cash in a fund for a few years. They would get statements showing their cash just increasing regularly.
Footballers were targeted. With Kevin Neal and his companies, much of that was in fact just one footballer telling another. He had a large number of footballers from the premier leagues. They all needed to set aside money to ensure they had an income after they retired or to invest their pensions following retirement to create a good income. The five year bankruptcy figure were likely repeated ad nauseam by Mr Neal in his sales pitch.
Other products were sold by other financial advisors. Land acquisition became a lucrative one. Baron or useless tracts of land would be bought with the sales pitch that with development the land could increase its value substantially. Two or three years later people would then find out the land was worthless. There are many ludicrous stories of financial advisors either being a part of the con or purposefully being blind to it because of the commission they were paid.
And it all goes down to that one issue. Commission. Pay enough commission and you can get a legion of financial advisors to sell your product, regardless of how trashy it is.
Two things happened. The financial melt-down in 2007/08 meant that a lot of people needed to suddenly withdraw their money from investments. But in respect of Death Bonds, the FSA (the financial watchdog until 2013) called Death Bonds a toxic product that should never be sold to anyone except the most astute and seasoned investor. Everyone, literally, demanded that their investments in Death Bond funds be removed (and most of the other ridiculous schemes that had been cooked up).
The problems the funds all had was that the cash was tied up in the death bonds. To get the life insurance policies they had to buy them. The insured got a stack of cash and the fund got the insurance policy and waited until either the insured died or it matured into a worthless waste of money. That necessarily meant that the funds did not have the cash with which to refund investors.
Across the world substantial funds all suspended themselves to stop the lines of people demanding a refund. During this period it was also found that rather than creating fabulous wealth, as promised, in reality the people who created life insurance policies were, shockingly, quite adept at working out when people were likely to die. That meant that fewer than anticipated (by the fund creators) people died during the lifetime of the policy. Too many of the policies matured with the insured still fighting fit and alive. That meant that the money paid for the policy was lost. The funds were ridiculously insolvent, so had to be suspended to stop people withdrawing their money.
And that is where the claims such as Alan Shearer’s comes from, though we do not know what type of funds he held. The case centred around his pension. Shearer, like many, had a very successful career – but before retiring he had no idea whether he would have a successful career after retiring. Most do not. As it happened, he did, but during his career he could not know. He turned to Kevin Neal Associates to look at how to invest his money to ensure his future was secure. Most of the media reported how much he is worth and how successful his commentary job is. But the fact is, he did not know that before retiring in 2006. He might have had a good expectation of it, but life can throw some curve balls at us – look at the late, great Christopher Reeve (the actor).
So if I am worth £36 million and a financial advisor has allegedly lost me £9 million, then yes, I would sue.
So what are the claims?
We have asked the solicitors for Mr Shearer if we can see the pleadings to that particular case. However, the claims that I have brought previously in respect of EEA Life Settlement claims were misrepresentation and negligence claims.
The products were sold as a win-win. All you have to do is park your cash there and you will easily make 8 to 10% was how this particular product was being sold in 2008. In 2008, at the very height of the economic collapse, 10% returns on any financial product was amazing. Banks offered 0.25% if you were lucky post March 2009 (when rates went down to 0.50%). Shares were collapsing all over the place, even [financial] bullet proof institutions like banks, historically a safe place to invest your money in shares, saw share prices literally collapse. Getting a return greater than 5% was difficult in those times. 8 to 10% was great.
What was actually happening was a financial advisor or accountant was being offered substantial commission. As a consequence, the advisor accidently forgot to explain the down-side to such products. They either forgot to mention the risks or simply lied. They would tell the consumer that there was no risk. The policies were being called on regularly and generating huge sums of cash, hence the fabulous returns. In reality, the policies were largely maturing with the insured still alive. The insurance companies that created the policies were simply very good at their jobs and can be very good at working out when someone will die.
So the FSA put out its “Toxic Product” statement. The EEA Life Fund would have collapsed had everyone taken their money out. The funds remain suspended, though occasionally some of the shares are sold and some investors do get some or all of their money back.
If you were sold a “once in a lifetime” investment by a financial advisor or accountant, and that product is suspended, call our Manchester Office to have a discussion. We have experience of dealing with these claims and these products. Other products include:
Centurion Defined Return, Life Settlements, Argent, EEA Life Settlements and Managing Partners Traded Policies, Four Elements Apollo, Axiom Legal Financing fund, Centurion Defined Return , Life Settlements fund and Argent Fund, CF Arch Cru Investment and Diversified Funds, Connaught Series 1 Income, Harlequin Property, LM Investment Management, Managing Partners Limited Traded Polices Fund, Mansion Student Accommodation, Strategic Growth, The Glanmore Property and Quadris Fixed Rate Distribution to name but a few.
Remember, simply having an investment in these suspended funds does not automatically entitle you to redress from the company that sold them to you. If you were told these funds were high risk or subject to high risk of becoming illiquid with little notice or you were a very experienced investor with the knowledge as to how a fund should be investigated, then you may have to await the re-opening of the funds. If, however, you were not advised adequately or properly or if your advisors misrepresented things to you (or even outright lied) then you should speak to our highly experienced financial litigation team in our Manchester Office. If you have illiquid funds in Ireland then speak to our Dublin office. If you have illiquid funds in the US then please speak to our New York Office.
Manchester: 0161 826 6922
Dublin: +353 1 659 9405
New York: +1 212 653 0677