Four pensioners have filed a High Court action against the investment bank, accusing it of mistreatment in a scheme which allowed them to take out mortgage worth up to 75% of the value of their Spanish homes.
The proceeds were then invested with an insurance company to provide an income, however the pensioners claim investment did not perform as well as promised, leaving them unable to pay off their mortgages which had to be repaid this year.
In one instance, Michael and Roberta Carney, 72 and 71, said they have suffered losses of €124,575 (£105,382, $139,878). They took out a loan of €292,500 in 2006 on their home in Malaga on the advice of the now-defunct Spanish advisory firm Henry Woods.
They claim that during an event by Henry Woods in October 2005, Stephen Dewsnip, a Rothschild employee at the time, gave a presentation about a scheme he said “would save participants a fortune in Spanish inheritance tax as well as providing them with a modest income”.
Dewsnip is one of the former directors of the collapsed Guernsey-based Providence Investments Funds whose parent company, Providence Global Ltd, is affiliated with Miami-based Providence Financial Investments which recently came under fire from US authorities for defrauding investors out of $64m.
According to documents seen by the Sunday Times newspaper, the aggrieved investors accuse Rothschild of abusing its position as a “highly respected bank” and profiteering by taking advantage of retired people with little or no relevant investment experience.
However, Rothschild has said it “categorically” believes the claims have no merit and that it will “vigorously contest them”.
