In a series of “Frequently Asked Questions” issued last Friday, KPMG said, while explaining how investor’s money will be distributed, that the two directors had been prosecuted in Sweden for “serious tax fraud” and had received custodial sentences, which they were appealing.
It was following the sentencing of the two directors that the company was first put into administration after concerns were raised by British Virgin Islands Financial Services Commission following contact from regulators in Sweden and Norway where many of the company’s products had been sold.
KPMG’s FAQ document was primarily issued in order to assist policyholders’ understanding of how the estimated €100m (£76m, $115m) in client assets will be distributed. It revealed that policyholders will all be charged a flat 7.8% fee on their assets in order to cover the distribution costs.
One of the main problems for administrators is that the company has been deemed by the BVI court to be cash-flow insolvent and therefore any costs must be borne by the only assets remaining, namely the €100m belonging to clients.
KPMG explains in the FAQs that the 7.8% charge “may seem high” but is a “prudent estimate to ensure all costs are able to be covered”. Specifically, KPMG estimates further expenditure of $1.7m in trading expenses, $4m in liquidators and legal fees and a “provision” of $1.7m.
The BVI based liquidator also confirmed none of the 7.8% “retention fee” will be used to pay the Swedish tax authority for breaches by Victory Life “or for costs associated with the custodial sentences handed down to two of Victory Life’s principals”.
A potential sale of the business was also discussed within the note, with KPMG stating it continued to believe a sale would be “in the best interests of all policyholders” and is encouraging any offers to be made by the close of business on 19 January. However, it also notes “it is a difficult proposition for any purchaser” due to a number of factors, not least the company’s insolvency.
KPMG said it plans to begin the process of distributing the remaining assets to policyholders from 23 January.
