Thomas Flohr, owner of luxury airline VistaJet, must fight a claim that he defrauded a Guernsey investment partnership two decades ago after London’s High Court refused to dismiss the case.
Flohr, who denies the allegations, had tried to have the case thrown out on technical grounds related to the circumstances of the case, in which a previously dissolved partnership was resurrected in 2021 in order to file the suit.
Frontiers Capital initially sued for breach of contract in 2021 but filed an amended claim in December last year, alleging deceit, claiming that a source of the Swiss entrepreneur’s fortune involved “fraudulent misrepresentation” in which he “set up, controlled, and kept hidden from [the investment partnership] a parallel structure” of companies.
The court has not yet ruled on whether the claim can be amended in this way, or the substance of the case. Flohr has opposed the amendment.
The legal setback comes as Flohr faces questions over his debt-laden airline and about hundreds of millions of dollars of payments made by Vista to a separate Flohr-owned entity as it built one of the world’s largest fleets of private jets.
The civil suit is spearheaded by the investor Timothy Horlick who oversaw the Guernsey partnership, Frontiers Capital, which in 2002 invested £7.5mn in a UK document management business chaired by Flohr called Comprendium.
According to the judgment, which was published on Monday, Frontiers Capital alleges that “in breach of duty, Mr Flohr caused a series of other companies containing the name Comprendium to be incorporated”. Frontiers is seeking damages and costs.
Frontiers’ amended claim alleges that Flohr secretly used these parallel companies in Switzerland and Germany to buy assets from his bankrupt former employer, the US IT equipment leasing group Comdisco, in breach of his duties to Comprendium UK and “in one instance for a profit of €93mn”.
Frontiers Capital also claims that Flohr reneged on an assurance to Horlick that if he bought certain Comdisco assets “he would secure revenue for Comprendium UK of between €10mn and €20mn per annum”.
Comprendium UK eventually failed and Frontiers Capital was dissolved in 2010, losing its investment and a further £5mn lent to the company. While such civil claims must usually be filed within six years, the claimant alleges that critical elements were “deliberately concealed” by Flohr, meaning the clock did not start until the partnership was resurrected.
Monday’s judgment, by Master James Brightwell, said “it would be an understatement to say that the defendant strenuously denies the allegation”, and that the decision to proceed was concerned with technical aspects of law regarding the way the partnership was dissolved.
The judgment said that at a “fractious hearing” in July, the High Court also considered questions of confidentiality “in respect of allegations said to be both scandalous and irrelevant” by the defence.
A further hearing is scheduled for March 6 to 8 next year. In advance of this, further arguments will be heard on whether Frontiers Capital has the authority to bring the claim, which may lead to the case being thrown out.
After Comprendium failed, Flohr went on to build an airline with the world’s fastest business jets and a super-rich clientele. VistaJet also has more than $4bn of debt, and auditor EY warned in its opinion on the 2022 accounts that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.
Flohr responded to that opinion by saying the business was highly profitable on the basis of earnings before interest, tax, depreciation and amortisation; that net losses were a consequence of conservative accounting of non-cash items such as depreciation; and pointed to the group’s ability to raise a new $500mn bond from investors as a sign of their confidence.
https://www.ft.com/content/52523044-5509-482b-915b-d23f690fa01a
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