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By Richard Smith
Having hooted mildly at FTAdviser yesterday, for their somewhat skimpy fact checking, I found my eye caught today by a similar miss from Reuters (in bold):
Nyesa Valores Corporacion SA announced that it relation to a planned acquisition of 20% stake in the Company’s subsidiary Nyesa Costa Rica SRL by Wilson Capital Group LLC (WCG), it has been informed that WCG is unable to meet the deadline for the first payment due to delay in the completion of formalities for the transfer of funds due to the complex control mechanisms in a different countries from which they originate. Thus it is not possible to specify the exact date that the disbursement will occur, but is expected to be received in the coming days. WCG announced on December 20, will acquire 20% stake in Nyesa Costa Rica SRL through a capital increase in an amount of USD 330 million.
Well, that’s a missed opportunity for a spot of investigative journalism, and no mistake. The bit in bold, ladies and gentlemen, is a classic scammer’s excuse, and should, ideally, have been a prompt for some probing. I suppose the guy at Reuters who gets the job of pumping out this sort of story just doesn’t get anything like enough time to have that kind of thought. At least we cynics can already guess roughly how the story ended. We have to, apparently: I couldn’t find a followup from Reuters. It’s time to investigate! Here is what I have dug up.
Nyesa Valores Corporacion SA is a listed Spanish property developer. Given its business focus, you can probably guess what its five year share price graph looks like, but have a ghoulish squint at it anyway, hereabouts. Off the top of my head, I make that a 99.5% decline, or a little worse. Results to match, one imagines. “Bloomberg for poor people” only carries the last three years of catastrophe, but you get the idea.
Nyesa had high hopes for their Costa Rican subsidiary. You can see how a project to develop a giant resort in Costa Rica (end value over EUR1Bn) would seem like a wonderful idea to an embattled management drowning in red ink from their Spanish activities. Concerned environmentalists might affirm that dumping a load of concrete and tarmac and sunburned idiots, and sunburned idiots’ waste products, onto the coast of Costa Rica, is a different order of catastrophe altogether than anything in Nyesa’s balance sheet.
But the environmentalists don’t run the show. For Nyesa the immediate problem is funding the project. Who on earth is going to fund such a development by such a precarious company? Bring on the alternative funding sources! Step forward, Wilson Capital Group LLC:
Nyesa Valores Corporación, formed through the merger of the Nyesa Group and the Inbesós Group, has signed a financing agreement with the US investment fund Wilson Capital Group LLC (WCG) to finance approximately €236 million to build the La Roca recreational tourism and residential complex in the town of Esparza, in the province of Puntarenas (Costa Rica), in exchange for taking a 20% stake in this project by signing a capital increase, according to a company statement sent to the Spanish National Securities Market Commission (CNMV).
This agreement modifies a previous one, in which WCG limited itself to financing the Nyesa initiative with a €330 million loan to carry out its project in Costa Rica. The agreement of intent between the two parties encompasses the transformation of Nyesa Costa Rica into a corporation, and the redenomination of its share capital from Costa Rican colones into US dollars.
We see that Nyesa’s financial position has worsened so much that it’s switched the purpose of the fund raising from a pure development loan (to the sub), to a recapitalization (of the parent), and in a lesser amount. One wonders how big the resort would actually had been, had it ever been built.
Because, of course, there was a wee snag. Here’s the timeline promised when the deal was announced on the 22nd October:
WCG’s commitment to invest in the share capital of Nyesa Costa Rica has been definitively formalized after the signature of a shareholders’ contract by Nyesa Genérica, S.L. and WCG-NGR Limited Partnership, a subsidiary of WCG, obliging the US financial institution to disburse the agreed amount in three tranches, the first and second of these being €71.5 million and the third €93 million, with WCG making a commitment to make the first payment by 15 November 2010, the second on 30 November 2010 and the third on 30 December 2010.
By December 20th, we have the Reuters announcement: neither of the first two of these strangely scheduled and bombastically entitled “disbursements” has taken place. But of course, that hitch is not really because of “delay in the completion of formalities for the transfer of funds due to the complex control mechanisms in a different countries from which they originate”. The “complex control mechanisms in a different countries” are no more complex on Dec 20th than they were when the deal was supposedly planned, two months earlier.
Nyesa haven’t a clue, have they? The reason for the delay is that WGC and WCG-NGR Limited Partnership haven’t got €236 million; they are fraudsters, making sure that by the time Nyesa wise up, the money is gone.
So WGC string Nyesa along for a few months. By April 14, 2011 WGC has gone bankrupt (PDF). Quelle surprise.
To any victim of Ayanna James’ Wilson Capital Group:
Please report your case to the FTC – http://www.ftc.gov/ftc/contact.shtm – and provide your details.
We were just informed that a large development project in Costa Rica was taken by Wilson Capital Group for six figures of ADVANCE FEES.
By coincidence, we did basic due diligence on this questionable firm with negative press online and no closed loan references, and warned others back in June of 2010.
Also, see the following thread for more details and victim information.
In early July there is vigorous turnover in the board of Nyesa. It’s all very sad (except that the despoliation of the Costa Rican shoreline is delayed for a little longer). To be sure, Nyesa’s pooch had a hunted look before WCG got into the act.
We see that half an hour on Google can be worth six figures to prospective seekers of alternative funding. Even for an entrepreneur seeking development capital in a hurry, or a Spanish guy with a half dead property company in dire need of something, anything, that is a good investment of time. Basic due diligence by Nyesa would have quickly uncovered some pretty salient facts:
- Wilson Capital Group had no more than four employees and a turnover of less than USD 1MN, making it preposterously unlikely that it was sitting astride a quarter of a billion Euros in development capital.
- The people that Nyesa were trying to deal with were by mid 2010 already the defendants of a fraud lawsuit in NYC, presided over by none other than the mighty Judge Rakoff (yes, that Judge Rakoff: small world, eh?). Here is the linkage between two of the defending entities, WGC and WGC-NRC; perhaps that will help someone figure it all out.
Aaah, due diligence! When will they learn?