Fladgate sued over Izodia fraud

Fladgate is being sued for negligence after a partner took action that allowed a fraud against shareholders in the former dotcom company Izodia.

As The Lawyer revealed today (4 August ), former Fladgate corporate head Nicolas Greenstone has been reprimanded by the Solicitors Regulation Authority (SRA) for actions that led to £33m being stolen.

Greenstone was admonished for signing a pro-forma without the authority to do so with his actions allowing Izodia director Dr Gerald Smith to transfer money from the dotcom to Jersey company Orb.

Smith was convicted of theft and false accounting in 2006 and sentenced to eight years in prison.

The claim against Fladgate centres on the firm not looking after Izodia’s interests and also representing Smith as well as Orb Group once the Serious Fraud Office launched an investigation into the stolen millions.

Fladgate’s corporate secretarial arm Walgate Services is also named as a defendant in the claim, which was lodged at the High Court on Friday (1 August).

The claim alleges that a Fladgate partner, understood to be Greenstone, “signed a forged and fraudulent minute purporting to record a board meeting of Izodia”.

Although the meeting between three Izodia directors never took place, the minutes showed that the directors had authorised the opening of a bank account with Royal Bank of Scotland (RBS). According to the claim, it was via this account that money was siphoned off by Smith.

It is also alleged that another Fladgate representative tried to cover up the misconduct and deliberately misled an independent adviser appointed to investigate the missing money.

Walgate is said to have “dishonestly assisted in the fraudulent misappropriation of over £27m-worth of Izodia’s monies by Smith”.

The claim went on to allege that by October 2002 Fladgate “knew or strongly suspected” that Smith or his companies had defrauded Izodia though it did not raise the alarm.

Izodia directors, City banker Rory Macnamara and fund manager Christopher Mills of JO Hambro Capital Management, have brought the civil action. The duo were also responsible for securing a £23m payout from RBS, whose Jersey branch was conned by Smith into diverting money from Izodia into companies he controlled.

Fladgate declined to comment.