Segoes immunity request stalls

John Kaweske, Owner of Segoes	Ken Krys, Joint Official Liquidator	Raymond Christian, Detective Chief Inspector

Wednesday,  October 19, 2005

The request for immmunity for the former president of Segoes Services Ltd continues to be in limbo, but according to his lawyers there maybe a way around the problem of getting the help from James Fontanetta to help track down the approximate $15 to $25 million investors funds that have reportedly gone missing.

According to sources close to the case, the collapse of the online broker services firm began when a disgruntled employee brought data on the company’s activities to the Cayman Islands Monetary Authority (CIMA).

Subsequently, CIMA began looking into Segoes’ business operations and suspended the firm’s authority to trade in October 2004.

Within weeks, an intricate web of companies’ accounts were allegedly established to transfer investors’ funds. This was reportedly going on until April this year, when John Kaweske sent a mass email out to investors saying that the funds had been misappropriated.

Around the time the email was sent out, Mr Fontanetta and Mr Kaweske as well as family members and associates of Mr Kaweske left the Cayman Islands and they have not returned.

Attorney, Stuart Diamond, who is representing Mr Fontanetta in the Cayman Islands, said that his client is still interested in assisting the liquidators regarding the misappropriated funds. However, Mr Fontanetta wants to be sure the information he provides will not incriminate himself. Furthermore they have met with the liquidator to discuss the options.

“Right now, negotiations are at a stalemate,” said Mr Diamond. “The Attorney General would not make a decision unless there was criminal charges and the Royal Cayman Islands Police Service, (RCIPS) will not determine charges unless they get direction from the Attorney General’s office.”

Mr Diamond said it was a frustrating situation for Mr Fontanetta, but they were working on a way to get around the situation so that he can provide assistance to the liquidators and are in the process of hammering out the terms.

When asked about new negotiations between the liquidators and Mr Fontanetta’s attorneys, Mr Krys said he could not comment.

Detective Chief Inspector Raymond Christian of the Financial Crimes Unit said that Mr Fontanetta’s attorney hasn’t contacted him. However, he was aware of the request for immunity and there were a number of issues relating to granting immunity.

He explained the case was ongoing and his office is collecting evidence from numerous local and overseas investors.

“I don’t think James Fontanetta will voluntarily return to the Cayman Islands or for that matter John Kaweske,” said Detective Christian. “I think there is going to be extradition proceedings to bring them back here.”

The Chairman of the Liquidators Committee, Gene Hoffman said most of the investors are becoming resigned to the fact that it will be several months before they see any of their money again.

“We are still waiting on the exact details on the court’s orders regarding the guidance sought by the liquidator on the fifth affidavit,” said Mr Hoffman. “There is still some confusion as to what the court order is going to mean to his hearing.

“I think most people are going to be resigned that it will be a long time before they will see a resolution.”

Recently, the Joint Official Liquidators obtained a default judgment order against James Fontanetta. The default judgment is for Mr Fontanetta’s failure to put in proper systems and controls and permitting millions of investors’ money to be misappropriated. The amount of the judgment has yet to be determined.

“Neither Mr Fontanetta nor his attorney chose to defend the statement of claim filed against him,” said Ken Krys, Joint Official Liquidator.

“We can take the action to enforce the judgment. We will shortly be addressing John Kaweske in a similar statement of claim.”

However, Mr Diamond said they are going to get the default judgment set aside.

In recent months, the Joint Official Liquidators obtained an injunction against both Mr Fontanetta and Segoes’ owner, Mr Kaweske, prohibiting them from selling or giving away their assets.

However, reports suggest that Mr Kaweske may have already tried to sell a condominium on Seven Mile Beach to a buyer without the knowledge of the Joint Official Liquidators.

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