Belisle fraud lawsuit to wait for CATCo insolvency decision in Bermuda

The fraud lawsuit involving former CATCo CEO Tony Belisle has been stayed pending a Bermuda Supreme Court decision on the insolvency and winding-down of the Markel CATCo retrocessional reinsurance funds.

As we reported back in December, former CATCo CEO Belisle is involved in a lawsuit brought on behalf of HWH Realty Holdings LLC, an investment business owned by the well-known German billionaire and one of the co-founders of tech firm SAP, Hans-Werner Hector.

The lawsuit alleges that “seismic losses” suffered by the Markel CATCo retro reinsurance funds in 2017 were far beyond where the risks attached to the strategies had been explained to the investors.

As a result, the fraud lawsuit in Florida alleges that Belisle misrepresented the risks of an investment in the Markel CATCo retrocessional reinsurance investment strategy, causing the investor to suffer larger losses than it had anticipated based on the CATCo fund’s marketing materials and messaging from the CEO.

The investor is claiming damages from former Markel CATCo CEO Tony Belisle, after it lost nearly $20 million from an investment made in June 2017 into the CATCo fund.

The fraud lawsuit in Florida is ongoing, but now stayed pending further clarity over the direction Markel CATCo insolvency proceedings take in Bermuda later this quarter.

Markel CATCo’s proposed buyout process and schemes of arrangement for the remaining assets its fund strategies hold is now awaiting a Bermuda court decision to proceed.

That court decision is not expected before January 22nd and the validity of investor undertakings for the proposed buyout arrangement have now been extended through February.

Tony Belisle requested the Florida court stay his case through the earlier of February 18th, or the date the Bermuda court decision on the schemes of arrangement is received.

The reason being that the investor making the claim against him, HWH, is an investor objecting to the proposed “schemes of arrangement,” and Belisle claims that “the decision of the Bermuda Supreme Court concerning the convening of meetings for the proposed schemes of arrangement may bear on how the parties proceed in this litigation.”

The judge in the Florida proceedings approved the stay, agreeing with the defendant that the Bermuda court’s decision on the schemes of arrangement could affect this case as well.

The Bermuda proceedings clearly have relevance to Belisle’s case in Florida, but it will be interesting to see whether the eventual decision in Bermuda changes anything here, or whether the investor is committed to its claim.

As we explained before, it does seem possible that investors are directing legal action at Belisle as a way to apply further pressure against the ongoing buyout process being undertaken by Markel CATCo.

So the direction the buyout terms move, if at all, may be critical in the direction the fraud lawsuit eventually takes as well.