At the end of what has been a large-scale and long investigation by the SFO, Stuart Pearson, former chief executive of AIM-listed Langbar International (formerly Crown Corporation Ltd ("Crown")) was found guilty at the end of June of three counts of making misleading statements to the market.  He was also barred from being a director for five years and a confiscation hearing is due to take place in August.  Mr Pearson was convicted under section 397 of the Financial Services and Markets Act 2000.

Mr Pearson's actions

Crown was incorporated in Bermuda in June 2003.    It was described as a business that bought underperforming companies, which it turned around and then sold at a profit.  Soon after incorporation, Nabarro Wells & Co Ltd was engaged as nominated adviser to gain an AIM listing for Crown.  The nominated adviser was told by Mr Rybak, the then executive chairman, that a Swiss investment bank, Banque SCS Alliance, was to be subscriber, taking €207 million worth of shares.  Crown changed the subscriber at the last moment, stating that it would instead be Lambert Financial Investments of Delaware, USA ("Lambert").  The listing proceeded and Crown was admitted to AIM in October 2003.

Lambert did not pay the money in respect of the shares but provided an "international certificate of deposit" dated December 2003, purportedly issued by Banco do Brasil, stating that US$275 million had been deposited in the name of Crown and that a further US$295 million would be payable to Crown a year later.  The certificate raised concerns when received by Banque SCS Alliance and the bank's investigations concluded that it was not genuine.  Other investors also breached their subscription agreements by failing to pay for the shares they had received. 

Crown in fact had no money and its shares had no real value.  Despite this, it continued to make public statements about its value, via the Stock Exchange's Regulatory News Service, based on the false certificate.   Mr Pearson joined Crown, renamed Langbar, in June 2005 and made a number of announcements about the company's cash assets.  In September 2005 he issued statements which the court found he knew to be false, misleading or deceptive or was reckless in issuing them.  He claimed:

  • the company had an asset value of nearly £357 million
  • it had successfully negotiated the exit of its cash deposits in South America
  • US$294 million had been transferred to a Langbar account at ABN Amro BV in Holland and
  • this sum had been admitted to the Euroclear and DTCC trading and settlement custody services.


Trading in the company's shares was suspended in October 2005 at the company's request and, in November, the company announced that it could not establish the existence of, or its entitlement to, the previously claimed bank deposits.  An investigation by the City of London Police Economic Crime Unit was then commenced and a joint investigation with the SFO commenced shortly thereafter.


As this case highlights, the relevant authorities are keen to take action in the area of misleading statements, given the potential impact of such statements on investors.  In the Langbar case, the number of victims is unknown but institutional and private investors have lost millions of pounds.