Izodia, the multibillion-pound dotcom company at the centre of one of the City of London’s longest-running corporate scandals, has postponed its own liquidation in the hope that it can recover some of the £5.3m ($8.7m) it is still owed from the case.
The company, which was looted by Gerald Smith and his company Orb in 2002, held its annual meeting on Monday, at which shareholders voted to pay themselves a dividend of 20p a share, but unexpectedly held off from winding up Izodia for good.
Investors are hoping that the £5.3m owed by Mr Smith could still lead to a sizeable windfall to compensate them for nearly a decade of trouble and legal wranglings.
If realised, this would equate to 13p a share, in addition to the 50p a share that has so far been distributed to shareholders. Izodia shares have not traded since December 2002, when they stood at about 44p.
It has now been five years since the jailing for theft of Mr Smith, prompting some to question whether the money will ever be recovered.
“As time goes on, I assume there is less and less chance of getting the money back,” said Rory Macnamara, chairman of Izodia. “But if we wrap up the company completely, there will be no one to fight our corner if any money ever does come through.”
KPMG is leading the efforts to recover the funds, through its risk and compliance department.
Shareholders at the meeting were mostly resigned to not recovering the £5.3m, and getting back only 50p a share from their investment. “It is not entirely satisfactory, but you take what you can get,” said Don Shilling, one of only eight shareholders present.
Izodia had previously been known as Infobank. At its peak, the London-listed software company had a market capitalisation of £2.4bn. After the dotcom crash the company shrank to become a cash shell on Aim, the junior London market.
Mr Smith’s involvement with the company began in 2002 when he used his investment company, Orb, to acquire 30 per cent of its shares and stack the board in his favour. Mr Smith then sanctioned a scheme to use Izodia’s cash to illicitly shore up Orb’s balance sheet and fund his own lavish lifestyle.
In August 2002 he instructed his lieutenants secretly to plunder Izodia’s bank accounts, which had been improperly transferred by Royal Bank of Scotland to Jersey.
An estimated £35m was taken from the company illegally in order to help Mr Smith meet a potentially crippling £17.2m interest payment due to Morgan Stanley on a £600m loan he had with the investment bank.
Izodia has since been awarded approximately £23m as part of a settlement in a case against RBS. It also sued and received significant funds from the law firm Fladgate Fielder.