Scottish prosecutors are considering launching a criminal case
in connection with the collapse of $600 million hedge fund Heather
Capital, following a police investigation into alleged
embezzlement.
The Crown Office and Procurator Fiscal Service, Scotland's
prosecution service, said in an email to The Wall Street Journal
that a case had been referred to it and it was considering what
action to take regarding a 46-year-old man.
A person familiar with the matter said the subject of the
investigation is Gregory King, the 46-year-old Scottish financier
who ran Heather via a complex web of offshore companies.
Heather Capital, which made loans to property developers,
collapsed during the credit crisis, losing its investors every
cent. It made most of its loans through a U.K. company called
Mathon Ltd., which was controlled by Mr. King.
Mr. King, who now lives in a villa in a gated country club in
the south of Spain, couldn't be reached for comment Thursday. Mr.
King declined to comment to a reporter who visited the country club
earlier this month.
The Wall Street Journal reported last week that Mathon lent
money to unusual borrowers, often secured against poor-quality
properties. These included rundown churches and derelict pubs on
the outskirts of Glasgow and a former garden center in a Scottish
port town.
While ostensibly for property development, the loans often
weren't paid back, leaving the borrowers with the cash, according
to U.K. company filings.
"The Procurator Fiscal has received a report concerning a
46-year-old man in connection with incidents said to have occurred
between 1 January 2008 and 20 January 2009," said a Crown Office
spokesman. "The report remains under the consideration of the
Procurator Fiscal."
At his country club, Mr. King said that he didn't want to speak
to a reporter. Previous attempts to reach him, through letters
delivered to the house and to his parents as well as through a
family friend, were unsuccessful.
Mathon's portfolio included loans to companies that listed
boxing promoter Mario Rea, who was barred over unexplained money
transfers in 2011 from serving as a company director for seven
years, as a director or secretary. Mr. Rea's spokesman declined to
comment.
The company also lent money to firms part-owned by businessman
Lawrence Gillick, who had previously been declared bankrupt, and to
companies controlled by businessmen Allan Stewart and Stephen
McKenna. Mr. Stewart was banned from serving as a company director
for seven years in the 1990s.
The Journal hasn't been able to reach Messrs. Gillick and
McKenna for comment; Mr. Stewart hasn't responded to a request for
comment. His spokesman told a Scottish newspaper in 2010 that Mr.
Stewart had a well-respected business record.
Mr. King personally took nearly $52 million in fees from the
hedge fund between 2005 and 2008, according to the fund's financial
filings.
"As a result of a police investigation into alleged embezzlement
concerning Mathon Finance Ltd., a 46-year-old is subject of a
report to the Procurator Fiscal," said a spokesman for Police
Scotland.
Jon Sindreu contributed to this article.
Write to Laurence Fletcher at laurence.fletcher@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires