Keydata Founder Seeks Probe Ban on FSA Staff Who Saw E-Mails

Keydata Investment Services Ltd.’s founder told a judge the Financial Services Authority should exclude from its probe of the company anyone who saw protected attorney-client e-mails improperly obtained by the U.K. regulator.

The FSA, which lost a ruling over the e-mails in October, should also hand over communications with other agencies to which it sent the material, including the Serious Fraud Office and the Insolvency Service in Britain and financial watchdogs in Luxembourg and the Cayman Islands, lawyers for Stewart Ford said at a hearing in London today.

“We want to know who at the FSA has seen the material,” said Hodge Malek, one of Ford’s lawyers. “We say those people should be taken off the case.”

Keydata administered 2.8 billion pounds ($4.42 billion) of assets when the FSA asked a court to place it into administration in 2009. The watchdog had started investigating the company two years earlier, examining whether it targeted investors with potentially misleading advertisements, and for tax irregularities.

The e-mails sent by Ford and other directors to legal advisers were covered by the attorney-client privilege and improperly obtained by the FSA, Judge Ian Burnett ruled in October. The so-called judicial review prompted the regulator to suspend its four-year-old investigation into Keydata.

The FSA’s lawyer declined to comment during a break in the hearing. Andrea Kinnear, a spokeswoman for the regulator, didn’t immediately have a comment when reached by phone.

Lawyer’s Advice

The privileged material included a lawyer’s advice to Ford on how to deal with the FSA and an instruction that the regulator should never see the communications, Malek said. The FSA’s dispersal of the e-mails to other regulators shows it was “hell-bent” to bring Ford down, Malek said.

“The FSA could have followed the correct and open path; instead they decided to take a risk because they thought the material was juicy and prejudicial and would help their case,” Malek said. “They took a risk and they were wrong.”

Ford wants to prohibit the material from being used for any purpose, as well as documents that incorporate anything from the e-mails. He also wants copies of FSA letters informing other agencies about the judgment, and any responses it received.

The SFO determined Ford wasn’t a suspect and offered to destroy the encrypted documents it received from the FSA, Malek said. If other regulators don’t follow suit, the e-mails could come back to haunt Ford, he said.

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