Esser cross-examined as AFL “fraud” trial begins

Former Cooper Gay CEO Toby Esser was cross-examined yesterday in London’s High Court over his claims the former owners and executives of AFL Insurance Brokers manipulated the company’s accounts over a number of years before he acquired a majority stake in 2017.

Last month, The Insurer revealed Alec Finch and his son Robert (Bob) Finch were defending allegations brought by Esser that they used funds from client and insurer trust fund accounts to give an inflated sense of the company’s profitability and value.

The dispute centres on a £3.58mn “black hole" in the accounts of Lloyd’s/regional broker AFL, now known as Ambon Brokers, which Esser’s Guernsey-based Next Generation Holdings vehicle claims was uncovered after it acquired a 58 percent stake from the father-and-son team.

Under cross-examination yesterday, Esser told the High Court that a disparity between the amount of accruals held in trust and the amount that actually flowed through to the business could only have been created by manipulation of the accounts, following “expert” analysis.

“Under the eyes of all those experts, the company would have had to have manipulated the accounts in such a way,” Esser told the court, adding that any argument the shortfall was created in another way was “fanciful”.

He added the UK’s financial services regulator and AFL’s advisers would have seen the true nature of the broker’s profitability and taken action had the alleged “manipulation” not taken place.

Esser was responding to questions put to him by Yash Kulkarni KC of Quadrant Chambers, representing the Finches, who also questioned the entrepreneur on the value and thoroughness of the investigation carried out by Next Generation and its advisers once the alleged false accruals had been uncovered.

The defence counsel argued the internal investigation lacked both “validity” and “independence”, adding Next Generation brought the claim against the Finch duo “without sufficient or sound investigation”.

But Esser rejected these assertions. “The investigation was thorough, the investigation was full, and it was conclusive,” he told the court.

In opening and written statements, Next Generation and Esser claim the alleged manipulation of means the business acquired was “valueless".

However, Kulkarni said the willingness of Esser and his Next Generation vehicle to pay £2.1mn for its shareholding in AFL showed the business not only had value but that Next Generation would have acquired AFL in any case as it provided the business with a much-needed platform from which to build.

“You’d have bought AFL regardless of its profitability,” Kulkarni put to Esser.

“Absolutely not,” Esser responded. “I may have paid less had AFL been less profitable and may have paid more had it generated greater profits. Profit always played a role in the decision [to acquire AFL].”

The court also heard the beginning of the cross-examination of Keely Dalfen, AFL’s former finance director. As previously reported, Dalfen sensationally admitted the allegations made against her, admitted causation and has made no omissions as to the loss suffered.

In written submissions, Dalfen claimed that Bob and Alec Finch both “finessed” the company accounts after she had pulled the relevant financial reports from the company’s online accounting systems in order to manipulate the accounts.

But Kulkarni argued that far from evidencing that the respondents manipulated the accounts, the evidence showed that Dalfen didn’t properly understand the nature or accounting methods of a specialty broking business.

“I knew there were incorrect figures in those balances,” Dalfen said, adding that both Bob and Alec Finch asked her on “multiple” occasions to add additional accruals to AFL’s financials. “These were not justified,” she said.

In 2021, AFL – since renamed Ambon Brokers Ltd – sold its 13-strong team specialising in Northern England regional business to Ardonagh, and separately its London market unit to Specialist Risk Group.

Following this AFL ceased trading, by which time Alec and Bob Finch had already resigned as directors.

Alec Finch was recently awarded Biba’s 2023 Francis Perkins Award, which recognises members of the association who dedicate their time and energy to promoting the issues of the UK insurance broking sector.

The trial continues.

Next Generation and Ambon Brokers Ltd are represented by James Potts of 3 Verulam Buildings, instructed by Devonshires Solicitors.

Alec and Bob Finch are represented by Yash Kulkarni KC of Quadrant Chambers, instructed by Ward Hadaway LLP.

Dalfen is represented by Robin Somerville of Clerksroom Direct.

Written by Henry Wallace and Ryan Hewlett.