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Lie of the land

The collapse of a supposedly pioneering firm has left well-meaning investors out of pocket and its founder languishing in a Cambodian jail, unswayed and unrepentant. Simon Parry investigates a green dream turned nightmare

 

In the squalor and stifling heat of the visiting pen at Cambodia’s Prey Sar Prison, Gregg Fryett appears strangely affable and relaxed as he discusses an alleged land fraud that has cost investors the equivalent of nearly HK$400 million.

“It’s all a big mistake – a misunderstanding,” the 47-yearold Briton says, with a tired, apologetic smile, in the casual manner of someone who has accidentally picked up someone else’s suitcase from an airport luggage carousel. Gaunt and pale in his shabby blue prison uniform, Fryett faces up to 15 years in one of Southeast Asia’s most notorious prisons but talks like a man still firmly in control of his own destiny and the biofuel venture he insists should never have been closed.

“My company would have been on the Fortune 500 in a couple of years if this hadn’t happened,” declares the fallen entrepreneur defiantly and without a trace of irony. “We’d have been on the New York Stock Exchange.”

Gesturing at the high prison walls and patrolling guards, he dismisses the suggestion he misled investors, causing them losses of hundreds of millions of dollars.

“If I was corrupt, I would be on a yacht in the Bahamas rather than in jail after coming back here to Cambodia to fight for the investors,” he says.

The downfall of Fryett – now sharing a cell with more than 20 other inmates in a jail notorious for overcrowding, appalling hygiene and brutality – has been nothing short of spectacular. It is also a salutary lesson for the booming green-fuel industry.

Two years ago, Fryett was flying the world and earning a handsome salary. At the peak of his success, he hosted a HK$300,000 party at London’s House of Lords, the upper house of the British parliament, where 100 invited guests toasted his vision for a green future. As guests sipped champagne on a patio overlooking the Thames before tucking into a four-course lunch, Ulster Unionist Lord Laird, who had arranged the party for Fryett, declared grandly: “We’re on the cusp of a sustainable evolution greater than the industrial revolution of the 19th century and the digital revolution of the 20th century.”

Fryett’s Sustainable Growth Group laid claim to biofuel ventures across Southeast Asia, including a plantation in Banteay Meanchey province, in northwest Cambodia, where it would grow jatropha – a small tree whose seeds can be used to make biodiesel and which has been hailed as a wonder crop of the future.

Some 1,200 private investors, many of whom had been persuaded by financial advisers to unlock their pensions and move their money into eco-energy schemes run by Fryett’s firms, pumped sums of up to HK$4.7 million each into the Cambodian project in the belief that they could turn a profit and make the world a greener place at the same time. But as money continued to pour in – nearly HK$400 million was invested, much of it in response to cold calls from sales agents – a whistle-blower within the company’s London office alerted anti-fraud inspectors to some disturbing details about the operation.

Although infrastructure had been constructed, land had been cleared and some trees had been planted, the company did not own the plantation it planned to use and not a drop of biofuel had yet been produced, investigators were told.

“What are we doing about clients that are now in their third year of investment and expect a 50 per cent share of oil revenues that don’t exist?” the whistle-blower wrote in an e-mail later submitted to court.

In February last year, nine months after the lavish House of Lords luncheon, the Sustainable Growth Group went into liquidation as the Serious Fraud Office (SFO) in London froze its bank accounts and assets – including those of the other Southeast Asian ventures – and began probing Fryett and his company. Then, in January, in a separate investigation, two Cambodian colleagues of Fryett were arrested for forging landownership documents.

After receiving what he claims were verbal and written assurances from a judge and anti-corruption investigators looking into his case that he would be given safe passage, Fryett travelled to Cambodia from his home in Thailand to try to resolve what he saw as a civil dispute over the ownership of the land in Banteay Meanchey. The land was – and still is, according to prosecutors – owned by companies controlled by Mao Mally, wife of Cambodian Deputy Prime Minister Ke Kimyan.

On March 23, as he sat drinking coffee with the judge in a restaurant in the Cambodian capital, Phnom Penh, Fryett was arrested and then detained in the jail known as S24 in the days of Pol Pot’s murderous Khmer Rouge regime. He is charged with forging documents relating to the plantation and faces up to 15 years in prison, if convicted.

“It was surreal,” says Fryett, who has shed 16kg since arriving in Prey Sar. “I was sitting with the judge in a private room of the restaurant and he had just heard my complaint about the land deal. I was the victim in this case as far as I was concerned. Then the anti-corruption unit rolled up and four heavies came into the room.

“They said, ‘We want to ask you some questions,’ and they produced a pair of handcuffs. They then produced a warrant signed two days earlier by the judge I was meeting and they forced me to put on the handcuffs and frogmarched me to a car.

“They took me all the way to the plantation, 300 kilometres away.

There was a kangaroo court waiting for me there. I was charged and put on remand and then they brought me back to Phnom Penh and put me in prison here.”

Fryett – who denies any wrongdoing – describes his detention as a “mishap” and insists that he has been prevented from creating a successful biofuel venture by a mere land dispute. Rather than him, he says, it is the people who owned the land, took payment for it and then cheated him over the transfer who should be tracked down and prosecuted. The SFO should never have got involved and failed to investigate properly when it did, he maintains.

“I have very little in the way of feelings about what has happened to me. I’m still not sure it really happened,” he says. “How can someone who has invested and paid for an investment be persecuted when the seller and agents haven’t been arrested? What kind of signal does that send to the rest of the world? What is the agenda here?

“Are they determined to prove there is no legal system in Cambodia?

Are they determined to prove they can act as they wish, when they wish, how they wish? I still think it is a big misunderstanding and everyone will recognise that in the end.”

As we talk, Fryett produces a thick dossier of paperwork that he keeps in the corner of his cell. It is packed with reams of documents apparently showing payments of millions of US dollars to the owners of the 6,000-hectare site.

“It’s a massive amount of investment and we’ve got all the paperwork to show it. Everything is bona fide. We are squeaky clean,” he insists.

Despite being in his fourth month in prison, he says: “This project is completely salvageable, in my humble opinion.

“We have had a lot of management problems but this is a very good business, if it is run properly. We were going to create a lot of jobs and invest a lot of money in Cambodia. What happens next, though, really depends upon the political situation here.”

Cambodians go to the poll for a general election on July 28.

“We put everything in place to make sure [investors] didn’t lose their money. I am furious at the heavy-handed approach by the SFO and furious that they haven’t investigated this properly. You don’t open an egg with a sledgehammer and that is what they did.”

Included in his folder of documents are letters to Cambodian Prime Minister Hun Sen, including one written this month in which Fryett says: “The law should be protecting us and supporting us as international investors, not persecuting us for personal or political gain.

“I understand that the application of law is slow and ponderous sometimes and remain happy to forget this small mishap of detention during investigation and press on with our work here in Cambodia if we are able and have the support of the government going forwards,” he writes.

Back in London, a decision on whether to instigate a prosecution against Fryett and other executives from his company is expected to be taken within weeks – and he says he fully expects to face charges, convinced the SFO will not back down at this stage.

“I am really looking forward to the trial in the UK – I can’t wait,” he says. “I am going to rip [the SFO] to pieces. I seriously believe they acted illegally and unlawfully. The investment scheme never faltered; it was slammed shut with pretty much total losses by an uninformed and under-resourced regulator when actually nobody had lost any money and the group was going from strength to strength.”

The SFO, inevitably, sees things differently. An investigation report it presented to Southwark Crown Court in London last February suggested Fryett had “a criminal lifestyle” and that he was enriching himself, along with other company executives, with investors’ money. The funds had been raised through sales agents who used cold-calling techniques and received commissions of up to 50 per cent, the report said. The selling continued until February 2012 even though auditors, eight months earlier, had questioned the prospect of the jatropha plantation ever generating returns for investors.

Fryett, the report by SFO investigator Mark Thompson said, paid himself a salary of US$25,000 a month as the investment scheme faltered, and also made unexplained payments – to bank accounts in Switzerland and Tanzania, and to a company incorporated in the British Virgin Islands – amounting to more than US$5.7 million.

Responding to those allegations, Fryett confirms he was paying himself a salary of £17,000 (US$26,000) but says he held three positions in the group at the time and his pay was “commensurate with market pricing”.

“The group was turning over £8 million per month at this time and growing,” he says. “I had personal account balances in October 2011 of about £40,000 – so, yes, I was really coining it, having worked like a slave for three years.

“The accusations also point towards me benefiting personally in excess of £4.4 million [HK$52.6 million] in cash but this is clearly not the case now that the SFO has had sight of the accounts. Most of my benefit was … as volumes increased and business revenues grew, so completely aligned to commercial success and not at the expense of the company or clients.

“As for a criminal lifestyle, I worked 14 hours a day and was actively building a better and stronger board and management team. When things went wrong, I did not run away with money as so many others have. Instead, I have fixed problems, changed staff and finally travelled to Cambodia in an effort to realise assets for my clients when the authorities have so nonchalantly written them off.”

Fryett says he wasn’t aware of “any significant payments” to companies and accounts in Tanzania or the British Virgin Islands. “The Swiss company has been very clearly explained to the SFO as a legitimate part of the group,” he says.

As he waits to find out if he will be tried in Cambodia or in Britain, Fryett is a shadow of the man who posed for pictures with Lord Laird in May 2011. Lord Laird has not been in contact with him since his arrest and Fryett laughs when I ask if he might seek help from him.

“He’d run a mile,” he says.

The peer has problems of his own to deal with, in any case. After hosting the luncheon, he fell out with Fryett over a £100,000 loan Fryett says the peer solicited on behalf of a business associate and which was never repaid. Lord Laird – who this month was suspended by his party over a cash-for-questions controversy after a sting by undercover reporters posing as lobbyists – also asked for a £3,000 a month fee to chair an oversight committee for the Sustainable Growth Group, Fryett claims.

Pale and gaunt, Fryett is being tested by prison doctors for tuberculosis When I asked him what I should bring on my prison visit, he asked for Wilbur Smith novels and multi-vitamin tablets. He remains stoic, however, pointing out that anyone who, like him, has been to a British boarding school does not find life behind bars too much of an ordeal.

“It’s manageable,” he says. “I’m still 20kg heavier than most of the other prisoners here so I’m not intimidated by anyone. It’s seriously overcrowded, of course – my cell is six metres by five metres and the whole prison is overcrowded by about 200 per cent.

“The [British Foreign and Commonwealth Office] have been useless.

They haven’t even been in to see the cell.”

However dire his plight, it is unlikely to win him any sympathy among the investors who were persuaded to put their money into his project for a biofuel revolution in Cambodia.

Gareth Fatchett, a solicitor who represents some 900 victims, says: “These were just ordinary people who were sold a dream of making a modest profit while saving the planet.”

That dream – like the abandoned jatropha plot in a remote corner of Cambodia – has now descended into a nightmarish tangle of broken promises and shattered lives.

 

 

         Simon Parry

 

Wonder oil that crashed and burned

It was hailed as the wonder crop that would solve the world's energy needs - a fast-growing, drought-resistant tree native to Latin America that produced seeds with up to 40 per cent oil content.

Fed by extravagant predictions of rich returns, millions of hectares of jatropha have been planted across Asia, Africa and Latin America since experts a decade ago concluded it was the best crop for producing biofuel. The belief was it could be grown in arid areas and produce fuel good enough to fly aircraft - helping bring wealth to poor areas and solve the world's energy shortage at the same time. A Virgin Atlantic flight from London to Amsterdam in 2008 using a mixture of bio and regular fuel helped feed that belief.

In 2007, China announced plans to produce six million tonnes of biodiesel a year by 2020 and subsidies for farmers to plant the crop in Yunnan, Guangxi, Sichuan, Hunan and Guizhou provinces. Across Asia, farmers were persuaded to give up their usual crops and plant millions of hectares of jatropha.

The story since then, however, has been one of disappointing yields and financial disaster for some poor rural communities. In India, a recent study found that 85 per cent of jatropha farmers had given up on the venture. In China, production of jatropha has been scaled back from the heady heights of 2007, when officials envisioned the crop covering an acreage equivalent to the size of England.

In countries such as Tanzania and Mozambique, jatropha ventures have ended in financial scandal as overseas companies that promised to fund operations went into liquidation or disappeared as sources of money dried up.

Zimbabwe began a huge jatropha-planting project in 2005, with a rush among farmers to switch to the crop, encouraged by lavish promises of subsidies and support from Robert Mugabe's government. Those failed to materialise and most plantations have failed.

A similar story played out in Myanmar. The military government there ordered each state to plant about half a million acres of jatropha. Households were forced to buy seeds and plant jatropha in their back gardens, human rights groups say. Without any support from the government and with no effective process to turn the seeds into biofuel, however, the jatropha trees were in most cases left to die in the ground.

The problem appears to be that the crop never lived up to its billing by overexcited speculators, who exaggerated or failed to properly research its properties. In particular, the claim that it could produce oil-filled seeds with little or no water was overstated.

A report by Promode Kant of the Institute of Green Economy in Delhi, India, on the failure of the jatropha industry globally, found: "Without moisture [jatropha] does not seed, or it seeds extremely poorly."

Other studies have confirmed that while jatropha can survive in arid conditions, it produces low oil yields and needs water and good land to be economically viable - meaning it can best be grown on land that is more valuable for food production.

Protests broke out on the Philippine island of Mindanao in 2008, when villagers claimed jatropha plantations were displacing those producing much-needed rice, bananas and corn.

There have been isolated success stories - and it remains to be seen whether jatropha crops can be more profitable and viable in countries such as China, where central control may solve the problems of bad infrastructure and support.

For now, though, the verdict on the wonder crop is decidedly downbeat. Kant's report concluded: "It appears to be an extreme case of a well-intentioned top-down climate mitigation approach, undertaken without adequate preparation and ignoring conflict of interest, and undertaken in good faith by other countries, going awry, bringing misery to millions of the poorest people across the world.

"It happened because the principle of due diligence before taking up large ventures was ignored everywhere."

 

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