The co-founder of Texas-based private equity firm Delos Shipping has been found to have diverted cash due to the company to other entities under his control, according to a recent “agreed judgment”.
A Texas judge approved a settlement that found Brian Ladin to have “wilfully abdicated fiduciary duties” owed to Delos and related companies after reviewing evidence in a lawsuit brought by Ladin’s former business partner, Richard Squires.
“These actions resulted in damages to plaintiff [Squires] in the amount of this agreed judgment,” according to the judgment signed by Judge Emily Tobolowsky. “Defendant, the defendant entities and plaintiff intend that this admission of liability and this settlement to be binding and to be given full preclusive effect to the fullest extent of the law.”
The court found that Squires is entitled to recovery of $3.009m and that the award cannot be avoided should the defendants decide to file for protection under Chapter 11 of the US bankruptcy code.
While the judgment appears to bring a resolution to the $4m lawsuit filed by Squires in 2019 and to Ladin’s counterclaim that he was deprived of deserved fees by Squires, Ladin said the document should not be seen as a final disposition.
He said a “stay order” is forthcoming.
“The agreed judgment will be put on hold while other parts of the case continue litigation,” Ladin said in an email exchange with TradeWinds.
Ladin added that “there are two other active lawsuits which are in process”, but he did not elaborate on the point.
In additional comments to TradeWinds on Wednesday, Ladin described the $3.009m judgment: "The settlement is for a series of payments that represent the dissolution of a five-year partnership."
He added, "There is nowhere in the documentation or anywhere else that says the money went into my private accounts."
Delos may be best known for providing funding in advance of Euroseas’ 2012 initial public offering in New York. It also acquired a piece of German owner Konig & Cie in 2013 and sold out in 2016.
The firm was also linked to failed attempts to seal a July 2018 order for six 93,000-cbm ethane carriers at South Korean shipyards for long-term charters to China's Zhejiang Satellite Petrochemical.
Squires claimed in his 2019 lawsuit that Ladin began diverting funds from Delos investments as early as 2013, citing the findings of GlassRatner, an advisory firm that specialises in forensic accounting.
The investigation, performed by two former Federal Bureau of Investigation agents, found some $3.7m in funds that Ladin allegedly diverted to himself or his wife across several shipping deals, Squires' lawyers charged in the lawsuit.
Ladin was alleged to have created fraudulent “fees” or “commissions” that steered money owed to Delos into his private bank accounts, according to the complaint.
Funds were allegedly diverted across deals that involved the likes of Chembulk, Konig and the Megacore joint venture between Omega Navigation Enterprises and Glencore, as well as Delos' involvement in the 22,800-gt cruiseship Deutschland (built 1998).
At the time of the lawsuit's filing, Ladin issued a blanket denial of Squires’ charges.
He alleged in a counterclaim that Squires reneged on promises to compensate him with management fees related to various special purpose vessel companies Delos had launched. Ladin also claimed that Squires’ meddling was responsible for bringing down the Zhejiang Satellite deal.
But the Dallas court’s judgment made no mention of any finding against Squires, whose lawyers did not immediately respond to an email seeking comment.
This story has been amended since publication to reflect that the judge found that Ladin diverted cash to other entities under his control and that he is liable for $3.009m. It also has been amended to reflect that the agreed judgment was approved by the parties and that the court reviewed the evidence.
