ADVANCE, SHERIFF: Lord Carloway’s evidence to Holyrood faces probe – Statement of ex- sheriff suspended for Heather Capital writ confirms Lord Malcolm's son worked on Court of Session judicial conflict of interest case linked to top judge

Ex-Sheriff Watson statement confirms judges’ son on conflict case. COURT PAPERS obtained in an ongoing probe of claims made by Scotland’s top judge at Holyrood – now reveal Peter Watson – a judicial colleague of Lord Carloway - ran the case for a construction company at the centre of a land contamination scandal linked to Court of Session judges who concealed conflicts of interest in court.

The court-sourced witness statement of solicitor and ex-Sheriff Peter Black Watson to the Court of Session - confirms Watson employed the son of Lord Malcolm in the case to represent the client – Advance Construction Scotland Ltd – which ended up being heard by Lord Malcolm - who concealed his link to his son during multiple court hearings.

The new material is a further blow to Lord Carloway – who demanded MSPs on the Scottish Parliament’s Public Petitions Committee accept his version of events in that there was no active involvement of Lord Malcolm’s son in the case whatsoever – a claim also contradiced by a witness statement from Lord Malcolm’s son: Ewen Campbell - Witness Statement - Nolan v Advance Construction

In the opening lines of Watson’s witness statement - ex Sheriff Peter Watson states: “I have been instructed by Advance Construction (Scotland) Limited (“Advance”) in relation to Mr Nolan’s action against the company. I have been running this case and acting on behalf of Advance since. I was approached by Advance in relation to defending an action raised against them by the Pursuer in this case Mr.Donal Nolan and accepted those instructions.”

Critical to the ongoing probe of Lord Carloway – Watson goes on to confirm he asked Lord Malcolm’s son – Ewen Campbell – to work alongside him in representing Advance Construction.

Watson states: ”Throughout these proceedings, I have been assisted by Mr. Ewen Malcolm Campbell and latterly, Mr. James Anthony Robb. During their involvement, both Mr Campbell and Mr Robb were also enrolled solicitors employed by the firm.”

Curiously, at no point in Mr Watson’s witness statement to the Court of Session does he refer to himself as a Sheriff and member of Scotland’s judiciary. Instead, Mr Watson refers to himself as “Professor Peter Black Watson”.

However, the admission by Watson that he employed Lord Malcolm’s son on a case in which Lord Carloway claimed Ewen Campbell had no active involvement - raises more questions of the Lord President’s evidence to the Scottish Parliament’s Public Petitions Committee at a crucial hearing during their six year probe of judicial interests and the creation of a register of judges’ declarations of interests.

At the time of the case – Nolan v Advance Construction Scotland Ltd [2014] CSOH 4 CA132/11 – Peter Watson was a Sheriff on the judicial bench alongside Lord Carloway (Colin Sutherland) – and Lord Malcolm (Colin Campbell QC).

Working alongside Peter Watson on the same case was Roderick William Dunlop QC of Axiom Advocates, and Ewen Campbell of Axiom Advocates – who was employed by Levy and Mcrae during the events of Nolan v Advance.

Lord Malcolm’s son later left Levy and Mcrae to join the current Vice Dean of the Faculty of Advocates Roddy Dunlop QC in Axiom Advocates.

Watson was later suspended for a record three years plus over his links to a £28M writ involving the £400M Heather Capital Hedge Fund collapse in an order issued by former Lord President Brian Gill in February 2015

An earlier investigation of this case revealed when Lord Woolman (who heard the proof after the case was passed to him by Lord Malcolm) - stated in court papers that Mr Nolan had a case, John Campbell QC removed – without instruction – most of his client’s own case including over £4million and a claim for legal costs – after he had discussions with the current vice dean of the Faculty of Advocates – Roddy Dunlop QC.

A full report on how the couple’s legal representative in court - John Campbell QC reduced his own client’s financial claim almost to zero and without any instruction or consultation - can be found here: CASHBACK QC: Legal regulator’s files reveal senior QC reduced claim without instructions, withheld key evidence & witnesses including Cabinet Secretary from Court of Session case

In an earlier article - DOJ revealed Lord Carloway had made false and misleading claims to the Public Petitions Committee and a guest MSP – Alex Neil – during a hearing where Lord Justice General Lord Carloway – as he prefers to be known – demanded an end to calls for judicial transparency. The report is featured here: DISHONESTY, LORD: Files reveal Lord Carloway misled Holyrood Committee on involvement of judges’ relative in Court of Session claim – witness statement exposes direct role of Ewen Campbell in £6M land case heard by his father - judge & privy councillor Lord Malcolm

During the evidence session - Lord Carloway faced questions from Mr Neil on the Court of Session case - where judge & Privy Councillor Lord Malcolm (real name Colin Campbell QC) – heard a land contamination case - up to EIGHT TIMES while his own son represented the defenders - Advance Construction Scotland Ltd in the same court room.

In response to questions from the MSP, Lord Carloway (real name Colin Sutherland) furiously claimed that Lord Malcolm’s son DID NOT have any “active involvement with the case whatsoever.”

However – a witness statement dated May 2013 - signed by Ewen Campbell – covering the time Campbell worked for Glasgow law firm Levy and Mcrae – contains a written admission Mr Campbell confirming he did in-fact represented the construction company, alongside lawyer Peter Black Watson – who was at the time a Sheriff and partner at the same law firm.

During the hearing, Alex Neil - MSP for Airdrie & Shotts - asked Lord Carloway: “If, in any case—without referring to a specific case—a close relative of a judge is participating in the case, rightly or wrongly, the perception is that there may be a degree of prejudice.”

Mr Neil said there were concerns the reputation of the judiciary should be protected and added: “I would argue that, certainly in at least one case recently, which we have referred to briefly, the perception is that there may have been unfairness and prejudice in the way in which the matter was conducted, particularly as the judge concerned was involved in the case not once but on a number of occasions.”

In response – a clearly flustered Lord Carloway claimed no such events had taken place.

Carloway took a strong line against the questions, and replied to the MSP stating: “I disagree entirely with your analysis of that particular case and I repeat what I said earlier. The case that you refer to did not involve the judge’s son having any active involvement with the case whatsoever.”

However - on page one of the released witness statement of Ewen Campbell – Mr Campbell confirms he did work for the defenders – Advance Construction.

Ewen Campbell states: “In September 2011 I was asked by Professor Peter Watson (witness) to assist in a new case in which we were to act for Advance Construction (Scotland) Limited (“Advance”).”

Ewen Campbell goes on to admit he worked on the case for nearly a year: “I assisted with this case until Friday 15th June 2012. At this point I ceased assisting Professor Watson as I was informed by Senior Counsel that I was a potential witness in the matter.”

The released witness statement of Ewen Campbell – the contents of which call into question the honesty of Lord Carloway’s evidence to MSPs, can be found here: Ewen Campbell - Witness Statement - Nolan v Advance Construction

Within the statement, Lord Malcolm’s son – who Carloway told MSPs had no involvement in the case - goes on at length to document numerous on-site visits he undertook at the behest of Carloway’s then judicial colleague – ex Sheriff Peter Watson, and on behalf of the client – Advance Construction (Scotland) Ltd.

In just one example, Ewen Campbell states: “At approximately 4 p.m. I left Levy and McRae’s offices and attended at Branchal Road. I was driven by Ian Butler, a colleague at Levy Sc McRae. On arrival at the site I observed that a number of vehicles were at the gate of the site. Mr Butler and I therefore parked our vehicle just round the comer from the entrance of the site.”

Ewen Campbell is later forced to account for allegations a Grangemouth based firm - IKM Consulting Ltd – employed by Levy and Mcrae as their ‘experts’ in the case – dumped contaminated materials at a site owned by the pursuer – Mr Nolan.

Despite Lord Carloway’s abrupt statement that Lord Malcolm’s son did not have “any active involvement with the case whatsoever” - Ewen Campbell goes on to say in his witness statement he personally talked to a legal representative of the pursuer - and talked the solicitor down from his client’s initial allegation IKM Consulting Ltd dumped contaminated material during their on-site activities for Levy and Mcrae & Advance Construction (Scotland) Ltd.

Ewen Campbell states: “I contacted [solicitor] regarding this who detailed that his clients had originally stated to him that IKM had dumped contaminated materials on the site but after further questioning reduced the allegation to having dumped soil like materials on site.”

Bizarrely, Lord Malcolm’s son adds within his statement he did not instruct IKM Consulting Ltd to dump any materials during their on-site activities under his supervision.

Campbell also admits to accepting additional instructions to work on the case in which Carloway claimed he played no active role in.

Ewen Campbell further stated: “Before I ceased assisting Professor Peter Watson in relation to this case, I was instructed on a number of occasions to prepare and send letters and emails to those acting on behalf of Mr Nolan.”

It should be noted that despite Ewen Campbell’s ‘account’ of events around the IKM Consulting incident - Advance Construction were subsequently forced to admit in the Court of Session before Lord Woolman that they had in-fact illegally dumped contaminated materials on Mr Nolan’s land.

The video footage and transcript of Alex Neil’s questions to Lord Carloway can be found here:

Alex Neil questions to Lord Carloway Register of Judges interests Scottish Parliament 29 June 2017

Alex Neil (Airdrie and Shotts) (SNP): I apologise for being slightly late. I had to go to the Public Audit and Post-legislative Scrutiny Committee. I apologise in advance if I cover ground that has already been covered.

Lord Carloway, as an issue of principle, do you think that it should be left only to a judge to decide whether they are going to recuse themselves, or should you or the keeper of the rolls be able to insist on recusal if you believe that there is a potential conflict of interest?

Lord Carloway: The short answer is that I do not believe that there is any problem with the current system, which is that the judge, who knows what his connection is to the case or the parties to it, should make the initial decision. That decision is made in open court, when the parties are present, and it is subject to review on appeal. In other words, if somebody is dissatisfied with that decision and if the litigant eventually loses the case, the decision will come before three judges who will review whether it was correct. If it was incorrect, the decision on the case would fall.

Alex Neil: The person bringing the case to court may not be aware of any conflict of interest that the judge may have and may never find out that there was one, but the judge may well have been influenced by a particular interest. Surely that is not right. If there is any potential conflict of interest, surely there should be a declaration or commitment by the judge, making an explicit statement that there is no conflict of interest. People may not have the resources to appeal, for example. Is the system not balanced against people who come to court for justice?

Lord Carloway: No, it is not. I go back to something that I mentioned earlier, which is very important. Scotland does not have a corrupt judiciary. The matter has been examined by independent persons, notably the GRECO anti-corruption body that operates under the auspices of the Council of Europe, which examined the UK judiciary, including the Scottish judiciary. It was clear that, fortunately, we, as distinct from many other countries, do not suffer from corruption in the judiciary. For that reason, it did not consider that a register of interests was necessary. If one introduces such a measure, one has to be satisfied that it is necessary and also that it is proportionate. If one analyses its proportionality, one has to look at what exactly we are guarding against. If the situation were to be that there was corruption in the Scottish judiciary—which we would discover at some point or another—of course we would have to consider measures to prevent that, one of which might be a register of certain interests. Until such time as it is demonstrated that there is corruption in the Scottish judiciary, I am entirely satisfied that there is no requirement for a register of interests and that it would be positively detrimental to the administration of justice, particularly in relation to the recruitment of judges and especially at the higher level of the judiciary.

Alex Neil: I want to draw a parallel with the register of interests that members of the Scottish Parliament have to sign and regularly update. That came about not because of any allegations or belief that the system was corrupt or that members of the Scottish Parliament are corrupt. In the 18 years that we have been here, I have not heard one allegation of corruption. The register is there not because of allegations of corruption but to ensure that there is no prejudice. If I participate in a debate and I have an interest that I have not declared, I will be open to an allegation not of corruption but of prejudice. Because there is a register of interests and because I have to declare interests in a debate or in a committee meeting such as this one, there is a transparency to ensure that I do not act in a prejudicial fashion.

To go back to the case that Mr MacDonald cited as I came in—the case of Advance Construction and Donal Nolan, in which Lord Malcolm’s son was involved as a lawyer for one of the parties—the issue there was not an allegation of corruption but one of possible prejudice or perception of prejudice. That is a very good example of why either a register of interests or a more robust system of recusal—or perhaps both—might serve the judiciary very well.

Lord Carloway: I am satisfied that Lord Malcolm’s actions were entirely honourable and that he acted in accordance with the code of judicial ethics. I am not sure what is—

Alex Neil: Have you investigated it?

Lord Carloway: I am aware of the background to it.

Alex Neil: No, but have you investigated it?

Lord Carloway: I have read the papers that it involves.

Alex Neil: With all due respect, Melanie Collins and Donal Nolan have written to you on numerous occasions, and at no time have you replied to them, let alone met them, so you have not heard the other side of the case.

Lord Carloway: I am sorry, but I am not aware of letters to me by those particular persons.

Alex Neil: Your office—

The Convener: Alex, let us be careful that we do not get into anything specific on that.

Alex Neil: Yes—absolutely. My point is about how Lord Carloway can reach that conclusion if he has not heard the other side.

Lord Carloway: I have read documents emanating from the persons that you have mentioned. As far as I am aware, they were not addressed to me, but I could be wrong about that. The position is that I am aware of the circumstances of the case. I am satisfied that Lord Malcolm’s conduct was entirely correct in the circumstances. That is part of the problem that you have perhaps highlighted. That case has nothing to do with a register of pecuniary interests. The suggestion is that we should start registering what our relatives are doing, where they are working and matters of that sort, which I suspect would go way beyond even what is expected of politicians.

Alex Neil: No—we have to register what close relatives do.

Lord Carloway: Can I deal with the difference between MSPs and the judiciary, which I think I dealt with earlier this morning? It is quite a different function. A politician is by nature someone who is not independent in the sense that the public expect the judiciary to be. That is not a criticism; it is a reality. As a generality, judges do not deal with the type of issues that politicians deal with. Politicians have executive power. They are dealing with major economic interests of one sort or another. As a generality, judges are not dealing with that type of thing. They are dealing with issues that are usually between private individuals but can be between private individuals and Government or others. Judges are not dealing with the type of issues that politicians are dealing with such as planning inquiries and so on at a local level or major economic development in society as a whole.

The need for independence in the judiciary is different from the kind of independence that a politician requires, because with a politician it is primarily, as Alex Neil has pointed out, about issues of a pecuniary nature. Those are not the issues that arise in most of the recusal cases with which we are concerned. What we are concerned with as judges is that we appear to be independent of all connection with the case. It is not a question of having a pecuniary interest.

If one looks at the register of recusals in the past year, I do not think that any of them were to do with pecuniary interest at all. They were to do with social connections with people—whether someone is a friend; whether a party to the litigation is a friend of a friend; and matters of that sort. Those are the types of situations that are raised by people in the practical reality of litigation and those are the issues that are being dealt with. Unless you are suggesting a register of one’s friends—and presumably, therefore, one’s enemies—the real issue with recusal in the judicial system would not be addressed.

The Convener: Last question, please, Mr Neil.

Alex Neil: If I can just finally draw the parallel between our register and what has been talked about in terms of either recusal or financial interest, MSPs—as individuals and collectively—do not have executive power per se unless they are ministers, but what is very important is the perception of fairness and the perception that justice is being carried out.

If, in any case—without referring to a specific case—a close relative of a judge is participating in the case, rightly or wrongly, the perception is that there may be a degree of prejudice. It might be very unfair, but the point is to try to ensure that the excellent reputation of the judiciary down the years in Scotland is retained. That reputation is not just for not being corrupt, which we all accept—we are not accusing anybody of corruption. The perception of fairness and the perception of not being prejudiced are also extremely important. I would argue that, certainly in at least one case recently, which we have referred to briefly, the perception is that there may have been unfairness and prejudice in the way in which the matter was conducted, particularly as the judge concerned was involved in the case not once but on a number of occasions.

Lord Carloway: I disagree entirely with your analysis of that particular case and I repeat what I said earlier. The case that you refer to did not involve the judge’s son having any active involvement with the case whatsoever. We have very clear rules in our statement of principles of judicial ethics on how to deal with such matters and it is made very clear in that statement that if a relative is the advocate in the case before one, the modern approach is that the judge should not hear the case, or one could put it another way round—the relative should not be presenting the case. Whichever way it happens to be put, the situation that we had 20 or 30 years ago, when it was commonplace for the relatives of judges of one sort or another to be advocating the case, no longer exists.

That practice no longer exists not because it was thought that there was any actual problem with the decision making but, as you say, because of a perception of unfairness. There is a clear judicial rule about that and I am not aware of any case in which it has been breached. I myself have been in a situation in which my son was involved in a firm that was litigating before me. In such a case, the judge would be expected to declare it and the parties would then decide whether to take the point. However, if they took the point and the relative just happened to be a member of the same firm operating in a different department, I would not encourage the judge to recuse himself.

The Convener: There are no final questions, so I thank you very much for your evidence. It has been helpful to clarify many of the issues that you presented to us in written evidence and to have an opportunity to explore some of the issues around prejudice, for instance.

ADVANCE SHERIFF AT COURT: Ex-Sheriff Peter Watson resigned from judicial bench in 2018

Peter Black Watson a former partner in Glasgow based law firm Levy and Mcrae – who was named in a £28million writ linked to the collapse of bust hedge fund Heather Capital – resigned his commission as a part time Sheriff on 10 October 2018.

The information was released by the Scottish Courts and Tribunals Service in response to a Freedom of Information request in 2019 – SCTS - Sheriff Watson resignation

The SCTS stated: “I can advise that Mr Peter Watson resigned his commission as a part-time sheriff on 10 October 2018. Mr Watson did not hear any cases between the lifting of the suspension on 12 July 2018 and his resignation. Mr Watson has not submitted any claims for expenses, nor attended any events, nor carried out any judicial functions, since the suspension was lifted.”

Watson’s resignation came less than three months after Lord Carloway had lifted Mr Watson’s record suspension from judicial office of over three years – imposted by Lord Brian Gill in February 2015

Mr Watson was suspended from the Judiciary of Scotland on February 16, 2015 - after the then Lord President, Lord Brian Gill, was informed by a journalist of the claims in the case against Levy and McRae, and specifically against Watson, over Heather Capital’s collapse in 2010.

The move came after allegations surfaced in a £28million writ naming part time Sheriff Peter Black Watson - and his former law firm Levy and Mcrae, and a number of individuals under investigation in connection with the collapsed Heather Capital hedge fund.

In response to queries from the media in February 2015 on the contents of the writ - the Judicial Office subsequently issued a statement confirming Lord Brian Gill  had suspended Sheriff Peter Black Watson (61) on 16 February 2015.

The suspension came after Gill demanded sight of the writ.

Responding to the Lord President’s request, Watson then offered to step aside temporarily – while the litigation concluded - however a Judicial Office spokesperson said “The Lord President concluded that in the circumstances a voluntary de-rostering was not appropriate and that suspension was necessary in order to maintain public confidence in the judiciary.”

A statement from the Judicial Office for Scotland read as follows: Sheriff Peter Watson was suspended from the office of part-time sheriff on 16 February 2015, in terms of section 34 of the Judiciary and Courts (Scotland) Act 2008.

“On Friday 13 February the Judicial Office was made aware of the existence of a summons containing certain allegations against a number of individuals including part-time sheriff Peter Watson.

The Lord President’s Private Office immediately contacted Mr Watson and he offered not to sit as a part-time sheriff on a voluntary basis, pending the outcome of those proceedings.

Mr Watson e-mailed a copy of the summons to the Lord President’s Private Office on Saturday 14 February.

On Monday 16 February the Lord President considered the matter.

Having been shown the summons, the Lord President concluded that in the circumstances a voluntary de-rostering was not appropriate and that suspension was necessary in order to maintain public confidence in the judiciary.

Mr Watson was therefore duly suspended from office on Monday 16 February 2015.”

A fulll report on Mr Watson’s suspension from the judiciary in 2015 can be found here: CAPITAL JUDGE: As top judge suspends sheriff over £28m law firm writ alleging links to £400m Heather Capital collapse, what now for Lord Gill’s battle against a register of interests & transparency for Scotland’s judiciary

In 2018, after matters relating to the Heather Capital writ came to a conclusion, it fell to Scotland’s current top judge – Lord Carloway (Colin Sutherland) to consider the ongoing suspension of Watson – reported in further detail here: CAPITAL NUDGE: Scotland's top judge Lord Carloway to consider status of de-benched Sheriff Peter Watson - suspended for a record THREE YEARS over £28million writ linked to collapsed £400m hedge fund Heather Capital

Later in July 2018. a statement from the Judicial Office for Scotland on the continuing suspension of part-time sheriff Peter Watson stated:

Following the extra judicial settlement of the Heather Capital action in which part-time sheriff Peter Watson was named as one of the defenders, the Lord President has lifted the suspension imposed upon him in terms of section 34 of the Judiciary and Courts (Scotland) Act 2008. Sheriff Watson will resume part-time judicial duties with effect from 12 July 2018.

Sheriff Watson was suspended from the office of part-time sheriff on 16 February 2015, in terms of section 34 of the Judiciary and Courts (Scotland) Act 2008.

Watson’s former law firm -  Levy & McRae, was one of several companies being sued by Heather's liquidator, Ernst & Young, after the fund's collapse in 2010.

Watson was also a director of a company called Mathon Ltd - a key part of the Heather empire.

The collapsed hedge fund Heather Capital – run by lawyer Gregory King was the subject of a Police Scotland investigation and a FIVE YEAR probe by the Crown Office.

The Crown Office later admitted there would be no prosecutions in the cases of the four individuals  - lawyers Gregory King & Andrew Sobolewski, accountant Andrew Millar and property expert Scott Carmichael – who were charged by Police Scotland in connection with a Police investigation of events relating to the collapse of Heather Capital.

Peter Watson now has his own law business, PBW Law.

Watson, and his former law firm named in the Heather Capital writ - Levy and Mcrae –  also represent the Scottish Police Federation.

Responding to queries from reporters, a  spokesperson for the Judicial Office said: “The action, in which suspended part time Sheriff Peter Watson was among the defenders, has settled.  An interlocutor to that effect has been issued.  The Lord President will consider what, if any, steps now require to be taken‎.”

Watson subsequently resigned from the judicial bench.

Despite EY’s withdrawal of the £28million claim against Levy and Mcrae & Peter Watson, detailed claims in the Court of Session revealed the following:

[21]      In the Levy Mcrae case:

• On 4 January 2007, HC transferred £19 million to its client account with LM (Lord Doherty paragraph [5]).

• On 24 January 2007, HC transferred £9.412 million to its client account with LM (Lord Doherty paragraph [5]).

• The money was intended to be loaned to a first level SPV Westernbrook Properties Ltd (WBP) for onward lending to second level SPVs (Lord Doherty paragraph [5]).

• On 9 January 2007, LM transferred £19 million to a Panamanian company (Niblick) owned and controlled by Mr Levene:the money was not therefore transferred to WBP.The transfer was undocumented and without security (Lord Doherty paragraph [5], and Condescendence 6 and 17, pages 20 and 44 of LM reclaiming print).

• By a memorandum dated 17 March 2007, HC’s auditors KPMG “identified a number of concerns relating to the documentation provided in respect of these loans”.Further work and information was required (Condescendence 5, page 13 of LM reclaiming print).

• On 29 March 2007, LM transferred £9.142 million to Hassans, solicitors, Gibraltar, under the reference “Rosecliff Limited” (a company controlled by Mr King):the money was not therefore transferred to WBP.The transfer was undocumented and without security (Lord Doherty paragraph [5], and Condescendence 6 and 17, pages 20 and 44 of LM reclaiming print).

• In April to June 2007, amounts equivalent to the loans thought to have been made to WBP (including accrued interest) were “repaid” to HC via Cannons, solicitors, Glasgow.The directors were unable to ascertain the source of these repayments (Lord Doherty paragraph [7]).

• Approaches made by HC to Mr Volpe and Triay & Triay, a firm of solicitors in Gibraltar, were met with a total lack of co-operation (Lord Doherty paragraph [8]).

• At a board meeting on 6 September 2007, “KPMG could not approve HC’s accounts … Santo Volpe had executed certain loans to SPV companies where non‑standard procedures had been followed which meant that inadequate security had been given for some loans … Gregory King stated that the loans to the SPVs had been repaid in full in May 2007” (Condescendence 5, page 13 of LM reclaiming print).

• By email to a non‑executive director of HC (Mr Bourbon) dated 7 September 2007, Mr McGarry of KPMG referred to the previous day’s board meeting, and expressed concerns about the situation.He asked for further information, namely “all possible evidence regarding the movement of monies out of Heather Capital into these SPVs and onwards to whatever purpose the funds were applied – ie, sight of bank statements, payment/remittance instructions, certified extracts from solicitors clients’ money accounts etc”.(It should be noted that, contrary to HC’s averment in Condescendence 5 at page 13C‑D of LM reclaiming print, the email did not restrict the inquiries requested to “explaining what information was required from Santo Volpe”:the request was much broader.)

• In October 2007 the non‑executive directors of HC met with the Isle of Man Financial Services Commission (FSC) to discuss “the issues” (Lord Doherty paragraph [8]).A director also disclosed the suspicious activity and Mr Volpe’s obstruction to the Isle of Man Financial Crime Unit (FCU), who said they would investigate (Condescendence 5 page 14 of LM reclaiming print).The auditors KPMG carried out an additional full scope audit.

• By letter dated 18 October 2007, FSC wrote to the directors of HC setting out further information which they required.

• By letter dated 26 November 2007 Mr King advised the HC board that “some sort of fraud had been deliberately introduced with invalid land registry details on a number of the loans”.He stated that he had applied pressure to Mr Volpe and Mr Cannon, whereupon there had been “full repayment of the loans with relevant interest” which meant that “investors were secure”.

• On 17 December 2007, KPMG signed the accounts and added a completion note using language such as “The risk of fraud increased to high as a result of the documentation issues surrounding the SPVs, where some form of fraud appeared to have been attempted”.In their audit report opinion, they stated “We have been unable to verify where funds advanced to the SPVs were invested.In addition, we were supplied with false documentation in relation to the SPVs which appears to have been a deliberate attempt to mislead us.Given these loans were repaid in the period, we consider that the effect of this is not so material and pervasive that we are unable to form an opinion on the financial statements [opting instead for express qualifications that loan and security documentation could not be validated] … There is uncertainty as to where the monies lent to the [SPVs] were then subsequently invested … Investigations continue to determine what party (or parties) were involved in and were accountable for these events, and whether any action should be taken against them …” (Lord Doherty paragraph [9]).

• By letter to HC dated 4 January 2008, KPMG gave serious warnings about their inability to validate loan and security documentation, and lack of evidence as to the purpose for which the money advanced to SPVs was applied.In their words:

“ … Our report is designed to … avoid weaknesses that could lead to material loss or misstatement.  However, it is your obligation to take the actions needed to remedy those weaknesses and should you fail to do so we shall not be held responsible if loss or misstatement occurs as a result … [Having explained the disappearance of the funds and the apparent repayments, on which legal advice had been received, KPMG warned] … these matters are extremely serious … an attempted fraud appears to have been perpetrated … We would recommend that the Board continue their investigation into this matter and formally document their decision as to whether or not to inform the criminal justice authorities …”

A full copy of a court opinion detailing these and other claims with regards to a further case against Burness Paull LLB  - which coincidently also collapsed earlier last year - can be viewed here: Court of Session allows proof against Levy & Mcrae and Burness Paull LLP in Heather Capital case as liquidators attempt to recover cash from collapsed £280m hedge fund.

In the motion of abandonment filed by EY & Heather Capital, heard in the Court of Session on 28 February before Lord Glennie, Lady Paton & Lady Clark of Calton, Lord Glennie’s opinion sums up matters in relation to issues in the Heather Capital case, which linked claims of financial wrongdoing directly to Scotland’s judiciary – who, ultimately heard and ruled on the case.

The Scottish Sun reported on the serving of the £28million civil writ which named lawyer Peter Black Watson - back in February 2015, here:

WRIT HITS THE FAN

FIRM FIRM SLAPPED WITH COURT SUMMONS - Top legal outfit in megabucks lawsuit

Practice is linked to bust hedge fund - Briefs with ties to big business and high-profile clients

By RUSSELL FINDLAY Scottish Sun 15 February 2015

A TOP law firm has been hit with a multi-million pound writ linked to a finance company at the centre of a fraud investigation.

Legal practice Levy & McRae — which acts for footballers, politicians, cops and newspapers — faces the claim over its role in connection with £400million investment scheme Heather Capital.

It's claimed millions of pounds went missing following the collapse of the hedge fund. And The Scottish Sun told last week how four men — including tycoon Gregory King — have been reported to prosecutors probing the allegations.

King, 46, ran Heather subsidiary Mathon, where Sheriff Peter Watson — a former senior partner at Levy & McRae — was also briefly a director.

The Court of Session summons was served on the firm six months after he left the legal firm.

Watson is one of the country's most high-profile lawyers and spent 33 years with Levy & McRae before quitting to set up his own business.

The visiting Strathclyde University professor sat on an expert panel created by former First Minister Alex Salmond to look into media regulation in Scotland.

Watson also acted for former Lord Advocate Elish Angiolini after she was harassed by a campaigner who was later jailed.

'Their clients are a who's who of Scotland' And he includes ex-Glasgow City Council chief Steven Purcell among his list of clients, as well as senior police and prison officers.

The legal expert, 61 — chairman of Yorkhill Sick Kids' Hospital charity — has also acted for former Rangers owner Sir David Murray.

And a Gers supporters' group closed down its website following legal threats from Watson, who was working for under-fire directors Sandy and James Easdale.

A source said: "Watson and Levy & McRae are very well known and their clients are a who's who of Scotland."

Investors from around the world sunk their cash into Gibraltar-based fund Heather Capital, which launched in 2004.

Some of the cash was loaned to Mathon to bankroll developments across Scotland. But many of the Mathon-funded plans did not happen — and some of the cash was not repaid.

Liquidator Paul Duffy of Ernst & Young has been battling to recover investors' cash since 2010 and is suing Heather's auditors KPMG for negligence over their role. Isle of Man court documents — acquired by The Scottish Sun — claim Heather was operating a "Ponzi" scheme to dupe investors.

They alleged that as early as December 2006, senior KPMG staff feared that Heather Capital "may have been perpetrating a fraud".

And in August 2007, KPMG employee Raymond Gawne told a colleague that he was "very uncomfortable" acting for the fund which "may have acted in a criminal manner".

The claim also alleges that millions of pounds of loans passed through the client account of Glasgow lawyer Frank Cannon who acted for Heather. KPMG senior executive David McGarry sent an email to Gregory King stating: "Frank Cannon has been uncooperative, either in providing some form of explanation for all of the security documentation prepared by his firm, or in agreeing to facilitate access to Cannon's clients' money account". McGarry added he did not accept "that this is due" to Cannon.

Watson declined to comment on the writ and Levy & McRae and Cannon did not respond to our requests for comment.

The Police Scotland report naming Mr King and his associates Andrew Sobolewski, Andrew Millar and Scott Carmichael is now being considered by the Crown Office.

A spokesman for Ernst & Young confirmed: "Heather Capital, via Ernst & Young, has made a claim against Levy & McRae." And a KPMG spokesman said: "The passages in the plaintiff's summons provide a selective and misleading picture and are drawn out simply to seek to make what is a wholly unsubstantiated case.

"The allegations are completely unfounded and are being fully contested by KPMG."

GREGORY KING MARBELLA-based former Glasgow Academy pupil, 46, was a lawyer and taxi firm boss before launching Heather Capital in 2004. Family business dynasty includes nightclub boss cousin Stefan King.

PETER WATSON GREENOCK-born solicitor advocate, 61, carved out a fearsome reputation as a media lawyer during 33 years at Levy & McRae. He also dishes out justice as a part-time sheriff across Scotland.

KING'S £400million hedge fund Heather Capital loaned millions of pounds to Glasgow-based Mathon, of which Watson was briefly a director.

TOP lawyer and part-time sheriff Watson has acted for a string of high profile celebrity, political, sport and media clients in a glittering legal career:

Watson’s clients included Alex Salmond, Stephen Purcell, Elish Angiolini, Yorkhill Hospital Board, Rangers Chiefs.

and a further development reported by the Scottish Sun on the suspension of Sheriff Peter Watson:

Bench ban for sheriff linked to fraud probe

Lawman, 61, suspended

By RUSSELL FINDLAY 25th February 2015, Scottish Sun

A SHERIFF was suspended after he was linked to a collapsed finance firm at the centre of a massive fraud probe.

Peter Watson, 61, was barred from the bench by judges’ boss Lord President Lord Gill following an inquiry by The Scottish Sun.

Watson, whose past clients include ex-First Minister Alex Salmond, was briefly a director of Mathon, a company run by Glasgow bookie’s son Gregory King, 46.

It received millions in loans from King’s hedge fund Heather Capital which crashed owing a seven-figure sum.

Watson’s suspension came 24 hours after we revealed Heather liquidators Ernst & Young filed a multi-million court demand against his former law firm Levy & McRae.

Lord Gill, 73, can suspend sheriffs and judges if it’s “necessary for the purpose of maintaining public confidence”.

Watson forged a fearsome reputation as a media lawyer over 33 years with Levy & McRae before he left the firm six months ago.

King is one of four men named in a police report which is being considered by the Crown Office.

The Judicial Office for Scotland said last night: “Sheriff Peter Watson was suspended from the office of part-time sheriff on February 16.”

Watson subsequently resigned from the judiciary later in October 2018 – which was confirmed in an FOI response from the Judicial Office in 2019.Earlier reports on the Heather Capital writ, and subsequent collapse of prosecutions in the collapsed £400M hedge fund can be viewed here: The collapsed £400M Hedge Fund with direct links to Scotland's judiciary