The Gaps in Legal Oversight: Walkers and the Failures at the Heart of the Port Fund Dispute

At the heart of the Port Fund dispute, now being heard before the Grand Court of the Cayman Islands, is a scandal involving hundreds of millions of dollars that were allegedly embezzled following The Port Fund’s sale of one of its most prized assets, Clark Global City in the Philippines.

The Fund claims the sale was just shy of $500 million; funds that were later frozen by Noor Bank in Dubai. Meanwhile, filings in the Philippines report the sale was truly worth almost $1 billion.

Questions not only arise about fund governance, however, but about the adequacy of legal oversight provided by Walkers, the global law firm famed for its work with the financial services community.

As the case enters oral closings on 7 May, a clear conflict of interest that Walkers failed to disclose at the time raises serious ethical and professional questions for the legal industry in a time when multi-jurisdictional disputes are increasingly the norm.

To understand the crux of the story, there is important background context. The Port Fund was an investment vehicle registered in the Cayman Islands. Walkers’ Cayman firm was engaged by The Port Fund, which counted among its investors the state-owned Kuwait Ports Authority (KPA) and Public Institution for Social Security (PIFSS).

In November 2017, $500 million claimed by The Port Fund was frozen by Dubai’s Noor Bank amid suspicions of money laundering raised by Kuwaiti authorities. The Fund’s directors – a Russian businesswoman Maria Lazareva and her Kuwaiti business partner Saeed Dashti – were arrested and accused of embezzlement. Although the initial conviction was quashed, in November 2019 Lazareva was convicted of money laundering and the embezzlement of Kuwaiti public funds. She fled to the Russian embassy in Kuwait, where she is still hiding to this day.

It was during this period that a lawsuit was filed against The Port Fund in the Dubai International Financial Centre courts by an entity known as Emerging Markets PE Management Limited (EMPEML). EMPEML engaged Walkers’ Dubai firm to support their claim, which was not contested by The Port Fund. Within three weeks, EMPEML was awarded $57 million.

So far, all above board. But it is the identity of EMPEML’s ultimate controllers that has raised the eyebrows of the Court: EMPEML was, until July 2018, known as KGL Investment Cayman Limited, whose majority shareholder was ultimately Maria Lazareva, the very same director of The Port Fund.

It would seem, therefore, that Lazareva sued herself while awaiting trial for embezzlement charges filed against her by the Kuwaiti state in order to siphon off funds claimed by The Port Fund that had been frozen in Dubai.

Walkers, through their separate firms in the Cayman Islands and Dubai, represented both sides in this dispute. But this created a clear conflict of interest given the obvious ties between Walkers’ two firms.

As EMPEML’s claim was allowed to pass through the Court uncontested, serious questions must be raised over the advice Walkers was providing its clients.

Dig into the court case currently being heard in the Cayman Islands even further, and the crisscrossing web of interests within this Byzantine corporate structure thickens. Mark Williams was director and founder of Port Link Holdings USA, the entity that owns The Port Link, the Port Fund’s General Partner (GP). Williams’ testimony at the trial which raises more questions than it answers.

But Williams wore many hats, also serving at KGL Investment Kuwait (KGLI), an entity that sponsored The Port Fund, as Investment Director. It is Williams’ senior role in several organizations at the heart of the Port Fund scandal that raises questions over whether clear conflicts of interest were addressed at the time.

Part of the issue is that Williams and his colleagues have not left a long paper trail for legal teams to follow. When asked during cross-examination whether he would agree that it’s unusual not to see a single document discussing the price for a share purchase of $18.5 million, Williams disagreed.

Doubling down, when questioned on why there are such few documents in relation to a share transaction, Williams admitted that this was because “everything was done orally” and via informal channels such as WhatsApp.

Eyebrows were raised further when it was revealed that Williams allegedly applied significant pressure on Walkers to accept a narrative that it was Kuwait that was misappropriating funds. If true, not only does this reflect badly on Williams, but raises key questions about Walkers’ professional independence and ability to maintain objective legal framing.

The implications of the Cayman Islands case will echo far beyond the courtroom, raising serious ethical questions not only about the conduct of senior leadership within the highly controversial Port Fund case, but also the role of Walkers, a renowned global law firm, in managing an apparent clear conflict of interest between two parties.