Investor sues former managers, directors of beleaguered Nova Austral for fraud

A creditor of Punta Arenas, Chile-based salmon farmer Nova Austral is suing some of the company’s former managers and directors for fraud, throwing yet another financial impediment at the company while it actively seeks a judicial reorganization to stave off bankruptcy.

Fratelli Investments Limited – a company formed by siblings of the Solari family, which owns Falabella, one of South America’s largest retail holdings – invested a reported USD 48.1 million (EUR 42.9 million) into Nova Austral between June 2017 and November 2022, and has now filed a criminal complaint for the alleged fraud with the Court of First Instance of Porvenir.

The suit accuses the representatives of Nova Austral’s controlling investment funds in 2017 – Altor Fund III and Bain Capital Private Equity – of fraudulently maneuvering to obtain funding for the company. In October 2022, Altor purchased Bain Capital’s stake in Nova Austral to give it full control over the company.

Specifically, the suit names Yngve Myhre, former chair of the board at Nova Austral; Halvor Meyer Horten, former board member of Nova Austral and partner at Bain Capital Private Equity; Tom Christian Jovik, Nova Austral board member and principal of Altor, Nova Austral’s parent company; Nicolás Nicolaides, former CEO of the company; and Sergio Montenegro, former CFO; as defendants who are responsible as either authors, accomplices, or concealers of the alleged crime.

The document states that “the defendants – as directors and administrators of the company Nova Austral – decided to place a bond in the stock market for USD 300 million [EUR 268 million] in 2017, knowing at least since 2016 that the company had severely breached Chilean environmental standards, as accredited in a case filed by the State Defense Council” in November 2022, local press reported.

The “breached Chilean environmental standards” allude to the historic revocation of three concessions from Nova Austral by the Superintendency of the Environment (SMA) concerning cases of overproduction that occurred under Nicolaides’s administration. The former CEO and four other former executives were brought up on charges due to this issue as well as other irregularities.

The State Defense Council (CDE) accused the company of providing false information to the treasury and abusing the Navarino Law, which provides benefits to companies that set up and operate in Chile’s southern Magallanes Region. Since then, the regulator has particularly targeted the company by levying consistent fines and implementing regular production limitations.

As a result, Nova Austral has been in a near-constant state of financial turmoil.

In 2017, the defendants, who were already aware of their environmental infractions, but had yet to face authoritative punishment for their actions, “planned, developed, and executed a criminal plan to fraudulently obtain resources for the company,” the Fratelli complaint claims, highlighting the company’s “triple line of false facts” in presenting supposedly high environmental standards, an above-average production standard, and a steady financial situation to authorities and investors.

“They concealed the company’s situation in order to get third parties to give them million-dollar sums of money and then dispose of it and completely destroy the company,” according to the suit. “At least since 2016, the company has been in serious legal violations – administrative and environmental – leading to a situation that was diametrically opposite from that which it feigned.”

Fratelli Investments referred to a mechanism through which the Nova Austral board of directors supposedly transferred its share capital to ... 

Photo courtesy of Consejo Regional de Magallanes y de la Antarctica Chilena