According to the Devlins, onetime Tokyo publishers, they were robbed of Metropolis. But they can’t get recourse.

I’ve had a few notes passed on this development, which I present to you as a screen shot.

Fullscreen capture 152014 101000 PM.bmp

I have posted about the dispute between Mark & Mary Devlin, originators of the Japan-side expat community’s popular Metropolis magazine, and self-billed entrepreneur Terrie Lloyd, who purportedly bought the magazine in 2007. The details that seem to be pretty solid were that there was an installment sale, and, for some reason, the amount that Mr. Lloyd thought he should be pay is different from the amount that the Devlins say they are owed.

In the meantime, Mr. Lloyd has made a number of public sales, including property in his native New Zealand and an outsourcing firm that he was involved in, called Bios. Prior to knowing about the Devlin story, I have speculated that at least one sale was the product of needing to deleverage after the 2007-2009 recession made clear that many of these expat businesses were vastly overvalued in the small community that used the 1990’s and 2000’s version of the internet to boost the status of their small-office businesses. IA Global (IAGI, now “Asura Development Group”) was clearly vastly overvalued, and I sense that any businesses operating in the same spaces that IA Global sought to, have the same problem. Except, they’re privately held. IA Global was public and under United States SEC regulations.

I want to believe that there is a positive, or happy, ending to this story, but it’s pretty obvious that it is one that can only end badly. If Metropolis was cash positive in 2007, then it’s clear that Mr. Lloyd sought control of it because many of the business fields that Lloyd was involved in were turning into cash drains, and the technique of running around and finding more liquidity through an unenlightened investor was not a practice that was going to work in the credit crunch that developed during 2007. (It’s the Lehman Shock of 2008, but we now know that the credit crunch was developing in the summer of 2007. They should really pin the start of the global financial troubles as the Bear Stearns crunch of 2007. But that’s an aside.)

This is what I think is happening: the dozen or so companies that were “incubated” by Mr. Lloyd were actually puffed up by leverage. Once the easy money went away, starting in 2007, it became a mad rush to find cash positive businesses. IA Global was doing the same thing, which is why (if you read the 10K filed in July 2010), you discovered that a number of deals between this tight group of so-called internet entrepreneurs quickly unwound in early 2008. Since then, it’s probably been a matter of squeezing any cash-generating assets for what they’re worth. Additionally, selling off available assets, many of which are probably against debt, to stay one step ahead of the creditor. In the worst case—which seems to be what Mark Devlin has been alluding to—it involves containing liabilities in one corporate entity, even in one separate country, and moving the assets in the balance sheet over to another corporate shell.

Alternatively, they “bill” an offshore, affiliated corporation where the assets are parked for “expenses” in order to send the value back to the country where they want to place the assets out of reach. If what Mark Devlin says is true, that looks to be what was done with the British Virgin Islands to Hong Kong maneuver.

Do you see how hard it is for a foreigner in Tokyo to get justice in Tokyo? Here, in the instance, I am evaluating the Devlins as bona fide sellers and Lloyd as not a bona fide buyer (because of this part about nonpayment in an installment sale.) The Devlins left Tokyo, and are US based. How would they be able to maintain litigation in Tokyo? A further twist is they are US investors, but not US citizens.

The counterparty is operating in at least four countries (Japan, Hong Kong, New Zealand, and the British Virgin Islands (BVI)—an overseas territory of the UK). As Hong Kong is now China, the only places where the Devlins match up to assets that are arguably claimable, are Scotland (their original home and part of the UK) and the BVI.

They probably can’t reach Lloyd and his associates in Florida, unless under a long-arm theory that whatever business Lloyd controlled that supported the [Devlins’] L-1 visa is somehow connected to Florida. I’m not licensed in Florida, and not familiar with their long arm, so I don’t know. It would be very easy for a Florida based judge (state or U.S. district court) to say, sorry, no jurisdiction—fairly or not. The judge can make any explanation; you’re stuck with it.

Then, they have to pay a lawyer, in a circumstance where it sounds like Lloyd has been controlling their cash flow since 2010.

There is probably some illegality that can be traced directly back to Japan, where Japanese courts have unquestionable jurisdiction. But as advisor Timothy Langley has explained, Japanese courts are not there to dispense justice on behalf of foreigners. And as I’ve argued consistently, Japanese law enforcers (administrative or judicial) would prefer to let there be shades of gray created around foreigners, because it denies foreigners the equal protection of the laws and makes them second-class residents while in Japan.

More and more, this is why you see internet campaigns develop. Social media is an imperfect remedy, if any at all. But the alternatives are imperfect as well. And more expensive.

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