A former director of Louis Group Isle of Man claimed he handed over operational responsibility for the companies more than a year before he formally resigned.

Lukas Nakos is one of three men facing disqualification for their involvement in the collapsed investment group. Liquidators have calculated total losses of investors’ funds in Louis Group IoM at £50m.

Mr Nakos (pictured above) claims he was a whistleblower who raised concerns when he returned from a secondment in Switzerland in 2007.

Cross-examined by Charles Davies, for the Financial Services Authority, Mr Lukas claimed he had handed over operational responsibilty for the companies in May 2007, more than a year before he formally resigned in June 2008.

He accepts that during his time as director loans totalling £18m made from Louis Group Structured Capital (LGSC) to Louis Group SP Investments (LGSP), the British Virgin Islands- incorporated entity at the centre of operations.

It is the FSA’s case that LGSP was potentially insolvent from the very first. Funds passed to it were paid out in ’all sorts of different directions’ and it wasn’t clear in many cases where all the money went. Some went to the Louis Family Foundation and around £8m went to head of the company Dr Alan Louis.

Mr Davies said that total loans between LGSC and LGSP were in the order of £25m and 80% of loans were made during Mr Nakos’ time in office. ’Do you accept that?’ he asked. ’I do,’ replied Mr Nakos.

He claimed the process of handing over responsibility had begun in November 2006 and culminated with a board meeting in May 2007 when delegations were approved.

He said the board had written to the FSA notifying them of the handover of the managing director’s role.

’The intention was that I resign,’ Mr Nakos told the hearing. But he accepted that the proposal to resign from the various companies was not put into effect until June the following year.

’I do accept that I did not officially resign. The resignations were not actioned as they should have been,’ he said.

Mr Nakos was asked about the documents that proved he had handed over responsibility for the companies.

He said it has been a serious problem as all he had were the minutes of Louis Group IoM board meetings and a back-up copy of his email inbox that only went up to mid-later November 2007.

Mr Nakos, until recently a team leader at the Living Hope Church in Douglas, had lost his job twice, the hearing was told earlier - first with the Louis Group and then with the new real estate venture he set up whose board were concerned at the fall-out of the pending disqualification hearing.

He stepped down as chief executive officer of that company in June last year and is working in South Africa for the church for free.

The others facing the disqualification hearing are former director John McCauley and the head of the Louis organisation, Dr Alan Louis, the latter portrayed in Mr Nakos’ evidence as a ’sophisticated conman’, said Deemster Rosen QC.

Dr Louis denies the allegations against him. He says the fund had a 100% success rate for 20 years before operations began in the island in 2002. ’It’s only in the Isle of Man where I am seen as a monster,’ he told the court.

Listing its criticms of the management of the Louis Group IoM, the FSA claims offer documentation for investors wasn’t complied with, transactions were not documented contemporaneously, there was a lack of security and there was no advance board approval.

Another theme, says the FSA, was the controlling influence of Dr Louis over all these companies. ’There is a pervasive sense that everybody appears to be subject to the dominance of Dr Louis.’

The hearing continues.