NOAL GP: Luxembourg Judge Rejects Novalpina’s Attempt to Interfere With Decision-making at NOAL Fund; Confirms Existence of Criminal Complaint Against Novalpina Personnel and Key Advisor

  • Stefan Kowski, Bastian Lueken and Weil Gotshal & Manges Partner Gerhard Schmidt accused in criminal complaint filed on behalf of NOAL Fund
  • Judge Philippe Wadlé rejects Novalpina’s attempt to obtain a summary judgment handing it veto control over key decisions at the Fund
  • Dispute follows Novalpina’s ousting as the Fund’s General Partner in 2021, by near-unanimous vote of investors

LUXEMBOURG--()--A judge has publicly confirmed that a criminal complaint has been filed against key Novalpina personnel for an alleged fraudulent seizure of rights from the investment fund from which Novalpina was ousted in 2021.

Judge Philippe Wadlé disclosed the existence of the criminal complaint whilst delivering the latest in a series of courtroom defeats for Novalpina last Friday. Novalpina has been fighting the Fund ever since the Fund’s investors voted by 99% to remove Novalpina as General Partner of the Fund in July 2021. This vote took place in response to a well-publicized rift between Novalpina’s founders, and following Novalpina’s decision to invest the Fund’s money in NSO Group, the operator of scandal-ridden spyware software Pegasus.

Rejecting Novalpina’s recent attempt to assert a veto control over key decisions at the Fund, Judge Wadlé also referred to one of two criminal complaints against Stefan Kowski, Bastian Lueken and Gerhard Schmidt for various allegedly fraudulent actions:

“…It can also be noted… that on 6 May 2022, BRG NOAL GP, MASTER LUXCO, NVP 101, NVP 103, NOAL LUXCO NORTH and the Fund filed a criminal complaint with the joinder of a civil party against Stefan KOWSKI, Bastian LUEKEN and Gerhard SCHMIDT for abuse of powers, as punished by Article 1500-11 of the LSC, this complaint concerning, among other things, the fact that on 8 July 2021, the managers of NOVALPINA GP adopted the Amendment of the Articles of Association...”

Kowski and Lueken are the ultimate controllers and beneficiaries of the Novalpina group. Schmidt, a former director of the ultimate parent in the Novalpina structure and longstanding advisor to the group, is also Co-Managing Partner for Germany of Weil Gotshal & Manges LLP, the international law firm. Schmidt and Weil advised Novalpina in substantially all of its investment transactions, including decisions relating to the acquisition and governance at NSO Group, where Schmidt served on the board; and a suspicious €1 million payment made to a banker advising the seller of Laboratoire XO when Novalpina was buying the French pharma company.

NOAL GP, the Fund’s current General Partner, has filed various complaints on behalf of the Fund in relation to conduct engaged in by Kowski, Lueken and/or Schmidt - with regulators in the UK and Cayman Islands, as well as Luxembourg. The criminal complaint in Luxembourg referenced last week has resulted in an active investigation by the investigating magistrate. It concerns various improper actions alleged against Kowski, Lueken and Schmidt, including attempts by them to threaten and coerce the Fund’s former independent directors. The offence in question is punishable by one to five years’ imprisonment.

Another criminal complaint against Kowski and Lueken, also being actively investigated by Luxembourg authorities in a separate probe, concerns the creation of the so-called veto right that Novalpina unsuccessfully attempted to assert in last week’s proceedings.

Issues in dispute in last week’s case

Novalpina was removed as general partner of the Fund following a near-unanimous vote from the Fund’s investors in July 2021 and an agreement amongst the parties for Novalpina to step aside. Novalpina has been trying but failing to get its removal overturned ever since.

A court in Luxembourg rejected one such attempt in June 2022. This was followed by another defeat last Friday. In both cases, Novalpina’s attempts to achieve a quick summary judgment have been rejected, and its arguments will instead be fully tested at trial. The Fund looks forward to those trials with confidence.

At issue in the latest litigation was a concocted veto right which Novalpina claims to have over one of the Fund’s investment holding companies. This claimed right, which the Fund argues is entirely illegitimate, arises from last-minute voting changes that Novalpina covertly engineered in the dying days of its appointment as General Partner to the Fund.

Specifically, Novalpina (via fresh managers appointed only 24 hours before) amended the governing articles of Master Luxco, a key governance entity within the Fund, so that Board appointments would require unanimous support from its shareholders. This purportedly gave Novalpina an effective veto over certain important governance decisions of the Fund, despite the fact that Novalpina’s own shareholding, at just 0.85%, was negligible.

Novalpina’s change was made without any independent oversight and without the prior knowledge of the Fund and its other investors. The change was clearly against the investors’ interests, since Novalpina was in the process of being removed as General Partner of the Fund at the time.

Recently, Novalpina had sought to assert its so-called veto right in Master Luxco in an attempt to set aside corporate decisions made long after its removal as GP. NOAL GP, the Fund’s current General Partner (since August 2021), argued that the claimed veto right was abusive, fraudulently procured and against the Fund’s interest.

The Fund and NOAL GP also argued that it contradicted separate undertakings which Novalpina entities (including Messrs Kowski and Lueken) gave at the time of its ousting, whereby they recognized NOAL GP’s appointment as the new General Partner and committed to support the transition of the Fund to NOAL GP.

Judge Wadlé’s decision echoes some of these points. In his decision, he described the claimed veto right as “a power which is not justified by any objective element and which is certainly not in the interest of the other shareholders of the company.”

He added: “There is every reason to believe that the Amendment to the Articles of Incorporation was made with a view to revocation of the appointment of NOVALPINA GP as manager of the Fund, in order to provide it with an advantage that it should not have in principle.”

A spokesperson for NOAL GP said:

“We are glad that once again a Luxembourg judge has acted to protect investors from Novalpina’s self-dealing. It is obvious that Novalpina’s partners illegitimately sought to create a “poison pill” situation and manipulate the legal process against the interests of the investors they had duties to. None of the Fund’s other investors had authorized such a change to Master Luxco’s voting rules, nor even been informed of it.

“Novalpina has provided no substantiation or explanation for why this so-called veto right should have been conferred to Novalpina for no consideration on the eve of its removal in what was obviously a conflict of interest.

“For Novalpina now to exercise any control of the Fund would be intolerable and a grave miscarriage of justice. We applaud the decisions made so far by the Luxembourg courts and fully expect that in due course they will wholly reject all such attempted abuse of investors in the jurisdiction.

“The key concern of the Fund and its current GP is to continue its ongoing investigation into the actions of Kowski and Lueken when they were at the helm of the Fund. These include Kowski’s involvement in decisions by NSO to sell Pegasus to undemocratic regimes that misused the software; misrepresentations as to the value and circumstances of the Fund’s investments; and various other seemingly illicit schemes. Schmidt was also a director of NSO Group’s controlling parent when such decisions were made.

“Novalpina’s efforts to interfere with the administration of the Fund appear to be motivated by a desire to hinder this investigation. However, our inquiries are ongoing and our discoveries so far have been shared with the Luxembourg criminal authorities and financial regulators in various jurisdictions. Kowski’s and Lueken’s attempted procurement of the veto right is the subject of a criminal complaint in Luxembourg (as noted expressly in last week’s judgment), and complaints to regulators in the UK, Cayman Islands and Luxembourg.”


Media enquiries
Palatine Communications: Conal Walsh / Andreas Grueter / Richard Seed

Release Summary

Judge discloses criminal complaint against Novalpina and senior Weil Gotshal lawyer as dispute escalates over Fund that invested in Pegasus software


Media enquiries
Palatine Communications: Conal Walsh / Andreas Grueter / Richard Seed