Category: Funds

LM Investment Scam

LM/MPF Managed Performance Fund If you were a victim of the LM Investments, There is still hope of recovering your lost money.

Posted by Expat Investment Fraud on
https://www.youtube.com/embed/wlbkrs94mr8

LM/MPF Managed Performance Fund If you were a victim of the LM Investments, mis-management of funds, fund fraud, Breach of trust with a fraudulent intention, or otherwise known as a Ponzi scheme. There is still hope of recovering your lost money. Between 2009 and 2013, LM Investments Pty Ltd (LM), was the fund manager of LM Managed Performance Fund (LM/MPF) (Gold Coast Australia). LM/MPF was approved by the Insurers, to be placed on the Bond platform and recommended to the IFAs as intermediaries for the Insurers.

The IFAs recommended investment in the LM/MPF and other LM products to clients between 2009 and 2013. As Bondholders, these clients were also clients of the Insurers. The LM/MPF was reviewed by the Insurer’s and the valuation statements of the LM/MPF were sent to clients by the Insurers between 2009 and 2013. LM operated as the Responsible Entity (the fund manager), for the LM First Mortgage Income Fund (LM/FMIF). The LM/FMIF was frozen in 2009 with no redemption payments and went into receivership on 8 August 2013, with BDO being appointed as receivers. BDO has estimated a return to investors, as of June 2016, of less than 15 cents in the dollar, and over AUD$300 million in losses for thousands of investors. In 2009, LM and its directors, irrespective of the losses in LM/FMIF, established and marketed the LM/MPF fund to approximately 5,000 international investors – raising approximately AUD$430 million between 2009 and 2013. The fund had an investment memorandum rather than a prospectus and was designated for professional investors only and not for retail investors. The investment memoranda were provided to the Insurers for sharing with investors. This did not happen. The investment memoranda had instructions and documentation as to how to make an investment in the fund. The Insurers would complete the documentation to make an initial investment thereby establishing themselves as the professional investor. Thereafter, for each subsequent investment, the Insurer was required to complete further documentation. This documentation required a warranty that no laws associated with the investment had been breached. Clearly, this warranty would cover the registration of IFA, product, and Insurer. In or about 2010, LM and one of its directors, Peter Drake, made an application to the Insurers to admit LM/MPF onto its Bond platform. The application was accepted following due diligence of LM/MPF by the Insurers. That review would have revealed that one of LM’s other funds, namely LM/FMIF, was then suspended from trading and was unable to pay investors. The fund is now in the hands of a liquidator. Despite this knowledge, the Insurers accepted LM/MPF on its bond platforms. Further, in relation to LM the insurers in their due diligence ignored serious red flags. When the FMIF (First Mortgage Income Fund) was suspended in 2009, Friends Provident International and Quilter (Old Mutual International) should have questioned the validity of the LM MPF. It became apparent that most of the assets the LM MPF invested in had first mortgages held by LM’s FMIF and also were Peter Drake developments (the Director of LMMPF and the Responsible Entity (Trustee) LM Management. Basic enquiries by the FPI and Quilter (OMI) in their due diligence would have revealed this and the conflict of interest involving Drake. LM marketed LM/MPF to IFAs in the jurisdictions, announcing that it had been admitted onto the Bond platforms by the insurers. IFAs in the jurisdictions promoted, marketed, and sold to investors LM/MPF via the Insurer’s Bond products. Elderly UK investors deposited substantial amounts of their life savings into LM/MPF. In or about 2010, because of concerns raised about the slow payment of redemptions, the Insurers suspended LM/MPF from its Bond platform, and its staff attended LM on the Gold Coast, Australia, and conducted a review. In or about late 2010, the suspension was removed from LM/MPF and the fund continued on the Bond platform organized by the Insurers. The IFAs in the jurisdictions continued to market the Bond products and LM/MPF on the Bond platform between 2010 and March 2013. There were no warnings or disclosures sent to investors by the Insurers, to indicate that they had raised concerns about LM/MPF and had suspended it for a time on their Bond platform. In March 2013, LM/MPF went into administration, and then receivership, owing approximately AUD$430 million to 5,000 investors internationally. Elderly UK investors are many of those who lost all their funds. If you have purchased LM/MPF Managed Performance Fund and or other LM Group funds including the Trilogy Wholesale FMIF, through a trustee or direct on the insurer’s platform and have lost money you may be entitled to recover money lost. Please visit our website and complete the questionnaire join the group action today! https://expatinvestmentfraud.com

New Earth Funds

IoM’s New Earth boss slams regulator probe a ‘witch hunt’

Posted by Expat Investment Fraud on

By , 16 Jun 17

John Bourbon, the former director of Isle of Man-based Premier Group, the company behind the ill-fated £300m New Earth Group of funds, has described the regulator’s decision to investigate allegations of mis-selling against the fund manager “something of a witch hunt”.

Speaking to Isle of Man Today, Bourbon, a former senior official at the Isle of Man financial services regulator, said that despite 3,247 investors facing losses of almost £292m ($372m, €332m), a greater number of people have made a profit from New Earth, which invested in recycling plants in the UK.

New Earth Recycling and Renewables (NERR) group of funds were wound up by the Isle of Man authorities last July, while another Premier Group investment Eco Resources Fund, was ordered to be shut in March this year.

A total of 189 investors lost up to £61m from the Eco Resources Fund, which invested in bamboo plantations in Nicaragua, with tax payers on the Isle of Man picking up the bill for the collapse of both funds.

Large commissions

Bourbon’s comments come despite allegations by the Premier Shareholder’s Group, a campaign group for investors, many of whom claim to have lost their life savings, that Premier Group (Isle of Man) paid large commissions to “unqualified and unlicensed” agents to target pensioners by marketing their funds as low risk.

The group also claims investors were locked in with “punitive” exit fees, often as high as 30%, which they were not told about when they signed up.

However, Bourbon denied the accusations, adding: “It is highly unlikely that anybody could have a significant investment in Premier Group without understanding the risk.”

Boubon insisted all fees and charges were clearly set out in the offer document that investors were required to sign to confirm their status as an experienced investor.

He added that it was financial advisers’ “responsibility to check whether investments were suitable for their clients”, adding that a number of Premier group funds were sold by unregulated IFAs in Spain where claims against them have been upheld.

Regulator’s failure

The Premier Shareholder’s Group also accused Isle of Man authorities, including the Financial Service Authority (FSA) of failing to protect investors, claiming the regulator had received complaints about the Premier Group funds as early as 2002.

The group added that despite concerns raised with the authorities, the regulator still went ahead and granted a new licence to the fund manager in 2007.

Last month, Isle of Man treasury minister Alfred Cannan has confirmed that the island’s Financial Services Authority (IOMFSA) is “undertaking a review” of unregulated funds and will “make appropriate recommendations for change”.

The Isle of Man Financial Services Authority said it is now investigating historic allegations against Premier Group (Isle of Man)

“The FSA can confirm the allegations and events surrounding PGIOM and its group of companies are actively under review by the FSA,” the watchdog told IoM Today.

‘Witch hunt’

Bourbon slammed the regulatory action as ’something of a witch hunt’.

“There is a popular view in the market that certain negative elements of the Moneyval report have placed pressure on the financial services regulator because they do not have examples that they can give of successful prosecutions when compared with jurisdictions that have strong Mafia and/or other criminal activity.

John Bourbon, the former director of Isle of Man-based Premier Group, the company behind the ill-fated £300m New Earth Group of funds, has described the regulator’s decision to investigate allegations of mis-selling against the fund manager “something of a witch hunt”.

John Bourbon, the former director of Isle of Man-based Premier Group, the company behind the ill-fated £300m New Earth Group of funds, has described the regulator’s decision to investigate allegations of mis-selling against the fund manager “something of a witch hunt”.

“It might therefore be suggested that they may seek to find other examples of wrongdoing to justify their existence when in fact the reputation of the jurisdiction should support the efforts they have made,” he said.

Eco Resources Fund

In February, the Isle of Man High Court appointed an inspector to look into the collapse of the Eco Resources Fund after the Premier Group told investors in November 2016 that the fund would have to go into liquidation after investors refused to pump any more money into it.

Against the advice of the liquidator and the FSA, Bourbon said the Eco Resources Fund still has the potential produce returns for investors for years to come if it is refinanced.

“With the right liquidator, it would be possible to refinance the fund, to pay off creditors and financial indebtedness by 2023 and be left with an asset which produces $25m per annum for investors for the following 60 years,” he said.

Describing Bamboo as an “amazing fibre product”, he added: “It can be used for anything from socks and pan scrapes to scaffolding on tower blocks in Hong Kong and at the other extreme activated carbon cleaning the world’s industrial chimneys.”

TAGS:  |  | 

THE LMIM COLLAPSE

THE LMIM COLLAPSE: ONE YEAR LATER, AN INVESTOR SPEAKS OUT

Posted by Expat Investment Fraud on

2/4/2014

“I was completely 
shattered,
my life in ruins”

Dozens of expats in Thailand lost their life savings when the huge Australian property fund went into voluntary liquidation in March 2013. The collapse of LMIM had a devastating effect on many of these investors who had been led to believe their money was being managed by a company that was strictly regulated and boasted a successful 14-year track record. One of the victims of this financial fiasco recalls how he was persuaded to invest in the fund and the terrible moment he was told by his independent financial adviser (IFA) that all of his money had gone.
Picture
Picture
JUST over a year ago, on March 19, 2013, longtime Bangkok expatriate Roy Fox received a telephone call at his home that would change his life forever. It was, he says, the call that one always reads about and dreads, but never expects.The caller was an independent financial adviser (IFA), a fellow Brit and Bangkok resident to whom Roy had entrusted a substantial portion of the savings he had carefully built up during a 40-year career spent working in Europe and Asia.

“I’ve got something to tell you,” said the caller, somewhat nervously.

“What’s up, Mike?” asked Roy.

“I’m afraid I have some bad news. I have to tell you that LM Investment Management (LMIM) has gone into voluntary liquidation.”

Roy froze. He recognized instantly the name LMIM, and he knew exactly what “voluntary liquidation” meant.
But as much as he tried to deny to himself such a possibility, it was fast  dawning on him that the money he had been advised to invest in LMIM, a A$3 billion property fund set up in Australia’s Gold Coast in 1997 by New Zealander Peter Drake, may have gone. And in one gut-wrenching moment, Roy saw his well-laid plans for a comfortable, secure retirement vanish into thin air. “I was completely shattered, my life in ruins,” he says.After an embarrassed pause, Mike rang off. As the boss of one of the 

financial advisory companies that had been marketing LMIM in Thailand for several years, it was his job to repeat this same conversation to the many other expatriate clients whom he had also persuaded to put their savings into this now-defunct fund.

During the following months, LMIM’s spectacular collapse was the subject of intense media scrutiny along with drawn-out investigations by Australia’s corporate watchdogs. Some serious finger-pointing at those believed responsible for the loss of so much money was carried out by administrators both here in Thailand and in Australia as anxious investors searched hopefully for ways to reduce their losses while trying to come to terms with their worst financial nightmare.

One year later, far from resolving anything, the investigations appear to have all but dried up. Peter Drake has faced nothing worse than having his passport seized and certain assets frozen. There’s even an unconfirmed report of him resuming his career in finance.

Most disturbingly, though, it looks increasingly likely that investors in LMIM will not even receive a small percentage of their money from the administrators – especially as their savings apparently rank behind the fees of the IFAs, the very same people who recommended the useless investment in the first place.
So how did an intelligent, worldly businessman like Roy get involved in LMIM? How was he persuaded to part with the best part of his savings to invest in an ultimately dud company?

Trust is the core issue here, says Roy.

“You put infinite trust in people like lawyers and doctors, and it’s the same with so-called financial advisers. They speak in the same professional way and you believe in them because they’re very clever at gaining your trust.

“Was I that stupid? Should I have believed their promises? These are questions I keep asking myself. My family didn’t believe that we had lost so much of our money. They berated me, that the family’s ‘jewels’ had gone literally in a second. It’s taken me nine months to understand what I did. But like so many others, when I first started investing, I thought it was the correct thing to do.”

Roy, who describes his background as “modest, typically British middle class,” says the investment was part of carefully laid plans to provide long term financial security in later life.

Retirement is, of course, no longer an option. Now in his 60s, Roy will have to continue working for the rest of his days, due to LMIM’s collapse.

“People in their 40s and 50s still have maybe 15 years’ working life to recover their losses. But for those of us in our 60s, close to pensionable age, the bell has gone – our working lives should be over. But we can’t stop working. It’s terrible. We’ve been slaughtered.

“The thought of a peaceful, contented time at this stage of my life has been replaced by worry, headaches and fear of financially surviving and getting through day by day.

Roy took the fateful decision to start investing in 2006, two years after ending a lifelong career working for major corporations.“I decided on a completely different career path and financial security was of paramount importance. My new life would mean losing the financial protection a big company had given me – a package that included a regular salary, car and a pension.”

He met Mike through friends who recommended him “as a good bloke who could be trusted.”

“After further meetings, I decided to take his advice and began investing through his company. Basically I wanted a better return on my savings. My one caveat to Mike was that my principle – my savings – should not be touched.

“I told him that I had heard about other people being burned by IFAs, so I was naturally somewhat suspect about the investment. I kept telling Mike to safeguard my money, which, naturally, he agreed to do.

Why did Roy choose to go with the LM property fund?

“The first thing was the reputation and image of Australia as a safe and heavily regulated investment haven. Originally, I was supposed to be investing in a secure and protected currency fund but somehow my investment ended up in a property fund. At the time I didn’t question this, but today I am suspicious and wonder whether someone was doubling their commission by making the switch.“Anyway, after several meetings, I went along with Mike’s advice, even though the last thing I wanted was to put my money at any kind of risk.”

To his credit, Mike was never overbearing in their conversations. “But at the same time he was extremely persuasive,” remembers Roy.

“Mike was also enthusiastic about LMIM, using words and phrases that suggested it had a great track record, it was Australian and heavily regulated – in other words, rock solid, like a bank.

“I checked with others who had invested in LMIM and they too believed we’d be looked after.

“We were promised good returns on our investment, and the only proviso was that after one year, the rate of interest could be changed.

“During mid-2011, LMIM offered us a three-year term with annual returns of 9%. Till then I’d been getting 7-8%. At this stage, nothing looked untoward about LMIM, but, shortly after, the rate we’d been promised dropped from 9% to 8.5%, which I didn’t object to, as I realized that we were dealing with market realism and rates could change.

“I didn’t know much about LM’s property fund, but always thought it was officially regulated by Australian authorities. But it wasn’t. One of the biggest accusations today is how Mike and other IFAs were able to sell a fund that was not regulated and targeted at people nearing a pensionable age.

“I understood that the fund was originally set up to generate funds for property mortgages. I had no reason to question it at first since there were no whispers or gossip about its viability. But I did get a horrible sinking feeling, a premonition of sorts, back in 2012 when I suddenly thought of the consequences to me and my future if the fund were to collapse. But my worries soon passed as I continued receiving my monthly interest payments and everything seemed OK.”

Did Roy ever check on Peter Drake and his company? “Yes, I checked their website regularly and I talked to friends and other investors. Nobody expressed any kind of concern.
Picture
“I never saw the company’s financial results nor did I have any idea how the fund was performing. If I was a financial sort of person, an economist or accountant, which I’m not, I would probably have asked to see the company’s bank statements and audited accounts. That’s why I employ a financial adviser – to do these things for me. And I trust what they tell me.”

Yet there were signals that not all was right with LMIM. Explains Roy: “Sometime in July 2012, I received an email from them, mentioning late interest payments and return on capital. The following day Mike called me and tried to cover up the email’s contents. I challenged him, but he merely brushed off my worries, saying LMIM sent it out by mistake.

“Nothing happened and everything seemed normal right up until the day I received that call from Mike telling me the game was over. LMIM had collapsed. I was mortified. My lifetime savings had gone.

“Over the next few months, the situation was given a positive spin by LMIM on its website and by Mike, who was very confident that we’d get back at least 50% of our money. This was cold comfort but it did offer a glimmer of hope that I’d recover some of my investment.

“Later, the administrators put out a bulletin saying that LMIM had very little in assets and what it did have was hyped, overvalued and misrepresented.”

From today’s perspective, what does Roy make of LMIM and its property investments? “In my mind, the fund was nothing more than a ponzi scheme – a complete fiasco.”

Roy is one of many expatriates based in Thailand who committed money to LMIM through a number of local IFAs. In his case, the sum involved was substantially more than half his savings. Others put in huge sums, as much as half a million US dollars or more, while some invested smaller amounts that were nevertheless painful to lose.

For Roy, his experience raises many questions. For example, did any of the IFAs really check what LMIM was doing and how it was performing? “It seems either they couldn’t or didn’t want to,” is his assessment.

“The entire episode is scandalous. I feel very deceived and very angry. The IFAs behind LMIM should together be made accountable.

“Looking back now, it appears from information provided by the LM Investor Victim Centre that LMIM was already in trouble back in 2009, so why didn’t the IFAs take heed of it?

“Also, looking back, I don’t know how I got sucked in. Nor do other investors I’ve spoken to. We’re all at a loss to explain.”

Roy, who says he eventually managed to get a small apology out of Mike, now suggests that the term IFA is misleading. “They don’t advise – they just sell. They have no ethics, and when things go wrong, they’re all over the place.

“But these same IFAs are still running around in fancy cars and enjoying an enviable lifestyle. They’ve not suffered at all. There’s no remorse, no heart. I sincerely believe they should give back the commissions to help compensate investors. But I also know it won’t happen.”

Picture
What about Mike – is it possible that he knew about LMIM’s impending collapse?

“Peter Drake was apparently in Bangkok on several occasions so some of these IFAs must have had a close relationship with the mother company and surely they would have inquired about the fund’s performance?”

Even Roy admits that may not be the case. “The IFAs were still selling LMIM the day before the fund collapsed,” he says. “For me, that’s real incompetence.”

The administrators appointed to handle LMIM have added to the furore. In its report, FTI Consulting said: “From our investigations to date, there is evidence to indicate the company may have traded whilst insolvent for a period and entered into certain transactions that may be voidable against a liquidator.”

With both his capital and monthly payments gone, Roy was unable to meet various financial obligations. As a result, he was forced to take out expensive loans to pay for bills – a situation he thought he’d never have to face.

The effect was devastating. “I lost confidence in myself, got sick and couldn’t work for several months. One’s belief in self-judgment is shattered. All my plans about retirement, taking time off to travel and relax – they’re all gone.

“Now I have to watch every penny. I feel very bitter. And I’ll have to work forever.

“Luckily, I don’t have children. Other investors in LMIM do – so how are they going to pay when their kids are halfway through schooling or university? They’ve been slaughtered overnight.”

Roy is not optimistic about clawing back any of his money. Since the fund was not designed for Australian nationals, he believes the authorities there are not really interested in the situation and would prefer to sweep it under the carpet.

Today, he is still trying to come to terms with his losses and what they have done to his life. Many questions still need to be asked, he believes. For instance, was LMIM ever properly audited? Wasn’t its board of directors aware of its precarious position?”
He also wonders out loud why IFAs operating here are not strictly regulated as they are back in the UK. “And how can they be permitted to market an unregulated fund to expatriates and people nearing their pensionable age?

“It beggars belief,” says Roy.

He’s also critical of the Australian Securities and Investment Commission (ASIC), which issued a statement in April of last year revealing that the LMIM fund was unregistered. “This is a real disgrace,” he adds.

Amazingly, Roy still gets several calls a week from IFAs. Nowadays he knows exactly how to handle them.

For more information about LMIM, go to https://sites.Google/site/investorvictimcentre
*Names in this article have been changed

IFA: How to ‘safely’ invest in Australia

This is how one financial planner in Thailand marketed the property fund, stressing that Australia has “some of the world’s best performing property markets” and adding that LMIM “has a track record of managing returns in this asset class for more than 14 years.”

•  Since the fund’s collapse in March last year, the administrators FTI Consulting have charged $2.4 million in fees, or $130,000 a week. Disbursements came to another $2 million.

•  Action against LMIM’s other directors – Francene Mulder, Katherine Phillips and Eghard Van Der Hoven – is being considered.

• EuroWeekly has reported that in Spain “hundreds if not thousands” of expats living on their investments were caught up in the scam, with many now having no money to live on.

• Cyprus-based IFA Scott Kennedy persuaded 180 people to invest in LMIM while pocketing 10 percent commission on the deals, according to the Daily Record newspaper. But Kennedy, 54, insisted that his commission of £1million has been put back into a pot to help investors with legal fees. He says he lost a £355,000 investment in the collapse.

Eco Resources Fund

Mystery surrounds bamboo plantations

Posted by Expat Investment Fraud on

EWAN LAMB concludes our trilogy on investors’ lost millions

The liquidator of the bankrupt Eco Resources Fund, which has cost shareholders and creditors in faraway bamboo plantations many millions of pounds, has been told the US finance company which now owns the forests may be willing to sell the assets back to ERF for $10 million.

Unfortunately the Isle of Man-based fund has only £12,555 in its coffers, and according to liquidator Gordon Wilson no-one “will be likely to invest or lend $10 million to the fund in current circumstances”.

Meanwhile, a report compiled by Mr Wilson suggests confusion reigns over who actually owns the plantations in Nicaragua and South Africa, which are part of an extremely complicated business set-up.

The Eco Fund was part of the Premier Group (Isle of Man) Ltd.’s empire which also included the worthless New Earth Recycling & Renewables [Infrastructure] Fund or NERR.

The NERR organisation, now also under investigation by a different team of insolvency experts, was meant to bankroll a £23 million waste treatment facility for the Scottish Borders before the deal was abandoned in 2015, leaving the local council’s strategy for garbage disposal in complete disarray.

Details of a meeting involving Mr Wilson and American businessman Troy Wiseman, founder of EcoPlanet Bamboo, which operates the plantations, have been made public for the first time. Mr Wiseman had also been an investor in Sustainable Asset Lending (SAL), believed to be the current owners of the bamboo real estate. Premier directors John Bourbon and Jamie Sutton were also present.

The report from Mr Wilson to investors, shareholders and creditors says: “Mr Wiseman opened the meeting by saying that he was attending as an inverstor in the fund and that he had no remaining executive role in or control over SAL. This was disappointing as we had believed that Mr Wiseman had control over SAL and it was on that understanding that we agreed to meet.

“For the avoidance of doubt, we still believe (based on our assessment of his conduct) that Mr Wiseman is involved with SAL as an investor and as either a controller or manager or influencer. Mr Wiseman then informed us that SAL had foreclosed on the plantation companies’ loans and that he had seen stock certificates in the plantation companies in SAL’s name”.

Mr Wiseman was then asked to provide evidence that the foreclosure had occurred, details as to who had done what, who knew what and when this all happened. “He agreed to provide these details and Mr Sutton has been following that up under our supervision.

“We don’t believe that Eco Bamboo Isle of Man or ERF ever gave permission to the plantation companies to include their shares as security for the SAL debts. This could prove to be a pivotal point if the fund is to retain or regain any interest in these plantations going forward”.

Since the meeting with Mr Wiseman in January, no information has been forthcoming from him or from SAL to demonstrate or explain what has happened to the plantations or shares in the various companies, wrote Mr Wilson.

“However, on a number of occasions since then, Mr Wiseman has indicated that SAL may be willing to sell the fund its plantations back for $10 million. Mr Wiseman knows all too well that the fund does not have $10 million. It is likely that as liquidator we will formally ask Mr Wiseman to provide evidence in order that we might better explain to you all what has happened”.

The report warns there are insufficient remaining liquid funds in the structure to pay for the cost of liquidation and “there are more than ample grounds to doubt that there will ever be any recovery from the bamboo plantations. We think it is unlikely that there will be any return on investment for investors or any dividend for creditors”.

The Isle of Man public purse will cover reasonable liquidation costs including costs to investigate and if necessary take action against those who may be accountable for the failure of the fund, said Mr Wilson.

The victims: Manita Khuller and Andrew Drummond lost thousands of pounds from their pension funds

The expat pensions that vanished

Posted by Expat Investment Fraud on

Rogue salesmen snared hundreds in a mis-selling scandal. Now big firms and regulators are under scrutiny.

The victims: Manita Khuller and Andrew Drummond lost thousands of pounds from their pension funds
The victims: Manita Khuller and Andrew Drummond lost thousands of pounds from their pension funds

Manita Khuller had only just moved to Thailand when a friend invited her to a party for expats organised by the British Chambers of Commerce.

It was an event that would turn her life upside down and leave her fighting for her life savings for the next decade.

Khuller, 51 at the time, was only recently divorced and had moved to Bangkok from London with her 11-year-old son to work as a management consultant.

She had traveled a lot in her career but this was the first time she had moved abroad. She was staying in a flat in downtown Bangkok, paid for by her employer, Ogilvy & Mather, a subsidiary of the global advertising company WPP.

It was a humid November day for the garden party, held at a local park. About 100 British expats mingled, enjoying free drinks and canapés. Khuller got chatting to Gary Bradford, a smartly dressed, softly spoken, middle-aged financial adviser, who was also from the UK. After a while the discussion turned to Khuller’s pensions.

“As a financial adviser it seemed like a natural thing for him to ask me about,” Khuller said. “I had little idea about pensions and tax, now that I was living as an expat for the first time.”

Bradford said he could simplify her affairs, save tax and allow her to pass on more money to her son.

Planning for retirement had been on her mind, so she agreed to meet Bradford, who worked for Professional Portfolio International (PPI). Its website says it offers “the highest level of financial planning and wealth management related services to clients throughout Southeast Asia and beyond”.

Over coffee at the luxury Emporium Suites Hotel in central Bangkok, Khuller told Bradford that she did not want to take too many risks as she was nearing retirement. She had about £320,000 in final salary pensions built up over decades working for Unilever and Procter & Gamble. He suggested she do what thousands of other expats were doing at the time, and move her money into a Qualifying Recognised Overseas Pension Scheme (Qrops).

These pensions were developed by the Treasury in 2006 and recognised by HM Revenue & Customs. They were designed to help British workers to head overseas for jobs and still keep saving for retirement in a tax-efficient way.

Khuller agreed to move her money to a Qrops offered by the finance firm Skandia, which was later known as Quilter International and is now Utmost International. Within three years one of her investments would fail and another would be frozen, cutting her retirement fund by about half.

She would later discover that her investments and adviser were unregulated, leaving her no route to gain compensation. Bradford would become impossible to contact.

Khuller, now 61, has spent the past decade tied up in legal battles trying to get the pension that was scattered around the world, without incurring thousands of pounds in charges.

She is one of hundreds of British expats who are starting to realise that their retirement plans have been shattered after they were persuaded by financial advisers to put their money into Qrops, which they believed were approved by the UK government.

Many find that the British advisers working overseas who convinced them to make their investments have now disappeared, and there is little help they can get from regulators.

Utmost International and RL360, two firms that offer investment products to expats, face a class action worth up to £200 million over allegations of widespread mis-selling by subsidiaries they now own, via financial advisers.

These subsidiaries, Royal Skandia Life Assurance and Friends Provident International, are also accused by lawyers of creating products that do not conform to regulatory standards in various jurisdictions around the world and of failing to spot wrongdoing.

Mis-selling on an industrial scale

Qrops allowed you to move your savings abroad while preserving tax advantages.

At the time they were introduced life was getting tougher for financial advisers in the UK. Their profitability had been hit by a crackdown on commission and new rules to protect savers. Many investors were going it alone.

Moving overseas offered a new chance to make money for advisers, particularly in countries with far looser or non-existent regulations, and British expats were key customers.

Initially it looked as though the new-style pensions had been a success. Within ten years 101,700 pensions worth £9.7 billion had been transferred to Qrops, according to HMRC. But slowly the complaints started to come in from savers who were querying exactly where their money had been invested.

Qrops, it would emerge, were used to mis-sell pensions on an industrial scale, and in some cases to facilitate scams, according to a House of Commons work and pensions committee report last year. An investigation by The Sunday Times has found cases of alleged mis-selling involving expats in Spain, France, Greece, Switzerland, South Africa, the United Arab Emirates, Thailand and Australia.

No such thing as a licence

As the number of complaints grew, some authorities, such as in Thailand, tried to clamp down on advisers. The adviser Neil Robbirt, 60, of the now closed Bangkok-based firm Global Consultants, has faced extradition to Thailand over allegations that he ran an unregulated advice business.

He returned to the UK in 2016 and now lives in Kent. In December a judge at Westminster magistrates’ court denied the extradition order on the grounds that it would breach Robbirt’s human rights because of Thailand’s poor prison standards.

Robbirt’s company was among 11 allegedly unlicensed advisory businesses that targeted expats, according to court reports. One of Robbirt’s clients was Andrew Drummond, 70, a freelance journalist who now lives in Royal Wootton Bassett, Wiltshire.

Drummond met Robbirt while working in Thailand and they became close. He was persuaded to invest in a Qrops and ended up losing tens of thousands of pounds, he claims. His account, now held with RL360, is still incurring charges.

Drummond said: “When the fund went belly up, I did not hear about it from Robbirt but from other victims. When I spoke to him about it and told him I had asked to put my funds in low-risk investments he said, ‘Nowadays there is no such thing as low risk.’

Robbirt denies this and says he tried to help to recover money from the failed investments that he recommended and that he had personally lost £250,000, having had no advance warning of the demise of the relevant fund. He said his firm operated in Thailand for 23 years and that he sought a licence from the Thai regulator, but that he was told no licence was available for providing advice to ex-pats for offshore products.

He said LMIM, the fund manager of the MPF that Drummond had part of his pension in, was licensed by the Australian regulator ASIC. He said RL360 administered the bond that this fund was held in, and they are licensed by the Isle of Man financial Services Authority. He said his firm only dealt with funds in licensed jurisdictions such as Australia and the Isle of Man

Class action over losses

The focus is starting to turn to the investment companies that created products made available through Qrops, many of which have subsidiaries in the UK.

A class action has been launched against Royal Skandia Life Assurance Ltd, now part of Utmost International, and Friends Provident International Limited, now part of RL360, by the London law firm Signature Litigation and Callin Wild, based on the Isle of Man.

The claim is being made on behalf of about 800 British expats who lost between £145 million and £200 million according to written submissions to the Treasury committee. The submissions were made by Niall Coburn from the Australian firm Coburn Corporate Intelligence, on the invitation of the work and pensions select committee as part of its investigation into pension scams in 2020.

The litigation, submitted to the High Court on the Isle of Man in 2020, will have its next hearing tomorrow.

Coburn says in the overview of his written evidence to the committee that the UK’s Financial Conduct Authority (FCA), the regulator, failed in its duty to stop investment companies selling high-risk investments to savers.

RL360 and PPI were approached for comment. Utmost declined to comment.

What now

The FCA said: “We have a huge amount of sympathy for those who have lost money in these failed investments. These offshore investment bonds were offered by life insurance companies regulated by the Isle of Man Financial Services Authority, and were sold to customers in overseas jurisdictions (via overseas advisers). If we uncover evidence of serious poor behaviour by firms we regulated for activities in the UK, we will consider the full range of our powers.”

Drummond’s pension is now £10,000 in the red. RL360 offered to waive the negative balance if he agreed not to pursue any future legal claim. Drummond has refused to do this

Meanwhile, Manita Khuller, who now lives in Chiswick, west London, has been on a crusade to find her money and bring her rogue salesman to justice. We tried to contact him through PPI, but had no response. Bradford’s firm made about £22,400 for securing the transfer of her pension to a Qrops, plus annual commission — a total of £35,000. Khuller says none of this was disclosed to her at the time. She later found out that her pension was held in Guernsey by trustees called FNB International, while her money was invested in Australia and other countries.

After a court case, which Khuller won on appeal, FNB returned the original amount she invested. She is the first person to get back some of their money that was stuck in a Qrops pension.

source: https://www.thetimes.co.uk/article/the-expat-pensions-that-vanished-9rk8xbfsg

 

Scam Alert Red

Class Action – Old Mutual International (formerly Skandia International) now Quilter and Friends Provident International

Posted by Expat Investment Fraud on

Class Action – OMI /FPI

This is an explanation of what you must do if you wish to join the Class Action after you have read this detailed explanation of how these largely fraudulent Funds and Bond Providers (Insurers) were set up and feel you qualify

Old Mutual International (formerly Skandia International) now Quilter and Friends Provident International (FPI) sold investment products described as “Portfolio Bonds” or “Insurance Bonds” (with specific product names such as the “Executive Investment Bond” and the “Reserve Investment Bond”). These investment products are referred to below as “Bonds” and were sold to customers all over the world – in particular, expatriate retirees.

The capital invested in the Bonds was often placed in funds that were inappropriate for the investor and which have now failed or suffered substantial losses (the “Failed Funds”). The Failed Funds include the following:

Axiom Legal Financing Fund
LM Managed Performance Fund
All other LM Group funds including the Trilogy Wholesale FMIF
Premier New Earth (all investment schemes managed by Premier New Earth)
Premier Eco Resources Fund
Kijani Fund

Class Actions are being brought in the Courts of the Isle of Man where the Defendant Insurers are domiciled.

The Insurers, Quilter and FPI, created these Bonds so that investors invested in funds purchased through the Investment Platform. Invariably on the recommendation of a Financial Advisor acting as the investor’s Agent. The Insurers then paid the ‘Financial Advisors’ commissions for their client’s purchase of the Bond while, at the same time, charging the Investor Management fees. This was known to the Insurers and fund commissions were not made known to the investors and neither were the full details of the commissions paid to the Financial Advisers by the Insurers for the purchase of the Bonds.

The insurer’s OMI and FPI were at all material times aware of these payments by the Funds to the IFAs to recommend the Investors purchase their Funds and had a legal duty to make the Investors aware of these Commissions and their failure to do so constituted enablement to assist in a Fraud on the part of the Financial Advisors. As a consequence, investors’ money was invested into high-risk Funds which were totally unsuitable for unsophisticated or retail Investors.

What can I expect to recover from my Investment?

The aim is for investors to receive at least a 50% return on their Captial funds invested together with interest.

Are there any alternatives available to Investors to recover their losses?

We are not aware of investors managing to recover their losses through any other routes and it is highly unlikely that recoveries will be possible through the liquidation of the Failed Funds since there is little or no value left in them.

Neither OMI nor FPI is likely to compensate investors voluntarily. So in short, a legal claim against OMI and FPI is likely to be the only viable route open to investors to recover compensation for their losses.

How are CLAIMS TO BE MANAGED
The action will be lead by a leading London-based Litigation specialist Legal Firm. Representing the investors/claimants, is an Investors Committee of Lawyers and a Businessman, all also investors/claimants. The Committee’s job is to look after the claimant’s interests and instruct the Legal Team on their behalf.

What Time frame can you expect?
Either Class Actions may be resolved sooner if the defendants agree to Mediation as is required under the Court Rules which we expect could result in a negotiated settlement or should the Insurers defend the cases it could stretch out for as much as two years but our expectations are that a Settlement will be achieved as there are factors which we cannot disclose at this stage which would in our opinion enhance the prospects of Settlement

If I register, will I have any financial exposure
The answer is no

A litigation funder has agreed to finance the legal costs of the proceedings. A Litigation Funder has contracted to meet the costs of the Litigation and an Insurer known as An After the Event Insurer (ATE)  will cover any adverse costs exposure in full and has put in place an insurance policy to cover potential adverse costs exposure. You will therefore not be required to make any financial contribution to the legal costs of pursuing the Class Actions and the litigation funder has agreed to meet any liability for the defendant’s costs if either of the Class Actions should fail.

If there is a successful outcome, Litigation Funder and ATE will be paid out of the proceeds of Settlement based on a sliding scale depending upon the amount recovered and the Legal Teams will recover most of their Costs under the terms of Settlement although any shortfall will be deducted from the Settlement along with a sum of 5% Site management fee.

It is expected the Investors will receive no less than 50% return on their Investments and possibly more when Interest is taken into account

If I invested directly in one of the Failed Funds – can I join the class action?

You can only participate in the Class Actions if you were sold a Bond (or a structured product linked to a Bond) by OMI or FPI but we are investigating whether a separate Class Action may be possible so it may be worthwhile registering for a possible future action

I invested in a structured product that was linked to a Failed Fund – can I join the class action?

Yes.

Please provide us with copies of your supporting documents and we will confirm whether you are able to join.

I bought the Bond several years ago – am I in time to bring the class action?

There is a strict time limit to bring some actions but in the cases of Fraud, the time Limits which normally apply to cases of Negligence are extended as you will still be within the legal Time Limits but you are advised to register now.

(a) Forsters LLP is a leading Senior law firm based in Mayfair in the City of London recognized by the major legal directories for its expertise in Commercial Corporate, Financial, and Banking disputes.

(b) Edward Cummins QC is the youngest Barrister ever to be appointed Queens Counsel in the UK and is a leading commercial barrister. recognized in particular for his expertise in commercial litigation and in complex investment disputes.

When you register on this site
You will add you to the database of the Class Action to which your circumstances apply depending upon which Fund you invested in and registered as a Claimant once you have completed the Terms of Engagement required by Law which will be forwarded to you by Forsters LLP

We may require further information from you which either we or Forsters LLP will inform you when you have been and added to the Class Action.

I have registered my claim but I have not been admitted to join the class action yet?

It’s possible you did not meet the entry criteria for the Class Action in which case we will inform you and advise what alternative avenues may be open to you.

Some of the Trustee Companies who facilitated

AJ Bell Youinvest

Boal & Co

Bourse Pension Trustees Limited

BWCI Synergy International

Carey Pensions and Benefits Limited (1) NOW OVERSEAS TRUST AND PENSIONS LTD

Castlerock Trustees Limited

Concept Trustees Limited

Finance & Trade Solutions Limited

Forthplus Trustees Limited

Frontier Finance Limited

Gower Pensions

Heritage Trustees Limited

Hornbuckle Mitchell Trustees Limited EMBARK

Hornbuckle Mitchell Trustees Ltd

iPensions Group Trustees Limited

IVCM Heritage Trustees (as trustee of Brooklands SIPP) Limited

London and Colonial Trust SIPP (1) OPTIONS

Marlborough Pension Trustees Ltd

MC Trustees (Malta) Limited

Momentum Pensions (Gibraltar) Limited

Momentum Pensions (Malta) Ltd

Oak Trust (Guernsey) Limited

Roy Thompson Trust (1)

Sippdeal Trustee Limited

Sovereign Pension Services Limited (Malta)

Sovereign Trust Guernsey Limited

Sovereign Trust International Limited (Gibraltar)

STM Gibraltar

STM Malta Retirement Plan

Trireme Pension

Trireme Pension Services (Guernsey) Limited

Weighbridge Trust Limited

Willow Trustees Limited (Gibraltar) SOVEREIGN

Willow Trustees Limited (Guernsey) SOVEREIGN

 

 

If you are interested in being part of the group claim, please get in touch with us (info@expatinvestmentfraud.com) and or Please complete Investment Questionnaire Below.

If you have any questions in respect of the Claimant Questionnaire, or any difficulties completing it, please get in touch with us.

Three individuals charged in Axiom Fund investigation

Posted by Expat Investment Fraud on

21 August, 2020 | Case Updates

The Serious Fraud Office has charged three men with multiple offences in connection with its investigation into the collapse of the Axiom Legal Financing Fund. Timothy Schools, David Kennedy and Richard Emmett are charged with carrying out a fraudulent scheme to divert money from the Axiom Legal Financing Fund for their own benefit.

The case will be listed at Westminster Magistrates’ Court on Wednesday, 30 September 2020.

Notes to editors:

  1. Timothy Schools  (DOB 19.03.1961), a former solicitor, has been charged with three counts of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006, one count of fraud, contrary to Section 1 of the Fraud Act 2006, and one count of transferring criminal property, contrary to Section 327(1)(d) of the Proceeds of Crime Act 2002.
  2. David Kennedy (DOB 07.01.1953), a former independent financial adviser, has been charged with one count of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006.
  3. Richard Emmett (DOB 02.07.1973), a former solicitor, has been charged with one count of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006, and one count of being concerned in an arrangement that facilitates the acquisition, retention, use or control of criminal property by another, contrary to Section 328(1) of the Proceeds of Crime Act 2002.
  4. The SFO announced its investigation on 16 May 2017.
  5. As these are live criminal proceedings, the SFO cannot comment further. The strict liability rule of the Contempt of Court Act applies.

Related Cases

Liquidated adviser firm exposed to troubled legal fund

Posted by Expat Investment Fraud on

iquidated advisory firm 20Twenty Independent, which entered liquidation proceedings earlier this year amid complaints over controversial tax-mitigating film schemes, could be the subject of further claims relating to investments in the troubled Axiom Legal Financing Fund.

According to an investor who wished not to be named, he was advised by Totus Wealth Management, which according to FCA register was a ‘trading style’ of 20Twenty, to invest in an SEB portfolio fund, of which one underlying fund was the Axiom vehicle.

Following the closing down of the Axiom fund, the investor said in his opinion based on information he has gleaned retrospectively it may never have suited his risk profile. He is currently claiming through the Financial Services Compensation Scheme to try and recover his loss.

20Twenty entered creditors’ voluntary liquidation in October. According to a directors’ report compiled following a meeting of creditors, the directors of the firm attributed its failure to increased restrictions and costs relating to its professional indemnity cover.

Totus Capital, a legally separate sister company of 20Twenty that also uses the Totus brand and is registered at the same address, has taken on a number of clients of the firm along with eight advisers. Liabilities remain with 20Twenty, which is now in the hands of liquidators CMB Partners.

The Axiom Legal Financing fund was placed into receivership in February. The fund’s investment manager, Tangerine Investment Management, was sacked from its role in November 2012 following the suspension of trading in the fund’s shares.

Taylor Moore, the UK-based distributor of Axiom, was placed into liquidation in June of this year. Although the Financial Services Compensation Scheme has yet to confirm if it will compensate investors, such compensation could lead to a £100m cost to advisers if FCA-regulated Taylor Moor, cannot meet any claims.

The investor said: “I did some research… and found information that had I been aware of before my investment I would definitely not have proceeded.

“When Totus [Wealth Management] did a risk profile on me my attitude to risk was [defined as] cautious to balanced. However, I found a [disclaimer] on the internet that Axiom ‘should only be made for the long term and by those for which security of capital is not essential’.”

Christopher Deacon, compliance officer for Totus Capital who also previously held a compliance function at 20Twenty, confirmed that Totus Wealth Management had sold the Axiom fund.

He recommended the investor contact the liquidators of 20Twenty, CMB Partners, if he is unhappy with the result of any complaint.

Following the liquidation of the company’s existing PI insurer in 2011, 20Twenty’s PI premium increased, its excess doubled and an exclusion was added for film schemes, which were its specialism. In 2012 it was offered a syndicated policy and saw its excess, premium and restrictions increase further.

The firm was the subject of five Financial Ombudsman Service rulings earlier this year that saw redress awards of £500,000.

British fraudster Timothy Schools receives 14-year prison

Posted by Expat Investment Fraud on

Following a successful investigation and prosecution by the Serious Fraud Office (SFO), Timothy Schools, the investment manager who used millions of pounds of investors’ money to fund his luxury lifestyle, has been sentenced to 14 years in prison, in a hearing at Southwark Crown Court today.

On Tuesday, Schools (61), the investment manager for the Cayman Island-based Axiom Legal Financing Fund, was convicted by a jury on 5 counts of fraudulent trading, fraud by abuse of position and money laundering.

The fraud

The Axiom Fund was set up in 2009 by Mr Schools to provide loans to law firms pursuing no-win-no-fee cases. The Axiom Fund secured over £100 million from approximately 500 investors, who were promised a secure return on their investment.

Whilst investors were told their loans would be provided to a panel of high quality law firms to fund legal cases with a high likelihood of success, the majority of the funds (amounting to £40 million) were paid to just three law firms – ATM, Ashton Fox and Bracewell’s – all of which Mr Schools either owned or held undisclosed interest in.

The loans provided to these law firms were siphoned off by Mr Schools. He used funds received by ATM Solicitors to pay himself over £1 million in salary, consultancy fees and other personal benefits.

The cases Axiom funded were not independently vetted, often failed at court and case insurance policies failed to pay out when cases did not succeed. Mr Schools covered up these failures by arranging for the repayments of old loans with new Axiom loans. This gave the false impression to directors, administrators and auditors that law firms were successfully repaying their loans and achieving returns on investment.

The number of clients whose cases were affected by the fraud is in the range of 35,000.

Financial benefits

The SFO investigation found Mr Schools dishonestly acquired over £19.6 million from the Axiom loan monies, including more than £5.7 million from audit and management fees he dishonestly added to the law firm loans. The monies were transferred and hidden in offshore bank accounts held within complex overseas trusts, and used to finance a lifestyle that included the purchase of shares in a luxury ski hotel in France, a motor boat, luxury cars and a £5 million fishing and shooting estate in the Lake District, bought through an offshore company.

Lisa Osofsky, Director, Serious Fraud Office, said: “Mr Schools deliberately abused his position of trust to enrich himself. Through a complex web of lies, he attempted to hide his fraudulent activity, while spending other people’s hard earned money.”

 

Map of companies and accounts investigated in Axiom case

Notes to editors: 

  • The Serious Fraud Office fights complex financial crime to deliver justice for victims and protect the UK’s reputation as a safe place to do business. We investigate and prosecute the most serious or complex cases of fraud, bribery and corruption.
  • On 10 August 2020 Timothy Schools, David Kennedy and Richard Emmett were charged with carrying out a fraudulent scheme to divert money from the Axiom Legal Financing Fund, for their own financial benefit.
  • The jury failed to reach a verdict for a second defendant Mr Kennedy, and acquitted a third defendant Mr Emmett on all charges.
  • Timothy Schools (DOB 19.03.1961), a former solicitor, was charged with three counts of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006, one count of fraud, contrary to Section 1 and 4 of the Fraud Act 2006, and one count of transferring criminal property, contrary to Section 327(1)(d) of the Proceeds of Crime Act 2002.
  • David Kennedy (DOB 07.01.1953), a former independent financial adviser, was charged with one count of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006.
  • Richard Emmett (DOB 02.07.1973), a former solicitor, was charged with one count of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006, and one count of being concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property by another, contrary to Section 328(1) of the Proceeds of Crime Act 2002.
  • The SFO is represented by Miranda Moore QC, Paul Raudnitz QC, and Aparna Rao.

British fraudster Timothy Schools receives 14-year prison

Scam Alert

Axiom fund set up to fill legal aid ‘black hole’, court hears

Posted by Expat Investment Fraud on

solicitor accused of dishonestly funnelling nearly £20m of investors’ money from a legal financing fund into his own pocket today told jurors the fund was set up to fill ‘the big black hole in the market’ after access to legal aid was reduced.

Timothy Schools, 61, is said to have received ‘just over £19.5m’ from the Cayman Islands-registered Axiom Legal Financing Fund before it collapsed in 2012. He allegedly used some of the money to pay for an estate in Cumbria, a personal trainer and football season tickets.

Prosecutors say the fund – which was set up to lend money to firms pursuing no-win no-fee claims, mainly in relation to unenforceable consumer credit agreement cases – made loans only to Schools’ Preston-based ATM Solicitors in 2009, the year when it commenced trading.

Co-defendant Richard Emmett, 47, allegedly received just over £1m through his firm Emmetts Solicitors, which later became Ashton Fox Solicitors. The court has previously heard this firm was ‘Emmetts plus ATM’ after it bought the latter at an allegedly ‘inflated’ value of £3.5m in 2011.

Former financial adviser David Kennedy, 69, is accused of receiving over £5m, some of which he is alleged to have used to buy property in the Swiss Alps, as well as in Tenerife and Hull.

Southwark Crown Court previously heard that ATM Solicitors was given its name because Schools used it as ‘his personal cash machine’, however Schools – beginning his evidence today – said the name was chosen in order to attract clients.

‘My motivation for that was to try and use it as a marketing ploy … [to] attract clients in to the firm, conduct their litigation and get them compensation so that we got money out of the other side,’ he told the court.

Schools and Kennedy are charged with fraudulent trading to dishonestly enrich themselves to the detriment of Axiom investors in relation to The Synergy Solution Limited, which the court previously heard was ‘the first business’ they used to authorise loans to law firms.

Schools also faces one count of fraud for allegedly abusing his position as Axiom’s investment manager through his control of Cayman Islands-registered Tangerine Investment Management Limited, by authorising an agreement between Axiom and Ashton Fox for his own personal benefit.

He faces two further counts of fraudulent trading: one for allegedly carrying on the business of ATM Solicitors for a fraudulent purpose and a separate count along with Emmett, both of whom were solicitors at the relevant time, in relation to funds loaned to Emmetts and then Ashton Fox.

Schools is also charged with transferring criminal property in relation to just over £1.1m of alleged criminal proceeds, while Emmett is accused of being concerned in facilitating the use of criminal property in relation to the same sum. The trio deny all the charges.

Asked by his barrister George Carter-Stephenson QC whether The Synergy Solution ‘ever dishonestly traded in order to enrich yourself and Mr Kennedy to the detriment of Axiom investors’, Schools said: ‘No, it did not.’

Carter-Stephenson asked Schools if Tangerine Investment Management was operated in a way which acted against the interests of Axiom investors, to which he replied: ‘Absolutely not.’

Schools said the fund was designed to ‘facilitate the introduction of loans from the fund to law firms in the UK to facilitate their ability to conduct low-value litigation’ and that it was intended to ‘make a strong return and enrich the investors ultimately’.

‘My motivation was really generated through the withdrawal of legal aid funding in the first instance,’ he said, ‘so a lot of these people who may have legitimate claims … would no longer have anywhere to go.’

Schools added that large law firms would not take on such cases ‘so I was looking to try and assist with what I considered to be the big black hole in the market’.

He was also asked by Carter-Stephenson about ‘the rationale behind your firm [ATM Solicitors] being the sole firm that was in receipt of funding’ in the year it launched, to which Schools replied: ‘Dave Kennedy and I approached a number of funders previously and for different reasons they never got off the ground, so we did not know to what extent, if at all, the Axiom fund would get off the ground.’

He added that this ‘made it impossible for us to go to any other law firm to try and arrange any kind of credit line to them because we did not know if the Axiom fund would raise £1,000 or £1m or £100m’, but that ATM could ‘accommodate that kind of fluctuation’.

Opening the prosecution case earlier this year, Miranda Moore QC said the Axiom fund was valued at around £120m in 2012 when it was suspended shortly after auditors discovered that Ashton Fox, which owed the fund £60m, would only be able to repay £65,000.

The court heard Axiom marketed to ‘sophisticated investors’ as offering a projected growth rate of between 10-11% a year with an expected case success rate of over 95%, lending money to a ‘genuine independent panel of law firms’ to fund ‘vetted cases’, jurors were told.

Moore said: ‘What in fact happened was that those that arranged for the loans to be paid out, Mr Schools and Mr Kennedy, made the loans to a very limited number of law firms. In fact, in 2009 loans were only made to one firm, ATM, controlled by Schools – it was his firm.’

She added that ‘later, loans were made to other firms in which he [Schools] held undisclosed interests’, including Ashton Fox and another firm called Bracewell Law.

Schools, of Penrith, Cumbria, denies three counts of fraudulent trading, one count of fraud and one count of transferring criminal property.

Emmett, of Grimsargh, Lancashire, denies one count of fraudulent trading and one count of facilitating the acquisition, retention, use or control of criminal property by another.

Kennedy, of Hetton-le-Hole, Tyne and Wear, denies one count of fraudulent trading.

The trial continues.

Source: https://www.lawgazette.co.uk/news/axiom-fund-set-up-to-fill-legal-aid-black-hole-court-hears/5112764.article