Tuesday, 6 October 2009

Slick Pair Accused Of £250m 'Ponzi' Fraud



Two smooth-talking businessmen masterminded a £250 million-plus international ‘Ponzi’ fraud from a former RAF base, duping investors with outlandish promises of huge returns, a court heard.

Imperial Consolidated, based at Binbrook, Market Rasen, Lincolnshire, and several overseas offices, collapsed in June 2002, owing £150m.

Lincoln Julian Fraser, (pic.l), 38,of Orford Hall, Brookenby, Binbrook, Market Rasen, Lincolnshire and Jared Bentley Brook, (pic.r) 39, of Sefton Drive, Worseley, Manchester, attracted 3,000 clients from all over the world.

“Instead of receiving their money back plus the generous rate of return which had been promised to them most investors lost everything,” prosecutor Tim Barnes QC told the Blackfriars Crown Court jury.

“This was an international fraud which cost investors hundreds of millions of dollars, they were promised high returns, they thought that their money was safe.

“These two defendants were masters of getting money from investors. They told a great story of capital protected investments, returns far above the normal rates of interest, investments in solid and successful trading businesses in the U.K.

“The published material on behalf of Imperial Consolidated was glossy and well put together,” explained the QC. “In layman’s terms they could certainly ‘talk the talk'.

"They projected themselves as dynamic entrepreneurs, proud of creating a great international business empire under the grandiose title ‘Imperial Consolidated’.”

Both men have pleaded not guilty to conspiracy to defraud investors in investment schemes between January 1, 1998 and June 30, 2002 and fraudulent trading, knowing it was for a fraudulent purpose between May 1, 2000 and June 30, 2002.

The court was told £253.9 million was invested in Imperial Consolidated over four-and-a-half years and over £150 million has vanished, despite investors being convinced by the pair their savings were safe.

“It was illusion and not reality,” Mr. Barnes explained. “The investments were not protected, the UK businesses were not solid and successful.

“The rates of return for those who were fortunate enough to redeem their investments before the crash came from utilizing new investor funds for that purpose and not from the profits of established successful businesses as the investors believed.”

The jury was told neither Fraser nor Brook, who lived in Beacon Lodge, near Louth during the fraud, have any accountancy or formal financial qualifications.

They were banned from being company directors after a previous venture – Progressive Leisure – which ran the Midland Hotel, Morecambe, Lancashire, ceased trading, leaving a string of unhappy creditors.

“These two men in reality treated the investors with contempt,” added Mr. Barnes. “They speak of pandering to the greed of the investors in setting rates of interest that would bring the money in.

“They made promises which could not be kept and were not kept. They diverted investor funds for their own use to pay for their own lifestyle and to enable them to pursue a range of personal and uniformly unsuccessful business interests of their own.”

The duo blame Administrators – who tried to solve the mess left by Imperial Consolidated – plus a host of others, including the police, Price Waterhouse Coopers and Internet whistle-blower David Marchant for the massive losses, the jury were told.

“The truth is that these two men were simply fraudsters or conmen,” continued the QC. “They were slick and professional and extremely successful in getting money from investors worldwide.

“They were fundamentally a couple of selfish and dishonest individuals who for some years perpetrated a highly successful fraud.”

The jury was told the overall benefit to the defendants totaled £20 million and investors funds were secretly ploughed into a string of failed ventures including a hotel, bar, South American mine, Sierra Leone granite quarry and a mobile field hospital.

Fraser spent £111,000 on Orford Hall, turning his cellar into a Panic Room with bulletproof doors and hundreds of thousands of pounds was lavished on his pet project of buying and restoring old military vehicles.

From May 2001 Fraser drew £50,000 a month from the Fraser Brook Partnership – a firm funded by investors – and pocketed a £2 million salary from Imperial Consolidated, which even paid his £1 million tax bill.

The jury was also told the pair used investors money to buy a £1 million Kingair plane then trousered £550,000 when they sold it.

“The only way in which Imperial Consolidated kept going for so long was by paying old investors from new investors money,” explained Mr. Barnes.

“The defendants knew that as soon as the flow of new investment money dried up that their game would be up.

“That is why they tried so hard to keep the flow of incoming funds by promising higher rates of interest and seeking to persuade existing investors from redeeming.”

Offshore branches of the company were opened in the Bahamas, Grenada and the British Virgin Islands, plus an office in posh Mayfair.

“The scale of the deficiency was enormous. Over £150 million of investor funds had apparently disappeared. How had this come about?” asked the QC.

A string of associated companies were created, convincing investors these firms were the driving force behind overall profits.

“Those UK businesses were simply a fig-leaf to cover the increasing black hole at the heart of Imperial Consolidated,” said Mr. Barnes.

Huge yields of 15%-36% were promised and investors were wowed by impressive statistics the defendants paid to be published in the respected Financial Times.

“Imperial paid for supposed performance figures to be listed in the F.T. That newspaper did not authenticate the claims, they merely published the information provided to them by Imperial in return for a charge.

“It gave the investment some creditability and the investors some comfort,” added the QC, explaining the company used terms such as ‘Capital Protected’ and ‘Total Asset Protection’ to impress customers.

Investors received bogus statements boasting the company was profitable. “Documents showing the purported increase in the value of the clients’ investments were not worth the paper they were written on.

“There was no successful underlying business activity to generate the rates of return,” said Mr. Barnes.

“The only way in which the fraud operated as long as it did was through lying about the true trading performance of the companies and by manipulating the Imperial Consolidated financial statements to give a false picture of their profitability and solvency.”

Even though RAF Binbrook was rented on a five-year lease in 1997 it was listed as a £6.95m company asset on the books, following a dubious valuation including false information regarding planning permission, the jury was told.

Brook was described by the QC as an “effective and persuasive spokesman” skilled at selling the funds and without his talents the fraud would have failed.

The pair even tried to convince the Bahamas Securities Commission their company had a growing £120m a year turnover.

Eventually the Serious Fraud Office moved in and the pair were arrested in 2004.

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