Some Thoughts on Pension Funds and Craig Whyte – Guest Post by Beanos

What does this story mean for Craig Whyte?
The full piece from the Serious Fraud Office website is shown below.
I think the SFO will be having a good look into the dealings of Mr Whyte with the funds from the Jerome Group Pension Scheme.  You may recall that a few million pounds of pensioners money ended up in the now infamous Collyer Bristow account where it was to be held before ‘investment’ in Rangers. 
I have worked in the administration of Occupational Pensions for 15 years. The basics of an occupational scheme are that the monies/investments are held in a trust, they are known as trust based schemes. Decisions are made by the trustees on behalf of the pension scheme members. As the title of the position suggests, a trustee is trusted to act in the interests of the scheme members in all decisions made in relation to the pension scheme.
In the example given, the SFO were investigating as GP Noble, in their capacity as trustees of the scheme moved many of the pension scheme investments to British Virgin Islands companies investing in such safe investments as bars in Thailand.  (an aside – Amazing the number of shady companies these islands seem to provide a home for).  Fees and commissions turned this into a lucrative enterprise for the participants but not the scheme members.
I don’t believe that Mr Whyte could have accomplished this without being elected as a trustee of the pension scheme. If that is the case, I would imagine that the dereliction of his duties as a trustee would be pretty clear. The case isn’t on the scale of the example but on the other hand is a lot simpler. The only saving grace for him is that these things take a long time to come to trial.
Posted by Beanos
From the SFO

12 July 2012

The conviction last year of the GP Noble director and his imprisonment for eight years can now be published.

With the conclusion today of the trial of two other defendants, reporting restrictions have been lifted over other trials conducted last year in relation to a £52 million pension fund fraud.

In the first trial, which concluded in July 2011, Graham Pitcher (D.O.B 03/04/61) of Bury-St-Edmunds, Suffolk, was convicted of conspiracy to defraud for his involvement in the misuse of pension scheme funds managed by GP Noble Trustees Limited (“GP Noble”), a UK based pension trustee company. He was sentenced to eight years imprisonment. Another defendant, Gary Cordell, the former operations director of GP Noble, who was tried alongside Pitcher, was acquitted of any criminal involvement.

In a separate trial Quentin Russell (D.O.B 18/08/57) of Haslemere, Surrey was convicted on 30 September 2011 of fraud and forgery offences. He was sentenced on 3 January 2012 to 15 months’ imprisonment.

The trial of Anthony James Morris and Peter Malmstrom for their alleged involvement in the fraud concluded today. Both men were acquitted on all counts.

 

Case outline

GP Noble (now in liquidation) was an independent trustee company registered in the UK and based in Nottingham. At the time of the offences, its principal director was Pitcher. GP Noble administered a large number of occupational pension schemes. Many of the schemes related to companies which had become insolvent and/or had gone into liquidation.

In August 2007, Pitcher removed £30 million of six of these schemes’ funds from reputable UK based investment houses and reinvested the funds in a British Virgin Island (BVI) company, Fareston Limited, which had been formed immediately beforehand. This was done without consulting the other directors of GP Noble, who would not have sanctioned this conduct had they known. These funds were used by Pitcher and others for fraudulent purposes, including the payment huge unwarranted fees and loans.

In April 2008, a similar manoeuvre was performed, removing funds to a value of £22 million from seven schemes in favour of three-year bonds issued by Multiple and Unilateral Financial Futures Limited (“MUFF Limited”), a company also registered in BVI. MUFF Limited used these funds for high risk speculative investments including investment in property developments in Thailand and funding for a film finance company. The bonds issued by MUFF Limited were virtually worthless to the pension schemes. There was little recourse for the pension schemes should the investments made by MUFF Limited have failed. The terms of the bonds offered no guarantee or security to the pension schemes.

As with the funds invested in Fareston Limited, significant sums of money invested in the MUFF Limited bonds were swallowed up in loans and fees.

In July 2008, as soon as it became aware of the transfers, The Pensions Regulator removed GP Noble as trustee of all the schemes it administered (see note 1). The case was referred to the SFO by the regulator on 17 July 2008 and accepted for investigation seven days later. The SFO’s investigation was conducted in conjunction with Nottinghamshire Police.  (Addendum on 23 July 2012: Of the £52 million unlawfully removed from the fund, over £35 million has now been recovered by the SFO and civil lawyers acting for the independent trustee company appointed in place of GP Noble.)

The role of Graham Pitcher

As trustee of the impacted pension schemes, Pitcher played a critical role in the transfer of the funds to Fareston Limited and MUFF Limited in complete breach of his duties to safeguard the interests of the schemes’ members. He dishonestly concealed the fact of these transfers from other GP Noble directors and broke industry rules by failing to inform the pension authorities of the dramatic change in investment strategy for the pension schemes. Pitcher effectively handed over control over the pension funds to entities with no assets or track record and without any form of security to ensure repayment. The SFO successfully argued that the dishonest reason for this was clear. During the trial, the jury heard evidence that Pitcher received substantial personal benefit for his role in the fraud and expected to receive a further £1 million per annum from MUFF Limited.

Commenting on Pitcher’s conviction and sentence, SFO Case Manager Jane de Lozey stated, “Graham Pitcher held a position of enormous responsibility. He abused his position as a guardian of other people’s money and his dishonest actions left pension funds completely unprotected. The lengthy sentence handed down by the Court reflects the severity of the fraud perpetrated.”

Role of Quentin Russell

Russell had been employed to provide investment advice as apparent independent justification for the extraordinary programme of investment by GP Noble in Fareston Limited and MUFF Limited. He was far from qualified to fulfill that role, being neither FSA registered, nor experienced in giving pension investment advice. Despite this, in return for substantial payment, he provided a series of fraudulent letters setting out his belief that the investments in GP Noble and MUFF Limited would be beneficial for the pension schemes.

On 3 January 2012 Russell was sentenced to 15 months’ imprisonment.

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17 Comments

Filed under Craig Whyte's Companies, Criminal Law

17 responses to “Some Thoughts on Pension Funds and Craig Whyte – Guest Post by Beanos

  1. Interesting Beanos, but as I’m not fully aware of the link to Whyte (missed that part of the Big Story), can you just a explain what it is? Ta

  2. Plughole

    Not sure of the link your suggesting Beanos, but, like you, think Craig Whyte’s involvement and Collyer Bristow’s collapse, absolutely stinks. I wouldn’t let Whyte anywhere near a pension trust. Will vast fees have been paid out before Collyer bristow’s collapse? Probably.
    Please keep digging on this, there may be more info out there.
    Thanks

  3. The link to Whyte is that he “was involved” with a pension fund (The Jerome Pension Fund) which invested several million pounds into Rangers when he knew absolutely that it was a poor investment for the pensioners. No one appears to know if Whyte was a trustee although if he was he will get treated the same way as the characters in Beano’s article……..hopefully!

  4. James

    Is this a Rangers blog or a legal blog? i’m confused as it keeps coming up on my Scots Law news feed but all it ever talks about is Rangers.

    • ecojon

      @James

      I think the legal situations and ramifications of the numerous issues that have beset Rangers in the past couple of years many of which have a legal slant to them is what you must be referring to.

      I can only assume that you have missed some of the amazingly detailed work that has gone into the various football rulebooks which casts doubt on whether they are fit for purpose or not.

      There are numerous other similar issues which have been sparked-off and I have no doubt many more to come. From my own knowledge of the people who post on here there are football supporters from a variety of teams and leagues that through in their tuppenceworth.

      And I believe Paul has a very liberal policy on guest posters – he must have if he puts up with me :) So I’m sure if there is something you want to post on a topic close to your heart then I look forward to reading it.

    • Yeah James, I for one can’t wait until the truth of this saga actually comes out into the open and can be dealt with properly by the relevant authorities, courts, etc – then all the inconsistencies, double-talk, half-truths and just plain nonsense won’t have to be highlighted by blogs like this any more.

      However, that may take a while, given the utter tosh still coming out of Ibrox and Hampden.

    • Carntyne

      There, there.

  5. Gortnamona

    I would like to know more about Jerome Group PLC and its pension fund before giving an opinion on the merits of its case.

  6. ecojon

    What fascinates me is not the dishonesty of those convicted but the ease with which they were able to operate and remove the money and stick it offshore. Surely tighter Regulation whould have made the ‘removal’ of the funds easier to spot or at least a helluva lot more difficult to carry out.

    As to the offshore element I’m afraid until this Tory Government, individual members of which benefit from the dodgy advantages of the Offshore Finance sector as do their City pals, totally ban British funds in any shape or form going to them then there is nothing we can really do to curb their activities.

    I would love if someone proved me wrong in that bleak outlook but ah hae ma doots.

  7. John Burns

    If Asil Nadir can get ten years for ‘stealing’ money (£29million) from his company – what should David Murray get for ‘stealing’ almost double that amount from the taxpayer?

    Stripping of knighthood, stripping of titles and, perhaps stripping of civilian garments to be replaced by HMP issue.

    Where’s is the difference in their actions – both set out to wilfully deceive.

    • ecojon

      @John Burns

      At the moment there is a difference: One has been convicted and one hasn’t even been charged so I think we will need to hold on a bit :)

      But Nadir will do a max of 5 years and probably after 3 max he will be in an open prison and spending more time at home than inside. Many people might think it’s a very light sentence for nicking £29million and might be happy to take that kind of sentence.

      I’m sure in the London riots the sentencing wasn’t far away for the theft of virtually worthless items.

  8. beanos

    There is no link as such but pension fraud like this is quite rare. Its hard to find examples of how such things will be treated. As far as i know, this is the firstcase of a pension trustee being tried in court for a fraud like this.

    I see the misuse of pension funds in each case to be remarkably similar in that the ‘investments’ were clearly carried out to benefit persons other than the scheme members.

    Even if Whyte wasn’t a trustee, I’m pretty sure that the ‘independent advice’ given to the trustees came from one of Whyte’s companies. No sane investment advisor would ever advise a pension fund to invest in something as risky as Rangers.

    • ecojon

      @beanos

      Had to laugh at: ‘ No sane investment advisor would ever advise a pension fund to invest in something as risky as Rangers’.

      Just wait till you see Green’s pitch I’m sure you’ll be rushing to invest :)

  9. beanos

    ecojon, i agree, its shocking how easy it was for this to occur.

    A lot of faith is placed in the trustees of pension schemes. They are responsible for millions of pounds of other peoples money. The adminstrators of the scheme will follow the trustees’ instructions pretty much blindly.

  10. Simon Wiliiam

    Unfortunately the SFO only has jurisdiction in England, Wales and Norteern Ireland. So they could not look at this.

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