Guilty verdict in SFO $15 million Ponzi scheme prosecution
5 September 2012
Guilty verdict in SFO $15 million Ponzi scheme prosecution
The SFO prosecution of Jacqueline Bradley (59) for fraud yesterday resulted in a jury finding her guilty on all 75 Crimes Act charges she faced.
The charges related to Mrs Bradley’s role as a director of B’On Financial Services Ltd (B’On) which she ran with her late husband. B’On sought funds from clients on the pretext of investing in various funds they had established both in New Zealand and offshore.
The SFO investigation revealed that between 28 April 2003 and 30 November 2009, 24 investors paid a total of $14.4 million and additional Australian investors a further AUD$840,000.
Money paid to B’On for investment was not used in accordance with the requirements of their clients. Instead it was used to make repayments to other investors, and to fund the personal lifestyle of the Bradleys through their Family Trust.
SFO Chief Executive, Adam Feeley said, “This is a classic Ponzi scheme where no genuine investments were made on behalf of investors. And like all Ponzi schemes, although they are doomed to ultimate failure, it operated to provide the Bradleys a luxury lifestyle while their victims suffered devastating consequences through, in many cases, the loss of their life savings. In one case, an investor lost their life insurance paid out in advance due to a terminal illness.”
Mr Feeley said the case was the second affinity fraud conviction in as many weeks, which highlighted the risk to investors of making investments purely on the basis of some personal relationship with the promoter of an investment scheme.
"We cannot over-emphasise the dangers of basing investment decisions on the recommendation of a relative, friend or acquaintance rather than careful investment analysis. The sad, simple fact is many people cannot be trusted and a decision based on a moment of trust can lead to a lifetime of financial heartache."
An initial complaint was received by the SFO on 20 January 2009 and a Part II investigation began on 28 January 2010.
Mrs Bradley will be sentenced in the Auckland District Court on 19 October 2012.
Note to editors
Jacqueline Bradley and her late husband Michael Bradley established B’On Financial Services Ltd on 20 April 1998 as joint directors and equal shareholders. They acted as financial advisors and investment managers. Prior to this they operated under a number of different entities.
B’On was placed into voluntary liquidation on 22 December 2009.
Affinity fraud explainedAn affinity fraud can take many forms but most commonly involves an investment scam where the fraudster is, or purports to be, a member of a particular identifiable group. This can include ethnic minorities, religious groups or individuals within a professional discipline.
Key to the crime is that the fraudster will exploit the trust and common bond that exists within such a group to deceive members into an investment scheme or other business proposition that they might not otherwise have accepted but for their knowledge and trust of the individual promoting the investment.
Often the victims of such fraud are slow to report any anomalies to law enforcement authorities because of their reluctance to undermine social cohesion with the group. Commonly they will seek to come to some arrangement within the group, and the fraudster amongst them will continue to assure investors that their investments are secure but the subject of some technical or administrative problem in being repaid.
Messages to the public on how to minimise the risk of being the subject of such a fraud include:
1. Thoroughly check every fact and figure, and do not believe anything simply because the person making the statements is known to you;
2. Be greatly suspicious of out-of-the-ordinary returns. Quick or very consistent returns on investment are classic signs of fraud;
3. Get things in writing. Fraudsters don’t like putting things in writing for fear of subsequent liability.
4. Be wary of people who claim to know you by way of a third party or via social media. A social connection, real or claimed, is no substitute for a relevant professional qualification to provide financial advice.
Crimes Act Offences
Section 220 Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—
(a) to account to any other person for the property, or for any proceeds arising from the property; or
(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.
(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.
(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.
(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.
Section 222 Theft by person required
(Pre-October 2003 amendment)
Every one commits theft who, having received any money or valuable security or other thing whatsoever on terms requiring him to account for or pay it, or the proceeds of it, or any part of such proceeds, to any other person, though not requiring him to deliver over in specie the identical money, valuable security, or other thing received, fraudulently converts to his own use or fraudulently omits to account for or pay the same or any part thereof, or to account for or pay such proceeds or any part thereof, which he was required to account for or pay as aforesaid:
Provided that if it is part of the said terms that the money or other thing received, or the proceeds thereof, shall form an item in a debtor and creditor account between the person receiving it and the person to whom he is to account for or pay the same, and that such last-mentioned person shall rely only on the personal liability of the other as his debtor in respect thereof, the proper entry of the amount of the money or proceeds or any part thereof in that account shall be a sufficient accounting for the amount so entered; and in such case no fraudulent conversion of the amount accounted for shall be deemed to have taken place.
Section 228 Dishonestly taking or using document
Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration,—
(a) dishonestly and without claim of right, takes or obtains any document; or
(b) dishonestly and without claim of right, uses or attempts to use any document.
Role of the SFO
The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.
The SFO operates three investigative teams:
• Fraud Detection &
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.
The SFO operates under two sets of investigative powers.
Part I of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”
Part II of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”
The SFO’s Annual Report 2011 sets out its achievements for the past year, while the Statement of Intent 2012-2015 sets out the SFO’s three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz