UK: HYIP fraudster jailed
The UK's Serious Fraud Office has obtained a conviction against the operator of a high yield investment programme that was really a money-sink.
Darren Inett, a 36 year old who pretended to be an investment adviser, has been sentenced to 4 years and 3 months" imprisonment at Worcester Crown Court for his part in a West Midlands based high yield investment fraud and disqualified from acting as a company director for 12 years. Three others have already been already convicted.
Darren Inett of Droitwich was part of a conspiracy to defraud investors during 1998 to 2000 through the offering of exclusive introduction to collective trading programmes on the financial markets.
The fraudsters operated from Droitwich, with an accomodation address in London, but arranged meetings with investors in smart hotels in the Birmingham area, arriving in hired expensive cars to give the illusion of being successful investment advisors.
However they were not authorised investment intermediaries, as required by law.
The investments were supposedly secured by bonds and/or insurance or share certificates. The reality was that neither the investment scheme nor the security existed.
The money lost by investors in the scheme in which Inett was involved amounted to around GBP550,000. Many victims were in Canada and the USA.
Inett"s co-conspirators were John Wilfred Thomas, David John Saull and Jasbir Singh Mudhar who were found guilty in June last year and sentenced on 8 August 2003 to prison sentences ranging from 4 years to 5 ½ years.
Inett was severed from that trial to be dealt with at a later date for health reasons. A court order prohibited the reporting of the conviction of the three defendants until the case against Inett was concluded.
This prosecution is part of a wider case in which the defendant John Wilfred Thomas was also involved - but not Inett, Saull or Mudhar. He (and others not prosecuted for jurisdictional reasons) conducted a similar fraud between 1994 and 2000 involving victims in the UK and Sweden. The parallel investigation, which started in February 2000, into both fraudulent operations established losses of GBP1.1 million. West Mercia Police were also involved in the investigation.
On resumption of proceedings against Inett, he pleaded guilty on 6 April and was sentenced today by Mathews, J to 4 years and 3 months imprisonment and disqualified from acting a company director for 12 years. He had previously been disqualified for 5 years in January 1998. A confiscation hearing is listed for 17 September 2004.
on 8th August 2003 at the same Court:
* John Wilfred Clark was sentenced to five and a half years imprisonment.
* David John Saull was sentenced to four years imprisonment.
* Jasbir Sing Mudhar was sentenced to four years nine months imprisonment.
Clark and Saull were disqualified from being company directors for ten and seven years respectively.
The total sum lost by the investors as a result of the fraud was in excess of GBP1.1 million.
From 1994, Clark through a number of business fronts set up by him, was engaged in the promotion of so called high-yield investment schemes to clients in the UK and Sweden. He sometimes used the name John Thomas.
In 1997, Clark entered into a similar business relationship with Saull. Together they promoted investment schemes, this time to include victims in Canada and the USA. Saull was registered as a director. Clark described himself as a "consultant." Mudar, an accountant by training, played an important role as an "introducer." Investments lost by clients amounted to approximately GBP550,000.
The defendants were not authorised to conduct investment business or act as intermediaries, as required by law relating to the financial services sector. Even so, they described themselves as "facilitators"; able to make special introductions for clients to financial trading houses and banks. They set out to persuade potential clients to invest money in supposed short-term, high yield investment programmes. Assurances were given that the invested monies would be secured by bonds and/or insurance or some other form of security. The individual sums invested varied hugely. One victim parted with GBP350,000. In some cases, clients were told that they could arrange loans for them.
Clients would sometimes be invited to participate in a pooled scheme whereby the collective sum would be large enough to "leverage" a short-term trading programme on the financial markets that would reap quick and substantial profits.
The reality behind these claims was that client monies were not in fact invested. There were no bank trading programmes.
Instead clients' funds were used by the defendants and by others who introduced the clients for their own benefit. The promised risk protection did not exist. The bonds were fake and the indemnity insurance worthless.
Once persuaded, victims would be sent contractual documents and correspondence so as to maintain the façade of a legitimate and professionally run business.
Investors who expressed concern when the promised returns were failing to materialise were fobbed off with excuses that parties on the other side of the deal were not performing adequately. Only when clients threatened to complain to the authorities, would some of the invested sums be returned. However, in September 1999, acting on a complaint from a victim, the West Mercia Police made some initial enquiries. When questioned, the defendants' explanations about the details of the investment strategy and the returns on investment were different. The case was referred to the SFO, who commenced an investigation in February 2000.
Clark, Saull and Mudhar were charged in October 2001. The prosecution case was presented by two indictments:
* Count 1 related to Clark alone for his conspiracy (with others who were not charged to defraud investors between 1 January 1994 and 31 December 2000.
* Count 2 related to Clark, Saull, Mudhar and another for conspiracy (with others who were not charged to defraud investors between 1 January 1997 and 31 December 2000.
The trial at Worcester Crown Court opened on 17 February 2003. Innett was discharged in eary June 2003 because of a medical condition.
The jury gave their unanimous guilty verdict against the others on 27 June 2003. Clark was found guilty on both counts and Saull and Mudhar were found guilty on the single count against them.
On count 1, other named conspirators are Ulf Ruden, Johan Botha, Lawrence Smith, Paul Goby, Marc Kantano, Karl Dieter Muth and Rajiv Patel. However, none were charged.
On count 2, other named conspirators are Ulf Ruden, Harold Eugene McDowell and Joseph Mottley. Another named conspirator cannot be identified here for legal reasons as he is facing proceedings in another case.
3. The SFO warns: "High-yield, low-risk" investments do not exist. The reality is that the higher the potential yield, the greater will be the risk. There is no incentive for a borrower (in this context, an investment bank) to pay investors a high return for using their money when there is no, or little risk, in their being able to repay the money. In the real world of investment, in order to pay investors a high yield, the investment bank would itself have to take investment risks, but where there is genuinely no risk, the bank will be able to borrow the money more cheaply elsewhere.
It goes on: Even where "leveraged investments" exist (that is where an investor borrows money to increase the pool of money available) the potential loss, as well as the potential gain is magnified. A lending bank would require security before agreed to any loan. In this particular fraudulent case, no genuine security was available in relation to any of the transactions.