Case Name: R v Bailey and Rigby           Court: Court of Appeal
Date: 20.12.05
Judge:
Statute: Financial Services and Markets Act 2000, s 397(c)
Offence: Reckless making a statement promise or forecast that was false and deceptive
Plea: not guilty

Total Sentence: Bailey 9 months. Rigby 18 months

Summary: Bailey was acquiteed of same offence. He was Director and CFO of software company. Side letters re value of contracts was supressed. Share price fell as a result.
Rigby was Chief Executive and Director - paid back £200,000 to investors who lost money as a result.

Court held matters to be taken into account are degree of recklessness financial context of statement financial concequences of the statement any deliberately deceptive steps taken Aggravating Features: Protection of investors: need for openness and integrity in financial markets Board and auditors were misled.

Mitigating Features:

good character
3 year wait for the FSA to investigate
Sentenced on basis of reckless, not the knowing offence

Reported: Banks on Sentence

Case:RvMillward           Court:Nottingham Crown Court

Date: 23/02/01

Statutes: Section 35 of the Banking Act 1987 & Section 20(2) Theft Act 1968

Plea: Guilty

Summary:

dishonestly concealing material Facts  
making false statements
dishonestly obtaining deposits         
abusing position as financial advisor  - using monies to fund own lifestyle

Many of M's victims were retired or approaching retirement and gave him money taken from their retirement lump sums. In some cases, victims trusted M because they used him as a financial adviser for 20 or 30 years and he bought legitimate products from him. Some were told that these existing products were not performing and he could recommend an alternative that could offer returns of 10% per annum.

Mitigating features:

Guilty Plea

Aggravating features   

18 customers who lost £145,000

Case:  R v Alan Evitts         Court:  Derby Crown Court 

Date: 23/06/05

Plea:Guilty Plea

Summary:Mr Alan Evitts, an unqualified accountant and book keeper, has been sentenced for 18 months in jail for taking over £204,000 in illegal deposits and making a number of false and misleading statements.

Mr Evitts got into financial trouble and abused the trust of his clients to stave off the evil day. He encouraged them to lend him money for fictitious investment opportunities but in reality he used it to pay debts to other investors.
Mr Evitts provided accountancy and book keeping services to small businesses. Between autumn 1999 and August 2002, Mr Evitts approached a number of clients asking either to borrow money or offering exceptionally high rates of return typically in excess of 20% over a three week period. The deposits were supposedly to finance 'deals' and investments. New deposits were used by Mr Evitts to repay earlier investors their capital and interest.

Mr Evitts took money from at least 14 people and in some cases they lost over £10,000. Because he was not authorised to take deposits, his clients did not have access to the Financial Services Compensation Scheme.

Mitigating features

Plea of guilty
Permanent injunction granted by High Court
E had been made bankrupt.

Aggravating Features

Unrealistic level of return offered to investors.
breach of undertaking given to FSA not to continue with the scheme.

Case:  R-v-Rourke                 Court:  Bradford Crown Court

Date:  15/06/04                                            Judge: HHJ Scott

Statutes: Sections 3 and 35 of the Banking Act 1987

Plea: Guilty

Summary:

Attempting to prevent witnesses assist the FSA investigation
pervert the course of justice.
Rourke was prosecuted under section 3 and section 35 of the Banking Act 1987 rather than for like offences under the Financial Services and Markets Act 2000 because the majority of the offending took place prior to commencement of the later legislation.
Section 3 of the Banking Act 1987: provides that no person shall in the United Kingdom accept a deposit in the course of carrying on a deposit taking business unless authorised to do so by the FSA or unless otherwise exempt under the Act. Any person who contravenes this section is guilty of a criminal offence.
Section 35 of the Banking Act 1987: creates the offence of fraudulent inducement to make a deposit where a person knowingly or recklessly makes a misleading false or deceptive statement or conceals material facts to induce another person to make, or refrain from making, a deposit or to enter into an agreement for that purpose. Breach of section 35 is a criminal offence.

The Banking Act 1987 was repealed and replaced by the Financial Services and Markets Act 2000.
Facts:
John Edward Rourke, aged 64, of Sildsen, West Yorkshire was sentenced to a total of two and a half years after he pleaded guilty to fraudulently inducing clients of his firm to make deposits with him of £340,000. It is thought that the full amount taken from clients and others may be up to £900,000.
The prosecution followed a three year investigation by the Financial Services Authority (FSA) into Mr Rourke's illegal activities. During the investigation the FSA obtained High Court orders restraining Mr Rourke's conduct and freezing his assets. Mr Rourke breached these orders by continuing to accept deposits and disposing of assets, and was jailed twice as a result, in 2001 and then 2002, for contempt of court.
On various occasions between 1994 and 2002 Mr Rourke persuaded people to deposit money with him by that the money deposited with him would be invested in a property scheme, dealing in repossessed houses;  that this scheme was risk free; and that very high returns could be achieved.

These activities contravened Mr Rourke had no such authorisation.
Many of Mr Rourke's victims had been clients of his book-keeping firm for many years and the professional relationship he had with them give him intimate knowledge of their financial circumstances.  Mr Rourke has now been declared bankrupt and it is likely clients will only receive a very small portion, if any, of the sums they deposited. Deposits placed with persons who are not authorised to take deposits are not covered by the Financial Services Compensation Scheme.

Aggravating features.

earlier breach of high court injunction resulted in custody.
Returns offered approached 50% rate of interest.
no property investment scheme ever existed
Breach of trust to accountancy clients.
No compensation available to victims

Mitigating features.

plea of guilty
had been made bankrupt

Counsel

J Barnett and A Berril-Cox  Prosecution
D Kelly                                  Defence