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Fraudster directors in last minute dispute over £60m UCIS case

by: Laura Miller
  • 23/02/2015
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Fraudster directors in last minute dispute over £60m UCIS case
Two firm directors who lost investors about £60m in a scheme the Serious Fraud Office (SFO) branded "an elaborate scam" have had their sentencing postponed following fresh allegations made at the eleventh hour.

Richard Aston Clay, who pleaded guilty to fraud charges related to the Arck investment scheme in December, and business partner Kathryn Clark, who admitted fraud and forgery in July and October last year, were due to be sentenced at Southwark Crown Court on 20 February.

But the night before the hearing, Clay’s defence team served the court with a document disputing elements of the case against him, and alleging witnesses for the prosecution – the SFO – committed illegal acts in relation to the case.

The prosecution disputed the allegations.

The difference in the accounts means the judge will need to hear further evidence from some witnesses before sentences can be handed down, in what is known as a ‘Newton hearing’, which will take place on 22 June.

Newton hearings occur if, following a guilty plea, the factual dispute between prosecution and defence versions is so different that it affects the appropriate sentence in the case. 

Where did the millions go? 

The fraud case brought by the SFO against Clay and Clark concerned the creation and marketing of Arck unregulated financial products made available to investors through financial advisers between 2006 and 2012.

It is estimated £60m was invested in the Arck property scheme by individual investors and, in some cases, advisers themselves.

The scheme collapsed in 2012, but not before Clay and Clark received in excess of £4m from it without explanation, according to a liquidator’s report.

This included a payment of £77,500 in respect of a Range Rover Vogue that Clay registered in his name, and payments from Arck in excess of £580,000 to Clark for which she has not been able to provide an explanation. 

Compensation on hold

Investors who lost money in the failed property scheme had hoped the sentencing of Clay and Clark would bring an end to the case and they would finally find out if they will receive compensation from the Financial Services Compensation Scheme (FSCS).

The FSCS said in January it has been receiving claims against advisers relating to advice to invest in Arck as far back as September 2013.

These claims have been on hold pending the outcome of SFO’s case against Clay and Clark. An FSCS update is expected by the end of March

‘Scam’

The Arck Unregulated Collective Investment Scheme (UCIS) centred on investments in overseas off-plan property.

It involved an investor buying a plot from Arck and then Arck undertaking to buy it back after a certain period.

The Financial Ombudsman Service (FOS) called it “an unusual and complex arrangement” that was suitable for sophisticated investors only.

However the SFO branded it a “scam”.

SFO joint head of fraud Jane de Lozey said: “This was a complex and thorough investigation involving financial products which appeared innovative but were in fact part of an elaborate scam.

“It is another example of the misuse of pension monies and highlights the vulnerability of investors to these types of frauds.”

The SFO and Nottinghamshire Police, assisted by the East Midlands Special Operations Unit, have worked jointly on an investigation into Arck since May 2012.

The Financial Conduct Authority has also been assisting with the investigation. 

Money in the (Yorkshire) bank

Along with advisers, high street name Yorkshire Bank is caught up in the debacle and has been forced to set up a ‘support scheme’ to help investors in financial hardship following Arck’s collapse.

Yorkshire provided Arck with banking facilities, and was supposed to hold investors’ money securely in segregated accounts.

But when Arck collapsed the money was nowhere to be found.

The lender has threatened advisers who sold the failed scheme that it will pursue them for money if their clients make a claim for compensation against the bank.

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