A guilty plea entered today at Southwark Crown Court completes the prosecution of six defendants over two trials in a £4 million commercial loans advance fee fraud between 2006 and 2009 operating as Gresham Ltd. With reporting restrictions now lifted the convictions of Edward Davenport, Peter Riley and Borge Andersen in May can now be published alongside the convictions of David Horsfall , Richard Stephens and David McHugh who all pleaded guilty before the second trial, due to commence today.
Trial 1
The first trial, presided over by HHJ Testar, involved the three defendants who directed and operated the fraud, Edward Davenport, Peter Riley and Borge Anderson. They were the driving force behind Gresham Ltd, a company promoted falsely by them as a long-established, wealthy and prestigious financial organisation capable of lending hundreds of millions of pounds as venture capital.
The three were convicted on 19 May of conspiracy to defraud. Sentencing was held over until 1 September. Davenport and Riley were each sentenced to 7 years, 8 months and disqualified from acting as company directors for ten years. (see note 1).
Andersen's sentencing was adjourned awaiting a pre-sentencing medical report and on 12 September he was sentenced to 3 years, 3 months and disqualified from acting as a company director for 7 years.
The SFO will seek Serious Crime Prevention Orders against all three defendants. Confiscation proceedings will also be taken against all three defendants.
Trial 2
The second set of proceedings under HHJ Higgins involved a solicitor and two individuals purporting to be professional advisors engaged by Gresham to support the façade. David McHugh, an individual with several previous convictions for dishonesty, posed as both a lawyer and accountant in order to deceive investors. Richard Stephens posed as a surveyor to convince investors their projects were being properly considered. David Horsfall, a solicitor, provided misrepresentations to investors as to Gresham's ability to advance loans.
David McHugh and Richard Stephens pleaded guilty to conspiracy to defraud.
David Horsfall pleaded guilty to fraud by false representation, contrary to s1 of the Fraud Act 2006.
These defendants will be sentenced on 10 November 2011. (See Note 2 for ages and residences of all six defendants).
Background
Gresham, a London based operation, purported to offer the sourcing and provision of commercial funding by way of loans or joint venture capital, for which "advance fee" payments were sought from individuals. (This Gresham is not to be confused with a similarly named business - see note 3.) It was set up by Davenport who in 2005 bought a near-worthless company registered many years earlier, Industrial Design and Finance, and renamed it Gresham Ltd. His company brochure described the business as having a "consistent record of trading…" over the "last 50 years". He recruited Peter Riley to run the company on the day-to-day basis, to meet prospective clients and sign the loan agreements. Davenport remained however, the "supreme leader", as described by one of the conspirators in a recovered email. Andersen joined Gresham in February 2008 to become Riley's principal lieutenant, signing agreements and fobbing off concerned applicants with bogus explanations for delays in provision of funding.
The dishonest representations which underpinned the Gresham operation included claiming that it had particular experience and expertise in the field of multi-million pound commercial finance, claiming that it had access to a number of sources of funds that were available to fund projects of the type that were being presented and claiming that it had a successful track record of arranging funding for clients. Solicitor David Horsfall, a long-time associate of Davenport (and who had acted for him in High Court litigation relating to his acquisition of the former Sierra Leone High Commission premises at Portland Place in 2000) added a professional reassurance to prospective applicants seeking confirmation of Gresham's ability to advance substantial loans. He also falsely claimed he had transacted loan agreements and dispersed money for Gresham.
David McHugh pretended to be a qualified lawyer and an accountant of 35 years experience. He traded as Touchstone Accountants and Touchstone Law. In reality he was not enrolled or qualified in either profession. He entered into the Gresham conspiracy in early 2008 and amongst the various deceptions he contributed to the fraud was the preparation of false company accounts
After persuading victims to seek finance, Gresham would proceed to obtain the advance fee from the applicant as an absolute priority and before taking any further step on the applicant's behalf. This would be followed with a range of deceptive assertions and claims designed to extract further monies from the applicant by way of deposits, fees for bridging loans or fees for insurance policies.
Having obtained the fees, further deceptions were made to convince the applicant that genuine and positive steps were being taken to provide the funding that they were seeking. When the applicant complained about the speed of progress or the lack of results, a range of tactics and excuses were deployed deflect the client from appreciating the true situation. An example is where Riley blamed delays on a fictitious Monaco financier called Louis Martin, even setting up an email address of that name and sending reassuring messages from it to applicants.
Riley and Stephens were old friends. The fraud used loan documentation templates from a previous similar dishonest scheme that Stephens (under the name of Kirkup) was involved in. Stephens joined in the conspiracy in 2007, following his release from prison, taking on the role of "surveyor" to visit the sites of the proposed building projects in order to give the impression that proper and professional procedures were being undertaken and as a pretext to demand "due diligence" fees which in some cases for site surveys were over 50,000 euros.
The defendants relied upon the fact that there was a worldwide demand by those either already in business, or wanting to go into business, for finance for commercial enterprises and willing to pay a fee in advance to acquire a loan. Often clients required 100% (or close to 100%) funding and they had frequently already exhausted conventional lending sources before approaching Gresham.
Gresham took advantage of the "credit crunch" that took that hold from 2007 onwards and when conventional sources of commercial financing became scarce. Holding itself out as a funding source in such an economic climate was a powerful draw for entrepreneurs who were keen to get their projects off the ground.
Loans were typically sought for construction projects in the UK and continental Europe, but also in North America, India and in the Caribbean. The fees were sought under a variety of pretexts, ranging from "verification" fees to "guarantee" fees. Most significant, and indeed profitable for the defendants, however, were demands for "due diligence" and "deposit fees". The latter were claimed necessary to raise the loan.
The loans Gresham claimed to be able to provide amounted to many hundreds of millions of pounds. Yet of the numerous victims contacted by the SFO not one received the monies promised. More than £4m in fees were taken from over a hundred applicants.
Proceedings
The SFO investigation opened in September 2009 following complaints made by victims. Searches of the defendants' commercial and residential properties were undertaken in December 2009. These searches involved 70 SFO personnel and 40 City of London police officers. The investigation was also supported by Cheshire and Derbyshire police forces. The defendants were charged soon after the searches.
Trial 1, which was presided over by HHJ Testar, commenced in January 2011 with guilty verdicts returned on 19 May and sentences passed on 1 and 12 September. Reporting restrictions were ordered because further court proceedings were scheduled for other defendants.
Trial 2 opened today, 5 October, where Horsfall pleaded guilty and with Stephens and McHugh already having admitted their guilt.
The Director of the SFO, Richard Alderman, commented "This was a proactive investigation that stopped a sophisticated criminal enterprise in its tracks. The time taken from the commencement of the investigation to trial was a little over fifteen months and demonstrates the SFO's commitment to reducing the time taken to bring cases before the Crown Court."
In passing sentence in trial 1, HHJ Testar described the Gresham operation as a "professional and sophisticated fraud that did a huge amount of damage…victims suffered crippling losses". He described Riley as "a very accomplished con-man…at the sharp end of the fraud" who had "spun a web of elaborate lies to explain why the money had not come. It was one fictitious charade after another" and enabled Riley to enjoy "a dolce vita life".
The judge described the SFO's description of Davenport as "the ringmaster" as "justified". He said that Davenport was in overall charge and though he worked in the background ("he doesn't leave footprints in the snow") he was the instigator and the instructor. Andersen was described as a less senior participant, receiving less benefit and that "the fraud was already a runner" before he joined Gresham.
Notes for editors:
1. A sentence of 8 years was passed for Riley and Davenport but was reduced to take into consideration time when they were subject to curfew orders after they were charged. Additionally credit will be given for time they were held in custody following their convictions in May.
2. Edward Ormus Sharington Davenport, DOB 11/7/66, of Portland Place, London.
- Martin Peter Riley DOB 1/1/47, of Brentwood, Essex.
- Borge Andersen, DOB 23/7/45, a Danish national of Putney, London.
- Richard Stephens DOB 9/7/44, from Sheffield. He was convicted in 2004 in an SFO case (Anglo American Ventures) under his former surname, Kirkup. It was an advance fee fraud offering commercial loans.
- David Horsfall, DOB 9/8/55, of Godalming, Surrey.
- David McHugh, DOB 2/11/57, of Warrington, Cheshire.
3. The Gresham company created by Davenport is not to be confused with Gresham Financial Ltd, a legitimate financial advisory firm regulated by the Financial Services Authority. By adopting the same company name, Davenport attempted to attach the image of the City of London financial district to his dishonest enterprise.
4. The Serious Fraud Office is a government department responsible for investigating and prosecuting serious and complex fraud. The SFO is headed by the Director (Richard Alderman) who exercises powers under the superintendence of the Attorney General. These powers are derived from the Criminal Justice Act (1987).
