At Blackfriars Crown Court today reporting restrictions were lifted on the plea of guilty by former Imperial Consolidated Group ("Imperial") director William ("Bill") Godley for his role in a conspiracy to defraud investors.
Two other defendants, former Imperial directors Jared Bentley Brook and Lincoln Julian Fraser, were today acquitted by direction of the Honourable Mrs Justice Gloster. This follows their retrial which concluded on 28 June 2010 after 150 days. The jury had already returned a not guilty verdict on one count of conspiracy to defraud but failed to reach verdicts on the remaining count of conspiracy and counts of fraudulent trading whereupon the jury were discharged. The SFO decided not to seek a further retrial.
Proceedings resume in relation to Godley on 2 August 2010 when he is to be sentenced. (He pleaded guilty ahead of the first trial which concluded in 2008). An application for costs by Brook and Fraser will also be dealt with on 2 August 2010.
Overview of the fraud
This case concerned a massive international fraudulent investment scheme which operated under the banner of the Imperial Consolidated Group of companies ("Imperial") during the period 1998 to 2002. In all, around £253 million was invested and had almost 3,000 investors. William "Bill" Godley was a director of various companies within the group, as were Jared Brook and Lincoln Fraser. Between them they were in control of all the company operations both in the UK and abroad.
The fraudulent scheme was operated in the UK from a former RAF site called Binbrook in Lincolnshire. The scheme involved sophisticated sales techniques, in less demanding regulatory environments, which induced money from investors on the basis that the UK limbs of the business were extremely profitable and worth investing in. Money was to come in from overseas investors, be applied to commercial lending in the UK and then to be paid back to investors with interest. Investors were attracted to the schemes by the promise of high rates of return and the assurance that their capital was protected. Imperial's glossy and professional brochures advertised the fact that investors' funds had the benefit of "total asset protection".
In fact, quite the opposite was true. The UK businesses, which purported to make money from various consumer loan schemes, were loss making and increasingly insolvent. Less than half of the investors' money was loaned out by the UK loan businesses. Investors' money was instead channelled in overheads and expenses, as well as extremely speculative mining interests which the investors knew nothing about.
Furthermore, investors' capital investment was not protected as promised by Imperial; the insurance that was in place protected the company not the investors. The high rates of interest which were promised could only be supported as long as new investment was coming into the group. It was a case of robbing Peter to pay Paul and was ultimately doomed to failure.
In September 2000 Imperial purported to diversify its lending businesses and acquired mining interests in South America. At this point, the company was already hugely insolvent. In order to present a solvent face of the business, the value of the mining interests were massively inflated in the company's financial records. The valuations of the mines were wholly unreal and inflated, and in many cases were not in fact owned by Imperial. Furthermore, most investors had no idea that their funds were now being used to finance mining acquisitions in South America - most were under the impression that the money was still being used in the various lending businesses in the UK.
The victims of the fraud were the investors who lost their investment on the collapse of Imperial. The investors themselves came from a range of backgrounds and countries. Only those investors who redeemed their funds before the collapse of Imperial received their original capital back with profits, and those redemptions were funded by the new investments that were still coming in. Most investors lost all of their investment. Later on when the administrators took control of Imperial, they estimated that they would only be able to pay back investors at most 5% of their original investment.
The investigation
The SFO accepted the case for investigation in September 2002. At that point the Imperial companies had already collapsed and the administrators - Mazars - were attempting to unravel the financial circumstances of Imperial.
The SFO, with the assistance of Lincolnshire Police, interviewed over 650 witnesses during the course of the investigation and sought evidence from more than 30 countries. This included a special on-line victim reporting system which was piloted to gather information worldwide from known Imperial clients. A Japanese language version assisted victims in that country. Over three million hard copy documents were obtained and over 900 digital items (such as computer hard drives) were reviewed.
All the defendants in this case were charged in June 2006 and, after a series of preparatory hearings and legal argument, the first trial commenced in March 2008 with a single count of conspiracy to defraud on the indictment. Bill Godley had already, in 2007, pleaded guilty to his part in the conspiracy (which could not be published until today). On trial were Jared Brook, Lincoln Fraser and Nicholas Fraser. Their trial concluded in September 2008 with the indication that the jury were unable to reach a decision in relation to the first two defendants. The jury acquitted Nicholas Fraser, who was the financial controller of Imperial and the brother of Lincoln Fraser.
Because the jury were unable to agree verdicts in relation to Jared Brook and Lincoln Fraser in the first trial the SFO then elected to proceed to a re-trial which started on 12 October 2009 and concluded with the jury being discharged on 28 June 2010. During the course of the trial, the prosecution called 60 witnesses. The defendants each gave evidence and were cross-examined extensively by the prosecution. The judge's summing up lasted 11 full or part days at the conclusion of which the jury retired for five full or part days.
Decision on a further retrial
The SFO considered that though there was a realistic prospect of conviction at a further retrial, the courts have made it clear that a second retrial is appropriate only in the most exceptional of circumstances. The convention followed almost invariably is that there should be only one retrial. Richard Alderman decided that this was not one of those very exceptional cases justifying a second retrial and that therefore there should be no further action to bring this case to a further jury
Commenting on the case, Richard Alderman said, "This case was a very complex one with many victims and it was clearly right for us to have taken this case and to have conducted the first retrial. It is very disappointing both for the victims and the defendants that the jury could not reach agreement on a number of the counts on the indictment. I have decided that it would not be right to apply for a second re-trial. Proceedings continue against Mr Godley who will be sentenced for the role he has admitted in this case".
The SFO has considered whether civil recovery against Jared Brook and Lincoln Fraser would be appropriate but has decided that there would be insufficient assets to meet such a claim.
The case represents a long and complicated investigation and a legal process which was challenged at every step by defence teams. The SFO wishes to thank all those persons who assisted with the investigation, and particularly who those witnesses who came forward to give evidence.
The indictment
Count 1: Conspiracy to defraud contrary to common law: Jared Brook and Lincoln Fraser between 1 January 1998 and 30 June 2002 conspired together and with William Godley to defraud investors in investment schemes established, promoted and operated by the Imperial Consolidated Group of companies.
Count 2: As count 1 but between 1 May 2000 and 30 June 2002.
Counts 3: Fraudulent trading contrary to section 458 of the Companies Act 1985: Jared Brook, between 1 May 2000 and 30 June 2002, was knowingly a party to the carrying on of the business of Imperial Consolidated Financiers Limited for a fraudulent purpose, namely defrauding investors in IC Mutual Limited and investors in placement companies established, promoted and operated by the Imperial Consolidated Group of companies.
Count 4: As count 3 but pertaining to Lincoln Fraser.
