Five people have been jailed for a total of nearly 18 years for their involvement in a complex London-based boiler room scam that resulted in £2.8m losses, in a coup for the UK markets watchdog that prosecuted the case.
The Financial Conduct Authority brought the criminal prosecution, its second-largest in terms of the volume of evidence seized, after carrying out a probe into five different boiler room companies, one of which claimed to be “one of the UK’s largest wealth advisory firms”.
A sixth defendant Michael Nascimento, a former bouncer described by the FCA as the “controlling mind, instigator and the main beneficiary of the fraud”, will also be sentenced at Southwark Crown Court next week.
Boiler rooms are unauthorised brokerages that use cold-calling and other high-pressure sales tactics to sell worthless or overpriced investments to unsuspecting members of the public.
The FCA alleged that between July 2010 and April 2014 members of the public were persuaded to invest in a company that owned land on the island of Madeira. Investors were told the land — and therefore the company’s shares — would increase in value to give returns of as much as 228 per cent, but none were ever paid. More than 170 investors lost money in the scam.
The court found the defendants guilty of offences of conspiracy to defraud, fraud, money laundering and perverting the course of justice, as well as breaches of markets legislation.
The case comes as the FCA has sought to flex its muscles as an investigator and prosecutor of financial crime and stamp out increasingly sophisticated boiler room fraud. During “Operation Tidworth”, as the case is dubbed, prosecutors found that defendants had forged documents under the name of the Four Seasons and Hilton Hotels as part of conning investors into thinking the hotel chains were interested in buying the Madeira development, for example.
Still, at £2.8m, the scale of the losses is small compared with other foiled boiler room scams targeting UK investors from overseas.
Senior broker Charanjit Sandhu was sentenced to five and a half years’ imprisonment. Hugh Edwards and Stuart Rea, who both recruited sales brokers, were sentenced to three years and nine months’. Jeannine Lewis, Mr Nascimento’s personal assistant, received two and a half years’ while Ryan Parker received two years.
“These fraudsters callously targeted investors who were often elderly and vulnerable, lying to them to get them to part with significant sums of money,” said Mark Steward, the FCA’s executive director of enforcement and market oversight. “Despite efforts to conceal and destroy evidence, the FCA, in one of its largest-ever investigations, was able to ensure that these criminals faced justice and ended up behind bars.”
Mr Steward added that the regulator was “determined” to recover as much money as it could from the defendants for investors under proceeds of crime legislation.
The trial judge, His Honour Judge Hehir, said that “some victims have lost everything they had”, adding that “those who commit these offences cannot expect anything but firm punishment”.
