Prison sentence: fraud lawyer Timothy Schools
Hundreds of British pensioners have launched a £120 million damages battle after accusing two major investment firms of promoting an infamous fraud.
They allege Friends Provident International (FPI) and Utmost International are ‘turning a blind eye’ to a series of high-risk investments, including a scam that saw an ‘extremely dishonest’ lawyer sentenced to 14 years in prison.
Retirees told Money Mail that they had become suicidal, with retirement dreams in tatters, after putting their money into what they were told were “safe and low-risk” funds they trusted because of the well-respected institutions they promoted.
In fact, most of the investments were risky and, according to the claim, sold by unlicensed and unregulated financial advisors, but were nevertheless approved to use online accounts with both financial giants to assess the condition of their investments.
As an added blow, the retirees say FPI and Utmost often charged them thousands of pounds in management fees even after the value collapsed.
Between 2006 and 2013, people put their savings into investments that were marketed and sold as an “insurance policy” or “bond” by the financial giants, which effectively acted as a vehicle for a range of high-risk funds.
Most investors were approached by word of mouth from independent financial advisors, but were shown corporate literature from the investment giants promoting the funds.
One of these funds was the Axiom fraud, where lawyer Timothy Schools looted £20 million from investors to fund a lavish lifestyle, including the purchase of a £5 million shooting range.
Others include speculative real estate developments that either collapsed or lost significant value.
Both FPI and Utmost, formerly known as Skandia, Old Mutual International (OMI) and Quilter International, now claim in court documents that they were not required to monitor the collapsed funds and have blamed investors and the financial advisers.
But Money Mail has seen a brochure produced by FPI for prospective investors claiming that the company is ensuring that fund managers perform “due diligence” when assessing investment opportunities.
Sold out: Sharon Huyshe’s pension was devastated after they used money from the sale of their Sussex home to invest with Skandia
A similar copy of Skandia stated: ‘We only do business through professional advisers’ who must ‘fully understand’ the products being sold.
The retirees also claim they were told the investment firms were regulated by the City Watchdog, the UK Financial Services Authority (FSA, which has since become the Financial Conduct Authority, FCA). But later they found out that there is no protection because the companies are located in the Isle of Man.
A couple who lost £250,000 went to the Isle of Man Ombudsman only to be told they could not get the money back. They were only offered £200 to make up for Skandia’s poor customer service.
Architect Andrew Walters and his wife Sharon Huyshe have left their dream of retiring in Greece in tatters after using money from the sale of their Sussex home to make the investment. Andrew, 68, has given up his retirement plans and now has to work seven days a week.
Sharon, who lives in Hythe, Kent, says: ‘It destroyed everything. We had to sell the house we bought in Greece, go back to England and go back to work. The money saved from a lifetime of hard grafting is just gone.”
Their advisor promised that the bond they invested in was low risk, but it turned out to be a risky investment that quickly collapsed and cost them a large chunk of their nest egg. But Skandia continued to charge annual fees of around £8,000 a year.
Bob Blackman, the chair of the All-Party Parliamentary Group on Personal Banking and Fairer Financial Services, says the group will look into the matter.
He says, “The well-established, credible Friends Provident and Old Mutual brands in these cases would have played a role in gaining investor confidence, much to their ultimate regret.”
Alan Parry, 72, a retired quantity surveyor, lost £500,000. He invested in various funds in 2012 through OMI, or Skandia as it was then known.
This included £200,000 in Axiom. He says: “OMI and FPI certainly have a duty of care to ensure that the funds promoted on their platforms are genuine and not controlled by criminals.”
Stephen Mitchell, 65, from Surbiton, was ‘absolutely devastated’ when he had to give up his pension and go back to work in insurance after losing £125,000.
This included £10,000 worth of Axiom, both through FPI and OMI.
He says, “I was told it was a guaranteed money maker. I thought the companies would at least do due diligence on the funds.”
The fraudster’s estate: Timothy Schools snatched £20m from investors to fund a luxury lifestyle including buying a £5m shooting range
OMI states in its defense that “it has not conducted… any due diligence with respect to the risk or suitability of … assets” and FPI said it never “implied” that it had done “due diligence” with regarding the assets.
Thailand-based independent financial adviser David Mills, who testified to the plaintiffs’ attorneys, says FPI agreed to work with his firm despite not having a license to operate in Thailand.
He says FPI representatives had told him their products were “rock solid” and that the funds on their platform were approved after appropriate due diligence.
More than 700 plaintiffs have applied for the class action, which is led by Signature Litigation and is expected to come before the Isle of Man courts next year.
FPI claims it only has to follow FCA rules ‘as far as it relates to its UK business’.
Because these products were largely sold outside the UK, FPI believes it acted legally, but is not bound by the FCA.
In most cases, it left the FSA in 2012.
Both Utmost International and FPI declined to comment, but deny any liability.
moneymail@dailymail.co.uk
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