A solicitor accused of dishonestly funnelling nearly £20m from a legal financing fund into his own pocket was ‘making money hand over fist’ while investors in the scheme ‘lost everything’, jurors heard today.
Timothy Schools, 61, is said to have received ‘just over £19.5m’ from the Cayman Islands-registered Axiom Legal Financing Fund before it collapsed in October 2012, shortly after auditors discovered that a law firm which owed the fund £60m would be able to repay only £65,000.
Southwark Crown Court has previously heard that Axiom, which was set up to lend money to firms pursuing no-win no-fee claims, made loans only to Schools’ Preston-based ATM Solicitors in 2009, the year it commenced trading. Prosecutors say ATM Solicitors was given its name because Schools used it as ‘his personal cash machine’, however Schools last month said the name was chosen in order to attract clients and that the fund was designed to fill ‘the big black hole in the market’ after access to legal aid was reduced.
Schools allegedly used some of the money to pay for an estate in Cumbria, a personal trainer and a £45,000 corporate box at Blackpool FC’s home ground – which he has told jurors was a business expense for the purpose of corporate hospitality.
Prosecutors have also said that Schools began ‘hiding the ill-gotten gains’ shortly after he was contacted in July 2012 by David Marchant, the owner and editor of investigative journalism website Offshore Alert, because he ‘could see the writing was on the wall’.
His co-defendant Richard Emmett, 49, allegedly received just over £1m through his firm Emmetts Solicitors, which later became Ashton Fox Solicitors. Jurors have been told that this firm was ‘Emmetts plus ATM’ after it bought the latter at an allegedly ‘inflated’ value of £3.5m in 2011.
Former financial adviser David Kennedy, 69, is accused of receiving over £5m, some of which he is alleged to have used to buy property in the Swiss Alps, as well as in Tenerife and Hull.
Miranda Moore QC, for the Serious Fraud Office, said today that Axiom investors ‘lost everything’, while the collapse of the fund meant that ‘thousands of claimant clients got nothing'.
‘The failure of the fund was not simply down to a twist of fate or a bit of over-enthusiastic journalism by David Marchant,’ she added. ‘It was down to these three men.’
In her closing arguments to the jury, Moore said that Axiom investors ‘may seem to you like faceless individuals who probably have a lot of money in the first place, but that does not mean to say they are entitled to be defrauded’.
She told jurors to ‘put yourself in the position of somebody who is going to invest in the fund’, adding: ‘This was a scheme, on the face of it, that could not lose money for the investors – every risk had been catered for.
‘If you were an investor, no matter how sophisticated or unsophisticated you were … you would have little doubt that this was a win-win,’ Moore said. ‘The reality, of course, was very different.’
Moore said the defendants had been ‘wholly dishonest – sometimes it was by being misleading, sometimes it was by leaving things out … and sometimes it was deliberately hiding things from those who were interested’, adding: ‘Those are all species of an underlying dishonesty.’ She concluded: ‘If you are put in charge of other people’s money [or] a part of someone else’s life, like dealing with their court case or both, you must take on the responsibilities that go with it and you must act with integrity and with honesty and these defendants – all in their various ways – failed to do that.’
Schools – of Penrith, Cumbria – and Kennedy – of Grimsargh, Lancashire – are charged with fraudulent trading to dishonestly enrich themselves to the detriment of Axiom investors in relation to The Synergy Solution Limited, ‘the first business’ they used to authorise loans to law firms.
Schools also faces one count of fraud for allegedly abusing his position as Axiom’s investment manager through his control of Cayman Islands-registered Tangerine Investment Management Limited, by authorising an agreement between Axiom and Ashton Fox for his own personal benefit.
He faces two further counts of fraudulent trading: one for allegedly carrying on the business of ATM Solicitors for a fraudulent purpose and a separate count along with Emmett, both of whom were solicitors at the relevant time, in relation to funds loaned to Emmetts and then Ashton Fox.
Schools is also charged with transferring criminal property in relation to just over £1.1m of alleged criminal proceeds, while Emmett – of Hetton-le-Hole, Tyne and Wear – is accused of being concerned in facilitating the use of criminal property in relation to the same sum.
The trio deny all the charges and their closing arguments are expected to be made later this week, with Judge Martin Beddoe likely to conclude his summing up on Monday.
The trial continues.
