Two solicitors dishonestly funnelled more than £20m of investors’ money from a legal financing fund into their own pockets, a court 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 2012, allegedly using some of the money to pay for an estate in Cumbria, a personal trainer and football season tickets.
Prosecutors contend that the fund, which was set up to lend money to law firms pursuing no-win no-fee claims, made loans only to Schools’ Preston-based ATM Solicitors – so-called because he used it as ‘his personal cash machine’ – in 2009, the year in which it commenced trading.
Richard Emmett, 47, allegedly received just over £1m through his firm Emmetts Solicitors which later became Ashton Fox Solicitors. The court heard 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.
Schools and Kennedy are charged with fraudulent trading to dishonestly enrich themselves to the detriment of Axiom investors in relation to The Synergy Solution, which the court heard was ‘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 is accused of being concerned in facilitating the use of criminal property in relation to the same sum.
Opening the prosecution case at Southwark Crown Court today, Miranda Moore QC said the Axiom fund was valued at around £120m in 2012 when it was suspended shortly after auditors discovered that Ashton Fox, which owed the fund £60m, would only be able to repay £65,000.
The court heard Axiom marketed to ‘sophisticated investors’ as offering a projected growth rate of between 10-11% a year with an expected case success rate of over 95%. It was sold to investors as lending money to a ‘genuine independent panel of law firms’ to fund ‘vetted cases’ within a 12-month timeframe, jurors were told.
Moore said: ‘What in fact happened was that those that arranged for the loans to be paid out, Mr Schools and Mr Kennedy, made the loans to a very limited number of law firms. In fact, in 2009 loans were only made to one firm, ATM, controlled by Schools – it was his firm.’
She added that ‘later, loans were made to other firms in which he [Schools] held undisclosed interests’, including Ashton Fox and another firm called Bracewell Law.
Moore also said that ‘from as early as 2010’ the Solicitors Regulation Authority was investigating ATM Solicitors, but that this was ‘never disclosed to those independent entities that were regulating the fund’ or investors.
Schools, of Penrith, Cumbria, denies three counts of fraudulent trading, one count of fraud and one count of transferring criminal property.
Emmett, of Grimsargh, Lancashire, denies one count of fraudulent trading and one count of facilitating the acquisition, retention, use or control of criminal property by another.
Kennedy, of Hetton-le-Hole, Tyne and Wear, denies one count of fraudulent trading.
The trial continues.
