Peter Allan Leonard, former director of Muirpace, a City based commodities firm, was sentenced today at the Central Criminal Court to 3 years 9 months imprisonment for fraud relating to grain investments. He was disqualified from acting as a director for 7 years.
Leonard had previously admitted, on 26 November 1999, at the City of London Magistrates Court to fifteen charges covering fraudulent trading, forgery and false accounting in relation to grain warrants amounting to over £32 million. A Press release was issued by the SFO on that date and the matter was widely reported. For ease of reference the background is repeated below.
Background:
Muirpace
Muirpace Limited and Muirpace Holdings Limited were engaged in the commodities markets. They traded on their own account, on behalf of associated companies, and on behalf of third party clients. Muirpace Limited was a member of LIFFE, the financial and commodities futures and options exchange. It conducted investment business and was regulated by the Securities and Futures Authority ("SFA").
Peter Allan Leonard
Peter Leonard (50), of Chislehurst, Kent was one of the founders (in 1981) and the principal driving force behind the Muirpace businesses. He was the chairman of Muirpace Holdings and the sole executive director of Muirpace Limited. In 1987, control of the companies passed to Thompson International Limited ("Thompson") though Leonard remained a shareholder, a director and in charge of business operations.
Grain Warrants
Leonard encouraged Thompson group companies and his clients to invest in physical commodities, specifically wheat, barley or other grains. The investment instruments were grain warrants. The grain industry raises finance through the use of these warrants. These are bearer documents showing the amount of grain to which title had been purchased. A warrant is normally for a unit of 100 tonnes of grain. Investors buy warrants for a specified period and either sell them back to the issuer or sell them on the market. These arrangements are known in the industry as "cash and carries". In return for holding grain warrants for a specified period, investors receive a return usually calculated by reference to interest rates.
Fraud revealed
In November 1997, Peter Leonard told Thompson, the principal owner of Muirpace, that in order to conceal losses of around £30 million he had traded fraudulently "recycled" grain warrants and had also forged warrants which he then traded. The catalyst for this admission was an instruction to Leonard from Thompson to liquidate all the grain warrants held by the Thompson group companies on the next maturity date (1 December 1997). However they were worthless. They were forged, not backed by grain, so no assets were available to liquidate the positions. Leonard had placed the warrants in safety deposit on behalf of Thompson in a London bank. Consequently the holders would not normally see them.
A subsequent examination of the Muirpace accounts determined the total loss to be £32½ million - which remains largely unrecovered by the investors. The principal loser was the Thompson group of firms to the sum of £28½ million. The other loser was Kris Fund III Limited, a private investment fund, to the sum of £4 million.
Investigation
At the same time as his admission to Thompson, Leonard's employer (ie Muirpace) notified the regulator, SFA, of his fraudulent actions. The matter was subsequently referred by the SFA to the Serious Fraud Office which, in conjunction with the City of London Police, opened its investigation in June 1998.
The investigation uncovered 127 forged warrants for a total of just over 300,000 tonnes of wheat. These purport to have been issued by Allied Grain Limited, a bona fide grain supply company based in Norfolk, but were in fact produced by Leonard. He forged the signature of an Allied Grain executive and used rubber address stamps that he had purchased, pretending to be of Allied Grain, with three false addresses. One address was a private house in Lincolnshire that Leonard used for mail forwarding purposes. The other two were premises with real grain silos but with which Leonard had no legitimate connection.
Leonard claimed that he had forged the warrants in order to conceal trading losses at Muirpace and that he had been doing this since 1985. Enquiries into the possibility of personal benefit continue to be made.
SFO Press Office contacts:
David Jones, Head of Communications
Caroline Paul, Press Officer
Rojina Roe, Press Administrator
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