Major insurance companies were defrauded by an independent financial advisor (IFA) into paying over £1 million in up-front commissions on fake policies a trial verdict confirmed today.
Philip Bates (d.o.b. 23/10/72) who operated from offices in Bedford was found guilty of fabricating business to maximise his commissions and was jailed by HHJ Ainley at Croydon Crown Court for five years and disqualified from acting as a company director for seven years. Confiscation proceedings have been postponed to a later date.
The fraud involved Mr Bates' running of his businesses Anderson Owen Ltd and Transtone Consulting Ltd (trading as Hammond Direct) in 2004. It concerned the "sham sale" by Mr Bates of the financial products of 17 insurance companies to over 100 customers.
Many of Bates' customers were unaware that financial products had been taken out in their names. Others were embroiled in a scheme whereby products were purchased not because they were needed or required but because Bates wanted the up front commission.
The two businesses subsequently went into liquidation and Anderson Owen ceased to be authorised by the Financial Services Authority. Shortly before the frauds came to light Bates left the country.
Arrangements between insurance companies and IFA's provide that if a policy is cancelled before a certain number of premiums have been paid the insurance companies are entitled to a pro rata "clawback" of commissions paid. However, when the insurance companies tried to clawback monies paid over the company accounts were empty. In fact, as the commissions had come in they had been swiftly transferred by Bates to his personal bank accounts first in Jersey, then in Guernsey, finally ending up in an account in Monaco in the name of Acorn Commercial Ventures Ltd for which he had power of attorney.
During the early phase of the investigation Bates' assets were traced and a restraint order was issued freezing the Monaco account in early 2006.
The victims were the product providers who paid out undeserved commission on policies which were not wanted or genuinely required. Customers who bought the policies were also victims in that policies were taken out without their knowledge and consent causing them financial loss.
Investigation
Following an initial assessment the matter was referred to the Serious Fraud Office who, in conjunction with the Economic Crime Department of City of London Police commenced a joint investigation. In March 2006 properties in Bedford and Hitchin were searched. On the same day searches were also carried out in Barcelona and Lubeck (Germany) with the assistance of police in those countries. Two persons were charged in June 2007 and the trial opened on 3 November 2008. The second defendant was acquitted.
Anne-Marie Ottaway Acting Case Controller at the SFO said:
"The proper sale of financial products depends upon honesty, integrity and trust. Mr Bates systematically and dishonestly abused that trust to satisfy his own ends. In his dealings both with his customers and the insurance companies with whom he operated he totally failed to observe the high personal standards the industry and the public have a right to demand and expect."
The offences
Fraudulent Trading, contrary to s458, Companies Act 1985
Philip Bates was knowingly party to the carrying on of the businesses of (1) Anderson Owen Ltd and (2) Transtone Consulting Ltd, for a fraudulent purpose, namely to dishonestly induce providers to pay commission on the purported sale of financial products.
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