Investment road-show fraudster Kevin Foster has been remanded in custody today after being convicted of defrauding investors of millions of pounds through his various schemes, collectively called KF Concept. Kevin Foster attracted £34 million from investors by promising very high returns on a collection of gambling and network marketing activities. Little of those funds were used for such activities, although millions were poured into an off shore pyramid scheme. Meanwhile, Foster paid himself and his close associates substantial incomes and used KF Concept money to fund his extravagant lifestyle.
After a seven-week trial at Harrow Crown Court, the jury found fifty-one year old Foster guilty of unauthorised investment activity, of deliberately concealing facts from investors and of stealing investors' funds.
The jury heard that Foster had used investors' funds to maintain a high lifestyle for his family, purchasing a farm in Kent for over £600,000 and fitting it with a swimming pool, hot tub, exotic animals, and Koi carp breeding pools. He spent over £700,000 on motor vehicles. He bought other properties, and paid off substantial personal judgements debts, serviced mortgages and credit cards, and withdrew almost £3 million in cash during the course of the schemes.
SFO Director commented: "I am very pleased with this verdict. This was a very complex investigation and the SFO was determined to bring justice for the many victims who lost their hard earned savings to this Ponzi scheme. I would like to thank colleagues from Kent Police and the FSA who helped us with our investigation".
Background
Fifty-one year old Foster started initially on a small scale in 2001, recruiting from work colleagues. He offered them a five to one return for a share in a football betting scheme. The following year, the scheme was given the title 'Football League Gaming Scheme'. Earlier participants, on being paid out by the defendant, were encouraged to roll over their winnings and also further invest in Fosters' next scheme. The operation grew more elaborate with each new scheme, with early participants being appointed as incentivised Team Leaders to bring in more investors.
From 2002, the schemes were collectively titled the "KF Concept". In 2003 this name was dropped and the name "Phase 9" was substituted by the defendant following negative publicity.
Foster promoted and expanded membership primarily by holding road shows at hotels and conference facilities across England, Scotland and Wales. These were lively spectacles, with Foster appearing on stage to loud music and cheering. The highlight of each event was that participants had the possibility of their name being pulled out of a hat and having their money paid out early or doubled, or winning a gift such as a car, or the loan of a Ferrari Spyder, with Foster paying out money gratuitously to 'deserving' cases.
The pay outs where designed to promote confidence that the scheme was viable. Many investors initial scepticism was dispelled when they saw or heard that fantastic returns were being paid out. They believed the schemes must work and encouraged family and friends to invest.
His liability on actively encouraging or requiring roll-overs from scheme to scheme increased exponentially. It is estimated that Foster would have needed to generate over £250 million to meet the accumulating expectations.
"Planline"
The largest portion of funds was applied by the defendant to an illegal overseas pyramid selling scheme called "Planline", run purportedly by a Cayman Islands registered company called Infocus International, which had bank accounts in Switzerland.
Infocus International claimed to be an internet-based art dealership, but the pieces of 'art' were valueless copies of paintings or photographic prints. They were a front for a pure money tree or pyramid scheme. Like all pyramids without a value and product, it was bound to fail without continual and exponential new investment. Only new money could provide the returns for earlier investors, yet Foster ignored public warnings and legal advice, and applied millions of investors' money attempting to position himself in a pyramid scheme made up almost entirely of those investors funds. At the same time he concealed Planline from participants, calling the investment 'Phase 9' and expelling Team Managers who questioned the scheme.
Up to £12 million was paid into Planline, with only £1,703 being returned.
The reality was that the whole Concept was an insolvent Ponzi scheme. Foster admitted to one Manager that he was "robbing Peter to pay Paul". Throughout it all, Foster maintained a high profile through the media, road shows, charitable donations, and sponsoring local teams and sportsmen However, his conduct was dishonest from the start and his road shows were riddled with claims such as:
- "The scheme makes its money from gambling wins and network marketing"
- "The scheme is worth £203 million in the bank"
- "I'm making about £28.50 from every £1"
- "One of my networks is making me about £1.5 million a month"
- "This scheme has got 50,000 people in it".
These claims were simply false. There was no £203 million in any bank. Furthermore, Foster undertook proportionately little gambling, and although he had some highly publicised wins, he consistently lost each year. In total over a million pounds was lost in gambling activity.
Similarly, only a relatively minor proportion of participants' funds were applied towards so called "network" or "multi level" marketing schemes, with negligible returns.
Investigation/Proceedings
Acting on information received, in January 2004 Kent Police and the Financial Services Authority ("FSA") interviewed Foster and searched his home in Kent. By the following month, when KF Concept's activities were halted by the FSA, some 8,500 participants had invested £34 million with the defendant.
The FSA obtained a freezing order and petitioned for Foster to be adjudged bankrupt. The case was referred to the SFO, who together with Kent Police conducted an investigation culminating on Foster being charged in May 2007.
He was charged with 8 offences under the Financial Services and Markets Act 2000 ("FSMA") and 8 offences under the Theft Act 1968.
A trial began at Harrow Crown Court on 18 January 2010 before HHJ Nic Madge and the jury retired to consider its verdict on 8 March 2010.
Foster was found guilty today on all 8 counts under the Financial Services and Markets Act 2000 and 6 of the Theft counts, relating to Foster's use of funds to purchase various properties and cars, and service his own extensive debts and civil judgments against him.
The jury found Foster not guilty on one count of Theft relating to £220,000 found at his address and could not reach a verdict on a further Theft count relating to the Ferrari Spyder.
The case has been adjourned to the 16 April 2010 for pre-sentence reports and psychiatric reports, with Foster having been remanded in custody until that date.
The Serious Fraud Office extends it appreciation for the patience of the many witnesses, former scheme members and managers, as well as former and current professionals from the FSA and Police who assisted during the trial.
Notes for editors:
1. The Serious Fraud Office is a government department responsible for investigating and prosecuting serious and complex fraud. The SFO is headed by the Director (Richard Alderman) who exercises powers under the superintendence of the Attorney General. These powers are derived from the Criminal Justice Act (1987).
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