The Serious Fraud Office (SFO) has charged Evan Paul Cherry, the sole director of an Auckland investment and financial advisory group, with stealing at least NZ$5 million of his investors' money and making false statements in investor reports.
The SFO has charged Cherry, whose Albany-based firms Investment Solutions Limited, ISL Nominees Limited, Trading Strategies Limited, ISL Strategic Investments Limited, and ISL Strategic Investments 100 Limited received about NZ$9 million from an estimated 175 investors, with seven charges under the Crimes Act. Charges have been laid in the North Shore District Court against the 54 year-old Cherry.
Cherry had initially sought and was granted name suppression, but the SFO says this was lifted last Friday.
It says Cherry's companies advertised as providing returns or finding solutions that “generally outperform the market”. If found guilty, Cherry faces a jail sentence (see further detail below).
"The SFO allege that at least NZ$5 million of these funds (the NZ$9 million total) were not invested in accordance with investment instructions," SFO chief executive Adam Feeley says.
"This case is yet another example of where we are seeing people target family and friends to invest where, we allege, the promises or representations made, bear little relationship to the reality of the investment scheme. We strongly urge the public not to let their personal relationship with someone cloud their judgement as to the merits of an investment scheme," Feeley added.
The Securities Commission, (the predecessor to the Financial Markets Authority) referred this case to the SFO in May 2011, Feeley said, having completed the initial analysis, resulting in an SFO investigation being launched in June last year.
SFO's background to investigation
Evan Paul Cherry commenced his financial advisory career around 1997. From around 2001 to 28 February 2007, Mr Cherry operated his own investment and financial advisory business through the following companies:
• Investment Solutions Limited;
• ISL Nominees Limited;
• Trading Strategies Limited;
• ISL Strategic Investments Limited; and
• ISL Strategic Investments 100 Limited.
The ISL companies received approximately $9 million in funds from an estimated 175 public investors.
Crimes Act offences
Section 220: Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—
(a) to account to any other person for the property, or for any proceeds arising from the property; or
(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.
(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.
(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.
(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.
Section 224: Theft by misappropriating proceeds held under direction
For offences occurring pre October 2003
Every one commits theft who, having received, either solely or jointly with any other person, any money or valuable security, or any power of attorney for the sale of any real or personal property, with a direction that the money or any part thereof, or the proceeds or any part of the proceeds of the security or property, shall be applied to any purpose or paid to any person specified in the direction, in violation of good faith and contrary to the direction, fraudulently applies to any other purpose or pays to any other person the money or proceeds, or any part thereof:
Provided that where the person receiving the money, security, or power of attorney, and the person from whom he receives it, deal with each other on such terms that all money paid to the former would, in the absence of any such direction, be properly treated as an item in a debtor and creditor account between them, this section shall not apply unless the direction is in writing.
Section 242: False statement by promoter, etc.
(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent—
(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or
(b) to deceive or cause loss to any person, whether ascertained or not; or
(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.
(2) In this section, false statement means any statement in respect of which the person making or publishing the statement—
(a) knows the statement is false in a material particular; or
(b) is reckless as to the whether the statement is false in a material particular.
Section 250: False statement by promoter, etc.
For offences occurring pre October 2003
Every one is liable to imprisonment for a term not exceeding 10 years who, being a promoter, director, manager, or officer of any company or body corporate, either existing or intended to be formed, makes, circulates, or publishes, or concurs in making, circulating, or publishing, any prospectus, statement, or account which he knows to be false in any material particular,—
(a) With intent to induce persons, whether ascertained or not, to become shareholders or members; or
(b) With intent to deceive or defraud the members, shareholders, or creditors of the company or body corporate, or any of them, whether ascertained or not; or
(c) With intent to induce any person or persons, whether ascertained or not, to entrust or advance any property to the company or body corporate, or to enter into any security for its benefit.