Jail time for Ponzi involving friends and investors

Published

Shane Richard Scott has been sentenced to four years, eight months' imprisonment for operating a Ponzi scheme, in a prosecution by the Serious Fraud Office (SFO).

Mr Scott appeared in the Auckland High Court today.

In September he pleaded guilty to four charges of ‘Obtaining by deception’, 20 charges of ‘Theft by person in special relationship’, one charge of ‘Using document with intent to defraud’ (for offending prior to 1 October 2003) and two charges of ‘Obtaining by false pretence’ (for offending prior to 1 October 2003).

Mr Scott operated a Ponzi scheme with no direct evidence of any legitimate investments.

Mr Scott had some friends and associates who invested with him over a number of years and some who were relatively short term. The long term investors believed he had been working on various overseas investments. The short term investors believed they would receive high returns in relation to property developments and exporting/importing deals.

The total of Mr Scott’s offending was approximately $5.4 million.

SFO Director, Julie Read said, “A Ponzi scheme works by using the money provided by later investors to pay out the earlier investors. There was never an intention to invest the money as promised and inevitably the scheme falls over when the new investors’ money is insufficient to pay out ‘investments’ that have fallen due.”

ENDS

Issued by

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Background information

Mr Scott built up trust with some investors over a long period of time (over a decade for some), and as a result of Mr Scott’s alleged offending, they have lost significant amounts of money. Some of the short term investors received their money back from Mr Scott, but only after extended delays and excuses.

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 240 Obtaining by deception or causing loss by deception
(1) Every one is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right,—
(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or
(b) in incurring any debt or liability, obtains credit; or
(c) induces or causes any other person to deliver over, execute, make, accept, endorse, destroy, or alter any document or thing capable of being used to derive a pecuniary advantage; or
(d) causes loss to any other person.

(1A) Every person is liable to imprisonment for a term not exceeding 3 years who, without reasonable excuse, sells, transfers, or otherwise makes available any document or thing capable of being used to derive a pecuniary advantage knowing that, by deception and without claim of right, the document or thing was, or was caused to be, delivered, executed, made, accepted, endorsed, or altered.

(2) In this section, deception means—
(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and—
  (i) knows that it is false in a material particular; or
  (ii) is reckless as to whether it is false in a material particular; or
(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or
(c) a fraudulent device, trick, or stratagem used with intent to deceive any person.

Charges for offending prior to 1 October 2003
Section 229A Taking or dealing with certain documents with intent to defraud
Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to defraud, -

1. Takes or obtains any document that is capable of being used to obtain any privilege, benefit, pecuniary advantage, or valuable consideration; or

2. Uses or attempts to use any such document for the purpose of obtaining, for himself or for any other person, any privilege, benefit, pecuniary advantage, or valuable consideration.

 Section 246 Obtaining by false pretence
1. Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to defraud or cause loss to any person by any false pretence, causes or induces any person to execute, make, accept, endorse, or destroy the whole or any part of any valuable security, or to write, impress, or affix any name or seal on any document in order that it may afterwards be made or converted into or used or dealt with as valuable security.

2. Every one who, with intent to defraud by any false pretence, either directly or through the medium of any contract obtained by false pretence, obtains possession of or title to anything capable of being stolen, or procures anything capable of being stolen to be delivered to any person other than himself, is liable –

3. To imprisonment for a term not exceeding 7 years if the value of the thing so obtained or procured exceeds the sum of [$300]:

4. To imprisonment for a term not exceeding one year if the value of the thing so obtained or procured exceeds the sum of [$100] and does not exceed the sum of [$300]:

5. To imprisonment for a term not exceeding 3 months if the value of the thing so obtained or procured does not exceed the sum of [$100].

About the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act.

The SFO is the lead law enforcement agency for investigating and prosecuting serious or complex financial crime, including bribery and corruption.

The presence of an agency dedicated to white collar crime is integral to New Zealand’s reputation for transparency, integrity, fair-mindedness and low levels of corruption.

This work contributes to a productive and prosperous New Zealand and the SFO’s collaborative efforts with international partners also reduce the serious harm that corrupt business practices do to the global economy.

The SFO has three operational teams; the Evaluation and Intelligence team along with two investigative teams.

The SFO operates under two sets of investigative powers.

Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.” 

Part 2 of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…” 

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:

  • the suspected nature and consequences of the fraud and/or;
  • the suspected scale of the fraud and/or;
  • the legal, factual and evidential complexity of the matter and/or;
  • any relevant public interest considerations.

The SFO’s Annual Report 2016 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO’s strategic goals and performance standards. Both are available online at www.sfo.govt.nz

The SFO Twitter feed is @FraudSeriousNZ