7 years and 5 months sentence for deceiving B’On investors

Seven years and five months sentence for deceiving B’On investors

Jacqueline Bradley (59) has been sentenced to seven years and five months' imprisonment at the Auckland District Court today.

Mrs Bradley was found guilty by a jury in September of 75 Crimes Act charges she faced as a result of a Serious Fraud Office (SFO) prosecution.

Mrs Bradley was a director of B'On Financial Services Ltd (B'On) which she ran with her late husband. B'On sought funds from clients on the pretext of investing in various funds they had established both in New Zealand and offshore.

However, the money paid to B'On for investment was not used in accordance with the requirements of their clients. Instead it was used to make repayments to other investors, and to fund the personal lifestyle of the Bradleys through their Family Trust.

Between April 2003 and November 2009, the offending totalled $14.4 million (plus an additional AUD$840,000 from Australian investors).

Acting Chief Executive of the SFO, Simon McArley, welcomed the sentence saying, "B'On investors based their investments on a degree of trust and affinity towards Mrs Bradley. The scheme cost some investors their life savings. This is an unfortunate reminder of the danger of making investment decisions based on trust alone."

This case marks the third prosecution involving an affinity fraud by financial advisors completed by the SFO in the last three months. Offending across these cases amounted to almost $21 million.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Background to investigation

Jacqueline Bradley and her late husband Michael Bradley established B'On Financial Services Ltd on 20 April 1998 as joint directors and equal shareholders. They acted as financial advisors and investment managers. Prior to this they operated under a number of different entities.

B'On was placed into voluntary liquidation on 22 December 2009.

Affinity fraud explained

An affinity fraud can take many forms but most commonly involves an investment scam where the fraudster is, or purports to be, a member of a particular identifiable group. This can include ethnic minorities, religious groups or individuals within a professional discipline.

Key to the crime is that the fraudster will exploit the trust and common bond that exists within such a group to deceive members into an investment scheme or other business proposition that they might not otherwise have accepted but for their knowledge and trust of the individual promoting the investment.

Often the victims of such fraud are slow to report any anomalies to law enforcement authorities because of their reluctance to undermine social cohesion with the group. Commonly they will seek to come to some arrangement within the group, and the fraudster amongst them will continue to assure investors that their investments are secure but the subject of some technical or administrative problem in being repaid.

Messages to the public on how to minimise the risk of being the subject of such a fraud include:

1. Thoroughly check every fact and figure, and do not believe anything simply because the person making the statements is known to you;
2. Be greatly suspicious of out-of-the-ordinary returns. Quick or very consistent returns on investment are classic signs of fraud;
3. Get things in writing. Fraudsters don't like putting things in writing for fear of subsequent liability.
4. Be wary of people who claim to know you by way of a third party or via social media. A social connection, real or claimed, is no substitute for a relevant professional qualification to provide financial advice.

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 222 Theft by person required to account
(Pre-October 2003 amendment)
Every one commits theft who, having received any money or valuable security or other thing whatsoever on terms requiring him to account for or pay it, or the proceeds of it, or any part of such proceeds, to any other person, though not requiring him to deliver over in specie the identical money, valuable security, or other thing received, fraudulently converts to his own use or fraudulently omits to account for or pay the same or any part thereof, or to account for or pay such proceeds or any part thereof, which he was required to account for or pay as aforesaid:

Provided that if it is part of the said terms that the money or other thing received, or the proceeds thereof, shall form an item in a debtor and creditor account between the person receiving it and the person to whom he is to account for or pay the same, and that such last-mentioned person shall rely only on the personal liability of the other as his debtor in respect thereof, the proper entry of the amount of the money or proceeds or any part thereof in that account shall be a sufficient accounting for the amount so entered; and in such case no fraudulent conversion of the amount accounted for shall be deemed to have taken place.

Section 228 Dishonestly taking or using document
Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration,-
(a) dishonestly and without claim of right, takes or obtains any document; or
(b) dishonestly and without claim of right, uses or attempts to use any document.

Role of the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO operates three investigative teams:

• Fraud Detection & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.

The SFO operates under two sets of investigative powers.

Part I 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 II 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..."

The SFO's Annual Report 2011 sets out its achievements for the past year, while the Statement of Intent 2012-2015 sets out the SFO's three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz