Ponzi scheme operator jailed for $17.5 million fraud

A Christchurch man who defrauded his clients of at least $17.5 million through a Ponzi scheme has been sentenced to eight years' imprisonment with a minimum non-parole period of four years on charges brought by the Serious Fraud Office.

Paul Hibbs was sentenced today at the Christchurch District Court. He previously had pleaded guilty to charges of ‘False statement by promoter’, ‘Theft by person in special relationship’, ‘Using forged documents’ and ‘Forgery’.

Mr Hibbs owned and operated Cameron Gladstone Investments Limited and Hansa Limited. Through these entities he provided clients with false investment reports and used their funds for unauthorised activities, which included using the proceeds from sales of clients’ investments to pay other investors. Mr Hibbs also used client money for business expenses, including paying dividends, and for personal purposes.

SFO Director, Julie Read said, “The sentence imposed today reflects the very serious nature of the offending. Mr Hibbs deceived his clients in a number of ways resulting in significant monetary losses. The prosecution of such matters is an important aspect of protecting New Zealand’s reputation as a safe place to invest and do business. People engaged in this sort of misconduct will be prosecuted and held to account.”

The Financial Markets Authority initially referred the matter to the SFO and assisted with the investigation.

FMA Chief Executive, Rob Everett, said, “Investors need to be vigilant about who they deal with and should always check to see if a financial service provider is licensed by us or another New Zealand regulator (such as the Reserve Bank), or the financial adviser is authorised by us. Our website will show which firms or individuals are licensed or authorised by the FMA.”

ENDS

Issued by

Henry Acland
Serious Fraud Office
027 705 4550

Note to editors

Background information

Paul Clifford Hibbs (49) was employed for a number of years as a private banker, dealing with high net worth individuals, buying and selling shares and managing clients’ investment portfolios. He left banking in 2002 and incorporated the investment advisory businesses, Cameron Gladstone Investments Limited, and later, Hansa Limited. Mr Hibbs solicited some of his old banking clients who bought with them their existing portfolios and investments.

Mr Hibbs was not a registered financial services provider.

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 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 with intent—
(a) to induce any person, whether ascertained or not, to acquire any financial product within the meaning of the Financial Markets Conduct Act 2013(external link); 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 whether the statement is false in a material particular.

Section 257 Using forged documents
1) Every one is liable to imprisonment for a term not exceeding 10 years who, knowing a document to be forged,—
(a) uses the document to obtain any property, privilege, service, pecuniary advantage, benefit, or valuable consideration; or
(b) uses, deals with, or acts upon the document as if it were genuine; or
(c) causes any other person to use, deal with, or act upon it as if it were genuine.

(2) For the purposes of this section, a document made or altered outside New Zealand in a manner that would have amounted to forgery if the making or alteration had been done in New Zealand is to be regarded as a forged document.

Section 256 Forgery
(1) Every one is liable to imprisonment for a term not exceeding 10 years who makes a false document with the intention of using it to obtain any property, privilege, service, pecuniary advantage, benefit, or valuable consideration.

(2) Every one is liable to imprisonment for a term not exceeding 3 years who makes a false document, knowing it to be false, with the intent that it in any way be used or acted upon, whether in New Zealand or elsewhere, as genuine.

(3) Forgery is complete as soon as the document is made with the intent described in subsection (1) or with the knowledge and intent described in subsection (2).

(4) Forgery is complete even though the false document may be incomplete, or may not purport to be such a document as would be binding or sufficient in law, if it is so made and is such as to indicate that it was intended to be acted upon as genuine.

(5) Every person is liable to imprisonment for a term not exceeding 3 years who, without reasonable excuse, sells, transfers, or otherwise makes available any false document knowing it to be false and to have been made with the intention that it be used or acted on (in New Zealand or elsewhere) as genuine.

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 two operational teams: the Evaluation and Intelligence team and the Investigations team.

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 2017 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(external link)

The SFO Twitter feed is @FraudSeriousNZ(external link)