Three years imprisonment for defrauding finance company

Three years imprisonment for defrauding finance company of $3.7 Million

Alan Edwards Wycherley was sentenced in the Wellington District Court on 2 December 2010 to three years imprisonment and ordered to pay $30,000.  The sentence resulted from a conviction on one charge of conspiracy to use documents to defraud laid by the Serious Fraud Office (SFO).  The charge related to $3.7 million of advances made by Lumley Finance Limited to Mr Wycherley’s company Debt Relief (NZ) Limited.  Mr Wycherley is a 52 year old Waikanae resident.
 
SFO Chief Executive, Adam Feeley, said “SFO is pleased with the delivery of a custodial sentence.  This continues the clear message from the Courts as to the seriousness of white collar crime.”

Mr Wycherley had previously pleaded guilty partway through a three week trial held in September 2010.  Mr Wycherley was also convicted of running a company while prohibited and illegally signing shareholder forms.

From June 2004 through to the July 2006 Mr Wycherley and Mr Mackie, a director and employee of the company, submitted 1,030 loan applications to Lumley Finance on behalf of purported clients of Debt Relief (NZ) Limited. The applications were falsified by Mr Mackie or Mr Wycherley and none of the named borrowers were aware that they had entered into a loan agreement with Lumley Finance.   The proceeds of later loans were used to repay the earlier loans, resulting in a net shortfall of $1,248,961.49. 

Mr Mackie had pleaded guilty earlier this year and was sentenced to 10 months home detention, community work and ordered to pay $10,000 in reparation.

For further information

Adam Feeley
Chief Executive
Serious Fraud Office
Phone 021 333 539

Note to editors

Case summary

Alan Edwards Wycherley set up Debt Relief (NZ) Limited (‘Debt Relief’) in February 2004. Debt Relief was a budgeting and debt management service business based in Paraparaumu. Keith Ross Mackie was installed as director because of Mr Wycherley’s bankruptcy. At all relevant times Mr Wycherley controlled the activities of Debt Relief.

Members of the public who found themselves in financial difficulties would contact Debt Relief’s budgeting consultants for help with debt management. Debt Relief usually kept a file for each client. Clients paid an agreed sum of money from wages or WINZ benefits to Debt Relief for its services, initially at $23.00 per week, rising to $29.00 per week.

Lumley Finance Company (NZ) Limited (‘Lumley’) has a product known as “Fee Funder” that enables professional service providers (e.g. accountants, tax consultants) to offer their clients loans from Lumley to finance their fees. Loans are advanced after the professional fees have been incurred and are paid direct by Lumley to the service provider. The client signs a loan agreement with Lumley in terms of which the client agrees to repay the loan to Lumley in instalments, with interest.

On 3 June 2004 Mr Mackie, as Director of Debt Relief, applied as a service provider to become an authorised distributor under the Fee Funder scheme.  Lumley approved the application and entered into a Fee Funder facility agreement with Debt Relief.  Debt Relief was liable for clients’ loans where the clients default on their individual loan agreements.

From 10 June 2004 through to the end of 28 July 2006 the Mr Mackie and Mr Wycherley, working together, submitted mostly by facsimile 1,030 applications for Fee Funder loans to Lumley Finance. All 1030 loan applications forms are the subject of the conspiracy charge.

None of the named borrowers completed the application forms or were aware they had entered into a loan agreement with Lumley Finance.  The application forms had been signed by either Mr Mackie or Mr Wycherley using the “clients” name. 

Some purported applicants were existing clients or had been clients of Debt Relief. Others had never heard of Debt Relief and had never used the company’s services; others had made contact with Debt Relief but never became a client of Debt Relief.  Some names may be wholly fictional.  The false applications were accompanied by false invoices that had been generated by the Mr Wycherley.

Of the 1030 Fee Funder loan applications submitted 1017 were approved.  Debt Relief received ‘loan funding’ from these amounting to $3,757,120.  Later advances were used to repay the earlier loans and a net shortfall of $1,248,961.49 resulted. 

After Depositions Mr Wycherley pleaded not guilty and was remanded to appear at the Wellington District Court for trial.  His trial commenced on 20 September 2010 and was expected to last three weeks. 

On 27 September 2010 after hearing oral evidence (from 15 prosecution witnesses) and seeking a sentencing indication from the trial judge, Mr Wycherley pleaded guilty to one global charge of conspiracy to use documents.  The maximum penalty for the offence is 7 years imprisonment.  Mr Mackie had previously pleaded guilty to one global charge of conspiracy to use documents.  On 26 January 2010 Mr Mackie was sentenced to 10 months home detention, 150 hours community work and ordered to pay $10,000.00 in reparation.

The role of the Serious Fraud Office

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud 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 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…”

The SFO’s Statement of Intent 2010-2012 sets out the SFO’s three year strategic goals and performance standards.  It is available online at: www.sfo.govt.nz(external link)