Today, for the first time, we reveal Shawn Richard’s account of the Trio Capital fraud, based on his confession to the Australian Securities and Investment Commission, which was only recently released. This was the document that convinced ASIC to claim the mastermind was an American living in Hong Kong, Jack Flader.
Shawn Richard, one of two men jailed over the Trio Capital fraud, admitted authorising fraudulent transactions and signing fake documents yet told investigators he was merely a foot soldier acting on orders from Hong-Kong-based mastermind Jack Flader.
In a 32-page signed confession, recently released under Freedom of Information laws, Richard gave details of how he divested $26.6 million from Australian superannuation funds into Flader-controlled funds overseas.
He got away with his behaviour and "put into effect Flader's instructions" by falsely presenting himself as the "controller".
The statement shows investigators believed Richard's version that "at all times" he was 'acting under the "ultimate control and instruction of Flader" when he authorised the fraudulent transactions and signed the fraudulent documents, then received money into secret accounts overseas - accounts he benefited from.
When Trio money was sent overseas to be "invested", some of it was fraudulently returned to Australia where it was used for a variety of purposes, according to the statement.
From 2005, money from the Astarra Strategic Fund, a Trio Capital managed investment fund, was earmarked to buy shares in other companies and some used to prop up Trio's failing property and equity funds.
In November 2005 Richard arranged for $6.5 million in ASF funds to be used to buy shares in Yarraman Winery and in return received almost $1.2 million into a Curacao bank account "from which he personally benefited".
Between September and December 2007, when the Australian Conference Association Superannuation Trust (ACAST) wanted to cash out an investment in another Trio-related fund, Richard fraudulently arranged to settle the account by using $3.1 million from ASF funds.
Then in 2008 Richard arranged for $2.1 million from ASF funds to be used by ARP Growth Fund to meet pension payment commitments.
The Statement of Facts formed the case againist Richard when he appeared for sentencing on dishonesty charges before Justice Peter Garling in the NSW Supreme Court in 2011.
Judge Garling found Richard's dishonesty "bespeaks intentional and knowing participation in criminality over a long period for substantial personal gain".
"I am satisfied that this conduct was for nearly all of the four-year period motivated simply by greed. The deceptions in which he engaged, knowing of the dishonesty of his conduct, seem to me to quickly tell against a naive, gullible man caught up, against his better judgment, in a dishonest scheme," the judge said.
Richard was one of three founding Trio Capital directors, along with Cameron Anderson and David Millhouse.
Yet the Australian financial regulator did not take action against the other two.
Trio Capital liquidator PPB identified direct links between all three directors of some of the companies that were appointed as investment managers to various Trio schemes and underlying investments.
"The books and records of Trio Capital do not show that Trio adequately disclosed the above mentioned relationships to unit holders of each scheme," the liquidators found.
Up until the time of PPB's appointment as administrator on December 16, 2009, the value attributed to the various investments were "grossly overstated".
"Since our appointment there has been minimal recoveries from the investments," they said.
PPB, in its report to the 2011 Parliamentary Joint Comittee Inquiry into the Collapse of Trio, said the majority of investments "were with companies connected to or ultimately controlled by parties involved in the establishment of Trio, being Richard, Anderson and Millhouse".
"Every investment has suffered impairment, the majority of which have resulted in nil recoveries."
The three men were directors of Trio Capital's holding company. At the same time they were on the committee which authorised Trio to invest in certain funds -- funds that they themselves managed.
Trio Capital invested about $10 million in two property trusts of which Anderson, Millhouse and Richard were directors in 2004.
The Australian Prudential Regulation Authority says those investments were speculative and illiquid.
In December 2010, the Australian Securities and Investments Commission permanently banned Richard from providing financial services.
Later, he was jailed after pleading guilty to two offences involving dishonest conduct in carrying on a financial services business. He also admitted making false statements about a financial product.
He was released in January this year after serving the minimum two years and six months of his three-year, nine-month sentence.
ASIC has taken no action against Millhouse and Anderson.
In 2013, almost four years after the freeze of Trio Capital, APRA banned Millhouse and Anderson for 10 and 12 years respectively from acting as trustees of a registrable superannuation entity or a responsible officer of a body corporate that is a trustee, investment manager or custodian of a registrable superannuation entity.
These banning orders limit Anderson and Millhouse from being involved in registrable superannuation entities only.
Unless ASIC takes action, both men can continue as directors and managers of companies and/or investment schemes not linked to superannuation entities.
To date, no one has been charged with stealing or fraud relating to the rest of the missing $176 million.
In October 2013, ASIC said that after three years of investigation by itself and the Australian Federal Police, there was insufficient evidence to prove Jack Flader had breached Australian law.
However, its website says Flader was "allegedly the ultimate controller of the Trio group".
"ASIC will provide relevant information relating to Mr Flader to the Australian Federal Police and the Australian Crime Commission," it says.
"ASIC continues to communicate with overseas regulatory agencies in relation to the Trio matter."
ASIC notes that since its investigation started in October 2009, more than 11 people have either been jailed, banned from providing financial services, disqualified from managing companies or have agreed to remove themselves from the financial services industry for a total of more than 50 years.
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