Britons operating in Prague served NY summons over ‘Ponzi scheme’

Alleged fraudster says charges against MMS are unjust: ‘at no point has any money been lost, embezzled, stolen or anything like that’

Brian Kenety 20.12.2012

Two UK nationals accused of helping run a “Ponzi scheme” that defrauded at least 50 investors out of more than $16.5 million — while they were working for a Dubai-based financial advisory — have established Prague-based property services businesses and are also said to be working here as independent financial advisors (IFAs).

According to a New York Supreme Court summons (Index No. 651489/2010) dated April 18, Britons Stephen White and Martin Kinsey are among the defendants in the fraud case, who are alleged to have knowingly cheated clients by advising them to invest into funds controlled by Montague Morgan Slade (MMS) — a company that, apart from its “virtual” office in New York City’s financial district, does not exist and never made investments on clients’ behalf. ‘[There] is no MMS beyond the Wall Street virtual office ... MMS is in fact nothing more than a Ponzi scheme.’

“The key over-arching fact that must be understood in order to understand the MMS enterprise is that there is no MMS beyond the Wall Street virtual office,” according to a 194-page supplemental complaint to the summons. “MMS is in fact nothing more than a Ponzi scheme.”

A Ponzi scheme is a fraudulent investment operation similar to a classic pyramid scheme, that pays returns to separate investors from their own money or money paid by subsequent investors — and not from any actual profit earned by the organization.

Both types of frauds require an ever-increasing flow of money from investors to keep the schemes going, but in a Ponzi scheme, the fraudsters interact with the victims directly, whereas in a pyramid scheme, those who recruit additional participants benefit directly.

The complaint alleges that the MMS scam ran from 2005 to 2010 and was masterminded by UK nationals Anthony Heald and Gordon Spedding and US national Michael Brown, who set up MMS. It says that both White and Kinsey, who brought investors into the fund, also knew they were engaged in fraudulent business, and further names two businesses founded by White (ExPat Solutions Group and a subsidiary, Emirates FX) as defendants. ‘In reading the prospectuses for MMS’s various funds, it is easy to forget that there is no fund, there are no files, there are no investments; it is all a sham...’

“In reading the prospectuses for MMS’s various funds, it is easy to forget that there is no fund, there are no files, there are no investments; it is all a sham created by Brown, Heald and Spedding using MMS’s sham Wall Street office in order to cause investors to transfer money to bank accounts in the name of MMS entities but controlled by Brown, Heald and Spedding for the sole purpose of funding the scheme and stealing the investors’ money,” the complaint reads.

Heald is currently facing charges in Winchester Crown Court, Britain, for, inter alia, money laundering relating to a $15 million theft from Commerzbank in Germany; according to the complaint, he and Brown have worked together on fraudulent schemes for over a decade and also stole money from investors in a number of US states (Utah, California, Nevada). Spedding — a former police officer from northeastern England — is believed to be hiding from the police in the United Arab Emirates, and using a passport issued under an assumed name.

Those accused in the MMS case have 30 days to answer the claims, according to the New York Supreme Court summons, addressed to White and Kinsey in care of the following businesses in Prague:

Star Capital Finance
ExPat Solutions Group
c/o Star Capital Finance
Emirates FX (a subsidiary of ExPat Solutions Group)
c/o Star Capital Finance
European Reality
River Diamond Apartments

The plaintiffs, most of whom are British, Australian, South African or Indian nationals resident in Dubai (United Arab Emirates), are seeking damages arising out of “breach of contract, common law fraud, racketeering, conversion and unjust enrichment” and charge that the defendants “working in concert, used false and misleading statements” to solicit investment in MMS and various entities it controlled “but then rather than making the promised investments, diverted the investments … and then ultimately refused to redeem them on demand.”

Guy Coghlan (plaintiff)

One of the plaintiffs, UK national Guy Coghlan, who according to the complaint invested nearly $270,000 into an MMS hedge fund (the “1095 fund”) on the advice of Stephen White, told Czech Position that he and other investors decided to take legal action a few months after White “fled Dubai” in May 2010 and had stopped communicating entirely with his old clients — who had long before stopped believing his and Kinsey’s excuses as to why MMS had not paid out at least partial redemptions on their investments.

“He kept saying he was over in Prague, trying to set up an office of ExPat Solutions and that this was taking up a lot of his time ... and then bing, he was gone,” Coghlan said in a telephone interview from Dubai. “We contacted Stephen White and Martin Kinsey and said we believed MMS was a fraud, that we’d discovered a lot of information on Anthony Heald and Gordon Spedding indicating that they’d a long track record of financial fraud.” ‘[We’re] not talking about small investors; we’re talking about $1 million and $2 million at a time.’

“We said, ‘You guys clearly did no due dilligence on these people, and furthermore, we suspect that you knew, towards the end, that these guys were not straight — and yet continued to maintain that everything was fine and bring in investors like Frans Plaggenburg [another plaintiff] into MMS. And we’re not talking about small investors; we’re talking about $1 million and $2 million at a time.”

Coghlan said that after trying to get White and Kinsey to join them in taking legal action against MMS, the investors had subsequently discovered that “White, in particular, was effectively running the MMS operation from his office in Dubai, and that he was probably faking signatures, issuing documents, issuing valuations from his office, either knowingly or otherwise, that had no value whatsoever.”

Stephen White (defendant)

According to the New York Supreme Court complaint, Stephen David White, 46, had lived in Dubai for some 28 years before he left in May 2010 “to avoid prosecution for his involvement in MMS as well as other financial improprieties.” White had met Spedding, one of the alleged “masterminds” of the Ponzi scheme, in Dubai in 2004 or 2005, the complaint says, and subsequently began offering MMS products to his own clients — despite being “aware at all times that the MMS products were fraudulent.” White allegedly fled Dubai in 2010 ‘to avoid prosecution for his involvement in MMS as well as other financial improprieties.’

White put at least nine investors, including Coghlan, in MMS with a total investment of about $3.9 million; another four investors and $1.1 million were put into MMS by “someone at ExPat Solutions, perhaps by White but also perhaps by someone else,” the complaint says. Moreover, Spedding started working out of the offices of ExPat Solutions, which billed White, on behalf of MMS, for $74,870 for “Annual Consulting Fees” and other services while “White and ExPat Solutions both received money from MMS’s bank account at Jyske Bank, totaling nearly $200,000,” the complaint says.

According to the plaintiffs, when MMS’s fraud became apparent, criminal complaints were filed against White and others at ExPat Solutions and they fled the country, abandoning the Dubai offices. “By August [2010], his office was completely vacated, and his staff had left — they’d been unpaid — and we decided it was time to take some action,” Coghlan said.

According to the Czech commerical register, White is a now a board member of two Prague joint-stock companies, the Westminster Group and Mount Stephen Investments, which were both listed in October 2010 with the aim of renting out commerical and residential properties, and has power of attorney at Santiago Trading and limited liability property services company Westminster Estates, which shares the same Prague business address as the Westminster Group; the companies also have board members in common. There are also Prague contact details for ExPat Solutions on a Czech server, but no business under that name appears to have been established here.

Coghlan told Czech Position that White has for a number of years been marketing properties in Prague, selling them through ExPat Solutions. “I actually bought a property in Prague in 2007 through Stephen White’s office,” he said, adding that Star Capital Finance — where Martin Kinsey now works out of as an IFA — had “done a deal” with Stephen White to be a preferred supplier of mortgages to customers of White and Kinsey when they were selling properties in Prague.

“They would obviously recommend Star Capital Finance, which I imagine was paying them some kind of incentive for that, and we were aware that when Kinsey and White first fled Dubai they were using either Star Capital Finance’s or European Reality’s offices to work from while they set up their next venture,” Coghlan said.

White did not reply to Czech Position’s requests for an interview or to make a statment presenting his side of the story.

Martin Kinsey (defendant)

The plaintiffs in the New York complaint allege that Martin Paul Kinsey, 40, was an investment advisor associated with White’s ExPat Solutions Group and offered MMS products to several of his clients, many of whom invested significant sums. “Kinsey put at least eleven investors in MMS with a total investment of approximately $2.1 million,” the complaint says. ‘[Kinsey] continues falsely to tell those investors that redemption of their investments is imminent.’

Like White, Kinsey was fully aware that all MMS products were fraudulent, it further alleges: “[Kinsey] continues to communicate with Spedding and maintains communications with some investors in MMS. He continues falsely to tell those investors that redemption of their investments is imminent.”

Kinsey told Czech Position that he had been advised by his lawyer not to speak to the media just yet about the case, which he said was launched by a group of investors in Dubai who have mistakenly drawn the conclusion that it is a sort of fraud when in fact there had only been “delays, not losses.”

“But there’s one thing I can tell you; if you read through the court document, I think it’s 194 pages, you’ll notice that there is absolutely no evidence — no solid evidence whatsoever — firstly to suggest that the [MMS] fund is fraudulent and secondly to suggest that myself and Stephen White,  that we sold the fund knowing it was fraudulent. That is absolutely not the case at all.” ‘[At] no point has any money been lost, embezzled, stolen or anything like that.’

“It also doesn’t mention in that document that I’m also an investor myself: I have almost a quarter of a million dollars in there… ” he said. “Bank accounts have been frozen — there’s chaos, really, with the whole fund — but at no point has any money been lost, embezzled, stolen or anything like that. And I’m hoping that I can give you a call next week and tell you people have received their money. That’s what’s being indicated to us.”

Star Capital Finance

According to the Czech commercial register, Kinsey is director and sole board member of the Prague-based limited liability firm Sirocco Group, listed in July 2009, with the aim of renting out commercial and residential properties.

In his Linked In profile (accesible via a Google webpage cache), Kinsey also lists himself as a “Senior Consultant at SCF Wealth Management,” which is part of Star Capital Finance, and he responded to a request for an interview sent to an email address connected to it. However, Josef Malíř, the managing partner and company’s owner, said there is no business connection between White and Kinsey and Star Capital Finance.

“The MMS thing is very unfortunate; however, it does not really have anything to do with this company itself; it’s sort of Martin’s private thing, and he’s treating it this way,” Malíř told Czech Position. When asked whether Star Capital Finance acted as a preferred supplier of mortgages to customers of White and Kinsey when they were selling properties in Prague — as disgruntled MMS investor Coghlan has said — Malíř said this characterization was incorrect. 

“We do have our businesses and did have our businesses, but we are each completely independent, providing services for clients, just as Mr White and Mr Kinsey do. There is no relationship between Mr White and Star Capital Finance — no relationship whatsoever. Martin Kinsey is self-employed; he’s an independent financial advisor,” he said. The Prague contact details for ExPat Solutions Group, however, list the same Wenceslas Square business address as does Star Capital Finance.

Počet příspěvků: 1, poslední 22.5.2011 04:00 Zobrazuji posledních 1 příspěvků.