Fenner Moeran QC, of Wilberforce Chambers, for Dalriada Trustees in the High Court Beddoe proceedings in June 2017, sought the court’s permission – using the term “sharp stick” in his pleadings – and directions to use the Ark victims’ funds to force them to repay their Ark MPVAs.
- Beddoe proceedings: arguably (apparently) Dalriada could have been pursued by Ark victims without MPVAs for not pursuing repayment from those with MPVAs and conversely could have been pursued by Ark victims with MPVAs. So, to be on the safe side, they spent a quarter of a million quid of the victims’ funds on the Beddoe proceedings in the High Court.
And here we need to look at the meaning of the terms – MPVA and sharp stick:
- MPVA: an invented term – by Andrew Isles (chartered accountant at Isles and Storer), Stephen Ward of Premier Pension Solutions and Alan Fowler (former pensions lawyer with Stevens and Bolton) – to disguise a potential unauthorised payment from a pension fund – and cloak it in gobbledegook to prevent victims from realising they were being scammed
- Sharp Stick: Fenner Moeran’s extremely offensive statement that Ark victims should be beaten with a sharp stick (upon which neither the judge, Sarah Asplin, admonished him nor upon which Keith Bryant, the Ark victims’ QC, challenged him)
MPVA is an anacronym for “Maximising Pension Value Arrangements” – a euphemism for pension liberation. The rules are that if a person is under the age of 55, he or she can’t access any part of their pension without incurring an unauthorised payment tax charge of up to 55%. So all pension liberation scammers think up clever ways of fooling potential victims into believing there is a legal “loophole” to circumvent this rule.
The point of a pension liberation scam is not to provide members with a bona fide pension scheme designed to provide an income in retirement, but to make the scammers loads of money. First there is the transfer fee: in the Ark case it was relatively low at 5% – although Stephen Ward was charging an extra fee on top of that of up to £2k per transfer.
And then there are the investment kick-backs. We still don’t know how much the Ark scammers earned out of the speculative, illiquid, high-risk properties they purchased in various dodgy offshore jurisdictions. But it will have been very lucrative. In subsequent scams, the scammers earned huge commissions such as 20% from Dolphin Trust; 30% from Park First; 46% from Store First.
The scammers always promise spectacularly high returns on the investments with assurances such as “guaranteed 8% per annum”. In the case of Ark, the victims were told they would receive up to 9% a year on the growth of the value of “high-end London residential properties” in which the pensions would be invested. This, of course, was a lie. But by the time alarms started to ring and the victims realised there was no way out of this toxic flight with no parachute, it was too late.
But let us revert to the portion of a transfer which is liberated. This can range from 5% to 85% depending on the structure of the scam. And it is given various names or labels such as “cashback”; “thank you”; “refund of fees”; “trousers”; “loan”. The favourite word used is “loan” because the scammers claim that “loans are not taxable”. There is no intention for the money ever to be paid back – that isn’t the point of the exercise. The scammers know the victims would never be able to repay the funds.
The use of the word “loan” in some schemes is merely a marketing term used to fool people into believing they won’t be taxed on the money. And the scammers have no interest in whether the victims ever get taxed or not – because by the time HMRC gets around to sending out tax demands, the scheme will have collapsed and the scammers will be long gone and far ahead on their next scams. They never stick around to help mop up the train wreck left behind.
Sometimes there are elaborate “loan” agreements or contracts – such as in Ark. But sometimes there are brief, amateurish documents such as in Evergreen (Stephen Ward’s “Marazion loans”) and Capita Oak (James Hadley’s “Thurlstone loans”). And sometimes the scammers don’t even bother with loan documentation at all – such as in James Lau’s Salmon Enterprises.
Often, the victims are surprised when they receive “loan” documentation and alarm bells start ringing. But the scammers assure the victims that this is “just a paper exercise” or “administration to make sure HMRC don’t try to tax the money – because loans aren’t taxable“.
In the Ark scheme, the victims were told the amounts liberated would not be taxable because they didn’t come from the members’ own scheme, but from another scheme. And this is why 14 schemes were set up to work in pairs so that up to 99 people in each pair of schemes could swap cash from their transfers. So this was an artificial mechanism structured purely to operate the liberation – using the label “MPVA” to dress the payments up as something more glamorous and bona fide than just a dollop of unauthorised cash in a person’s trousers.
Very few of the victims were told their cash would ever have to be paid back. The MPVA agreements never once mentioned the word “loan” but did mention the word “discharge” and suggested that the MPVA would be automatically “discharged” after a period of years.
Some victims were told the MPVA would be settled or repaid out of the growth that the Ark pension would enjoy (because of the wonderful investments!). It was explained that the MPVA would grow at 3% a year but the pension fund would grow at 9%. But the member would never have to pay the MPVA off out of their own pocket.
Other victims were told the MPVAs would never have to be paid at all because of the reciprocal nature of the transfer/payment structure. It was explained thus: two “paired” members in different schemes would each have a reciprocal MPVA of – say – £50k. If they both decided they never wanted to pay the MPVAs back, they would just treat them like equal IOUs and agree to simply tear them up.
Now remember, the victims weren’t told these things by any old spivs – they were told them by Stephen Ward of Premier Pension Solutions and his various accomplices (e.g. Fraser Collins, Terry Tunmore, Paul Clarke etc). Stephen Ward was back then – and still is now – a regulated financial adviser of many years’ experience, as well as the author of the Tolleys Pensions Taxation Manual, (and Level 6 CII qualified).
The same assurances were also given to numerous victims by George Frost, of Frost Financial, a regulated mortgage and insurance broker. And the victims who received the advice on the merits of entering into the Ark scheme believed they had every right to believe and trust professional, qualified and regulated advisers who assured them the MPVAs would never have to be repaid and that their pensions would be safe and secure.
HMRC does not care whether a sum of money accessed from a pension before the age of 55 is called a loan, thank you, cash back, fee refund, MPVA or any other euphemism for “liberation”. They don’t care whether it is repayable or whether it is ever repaid or not. They don’t care whether it comes directly from the member’s pension scheme, or from somebody else’s pension scheme, or via some convoluted arrangement designed to conceal the source of the money – such as Stephen Ward’s Evergreen/Marazion pension/loan scam. If a member makes a pension transfer and receives a sum of money as a result – irrespective of where it comes from – HMRC will issue a tax demand of up to 55%.
To illustrate how pension liberation scams range from the very simple and transparent to the highly complex and opaque, here is an example of one arrangement which Stephen Ward and his merry men, Alan Fowler and Bill Perkins, were involved with in 2013 – after Ark, Evergreen, Capita Oak and Westminster pension scams had all been suspended:
From: Stephen Ward <SWard@ppsespana.com>
Subject: Re: a solution for you !
Date: 17 October 2013 20:58:15 BST
To: billperkins <firstname.lastname@example.org>
Cc: Alan Fowler <email@example.com>
Thanks to you both for your understanding…. Am unused to non delivery! The arrangement I heard about today works like this as an example (ignoring fees) and this is the simplistic version …
- Client borrows 16k or thereabouts (this is available in the package)
- He gets a non recourse loan (which will not be repaid) of £84k
- He buys shares in Xco for £100k. These are listed on the CISX (name is Elysian)
- Transfers £100k to James Hay SIPP
- SIPP pays member £100k for the shares
- Member repays the 16k and trousers £84k
My IFA connection has done 40 of them so far. Advice to transfer to the SIPP is from an FCA regulated IFA. James Hay and Suffolk Life know the full structure and are happy with it.
The FCA-regulated IFA to whom he was referring was Angela South of Magna Wealth. She soon made a hasty exit from the collaboration with Stephen Ward when victims realised this was a scam and threatened to report her to the Serious Fraud Office. Victims who participated in this scam have now received tax demands from HMRC and Elysian Fuels is now worthless.
Dalriada’s QC, Fenner Moeran, seemed like a very sharp cookie. His skeleton argument (which we never got to see), and his opening speeches, started with the assumption that the MPVAs were definitely loans; that there was no question that they were loans and that the members knew and accepted that they were loans.
The judge, Sarah Asplin, accepted this without question and there was no debate on the subject. Kim Goldsmith’s QC, Keith Bryant, sat as quiet as a corpse and made not one single interjection or objection – even though he was sitting next to Kim who knew perfectly well – and must have told him – that the victims were not aware the MPVAs were loans. Indeed, they were categorically assured that the MPVAs would never have to be repaid.
Even more astonishing was the fact that Dalriada was aware the victims never knew the MPVAs were loans. Dalriada’s Sean Browes and Brian Spence, as well as Pinsent Masons’ Ben Fairhead and Ian Hyde, had attended various meetings with the Ark Class Action and gone through this issue numerous times. They were also fully aware that one victim was horrified when she was subsequently told the MPVA was a loan and she immediately called Dalriada and asked to repay it. But Dalriada had refused.
Furthermore, dozens of Ark Class Action members had completed HMRC’s 10-point questionnaire (the Q10) which specifically asked about the arrangements and what they had been told about the need to repay the MPVAs. This is evidenced at HMRC’s question 8:
8: “DETAILS OF WHAT YOU WERE TOLD ABOUT THE NEED TO REPAY THE LOAN”
Here is a typical response to this question by one of the victims:
“I was told that although on paper it would be an official 25 year loan, that because of the nature of the way the loans were set up, i.e. the quid pro quo arrangement, whereby as one person received their monies from the other members scheme and vice versa, if there was a request for any monies to be repaid in the future from each member, each would tear up each other`s IOU and be quits, so to speak, as already stated.”
Stephen Ward – BA (Econ), ACII, APFS, APMI, ex examiner for the pensions management institute and for the CII, confirmed that the Ark scheme was designed by specialist pensions lawyer Alan Fowler – head of pensions at Stevens and Bolton.
Ward went on to explain how the MPVAs worked: “The best way to understand this is in terms of my lending you £100 and you lending me £100. If I do not repay you and you do not repay me then we are both in an equal position. Conversely, if I repay you and you repay me then the position is identical to that which would arise if neither party had repaid the other”.
These statements have been made to HMRC by Ark victims on countless occasions – and Dalriada has always been perfectly well aware of this. And yet Fenner Moeran used his sharp stick to knock these evidenced facts completely off the table – so that the judge was never made aware of them. Mind you, Keith Bryant QC was no better – because he didn’t bring them to the judge’s attention either.
I would go so far as to observe that Fenner Moeran should have used his sharp stick to point the judge to these evidenced facts – and Dalriada should have made sure he did so. By omitting to do so, both Fenner Moeran and Keith Bryant allowed the judge to come to the incorrect conclusion that:
“members who received the MPVA loans agreed to repay them. That’s the point of a loan. It’s not a gift. They cannot now complain about having to repay them. They can complain about having to repay them earlier, but that’s a cashflow issue which is vastly overwritten by the capital harm that is suffered by the non-recipient members”
Fenner Moeran merely leaned on his sharp stick and did nothing to correct the judge. As I was sitting behind him, I couldn’t see whether he was smirking – but I have a feeling he might have been. The judge was wrong on three counts:
The members with MPVAs did not agree to repay them – they were told they would never have to
They can most certainly now complain about being asked to repay them as they were never told they would have to and did not budget to do so
The capital harm suffered by members without MPVAs was mostly caused by Dalriada who did not reject their transfers after 31.5.11 but allowed transfers to continue right up until the end of August 2011
Having glossed over the facts smoothly, and directed the judge to her incorrect conclusion, Fenner Moeran then addressed the issue of ascertaining whether the Ark victims were in a position to be able to afford to repay the MPVAs. And then he produced, with a confident flourish, his pièce de résistance:
“The chances of getting ascertainably or enforceably more accurate information increases when you have the sharp stick of litigation behind it. If we want to see if we’re actually going to get any of this money back, the chances are that we’re going to have to wave a very large stick“
Fenner Moeran ought to be an intelligent person. In the full knowledge that a few feet to his right sat Kim Goldsmith, an Ark victim who had gone through six years of hell courtesy of Stephen Ward and George Frost and all the other scammers, and that a number of other victims were sitting at the back of the courtroom, he still made such an unbelievably stupid and offensive statement. He apologised later “I deeply and sincerely apologise for any misunderstanding or upset caused”.
But the damage had already been done – and you can’t un-say what has been said – especially when every word is recorded and transcribed. On behalf of Dalriada Trustees, he had deliberately misled the judge, and then proceeded to demonstrate clear contempt for the suffering of the Ark victims.
Interestingly, the judge had not remonstrated with Moeran for his crass comments – and Keith Bryant had not objected to the stupid and insensitive words. Throughout the rest of the proceedings, the judge remained – in my view – dominated and steered by Moeran. No attempt was ever made to disclose the truth about what the victims were told about repayment of the MPVAs by Stephen Ward, George Frost, Andrew Isles or Alan Fowler. And no explanation was ever given as to why Dalriada had not pursued these parties for having duped, misled and defrauded the Ark members.
This may seem like a completely off-topic piece of this report, but please stick with it – it will be worth it because it is the whole point of this report. Nearly 18 months before the Ark/Dalriada/Beddoe proceedings in the High Court, another case was heard: Royal London v Hughes. A pension scammer had tried to do exactly what the Ark scammers had done so successfully and profitably for nearly a year: transfer hundreds of secure pensions into a pension scam. But one ceding provider – Royal London – had blocked a transfer request. They strongly suspected the receiving scheme was a liberation scam – unlike the many ceding providers in the Ark case who handed over hundreds of transfers willy-nilly without question or due diligence – the worst of which was Standard Life.
Hughes complained to the Pensions Ombudsman that her transfer request had been blocked by Royal London. The Ombudsman did not uphold her complaint because he agreed with Royal London that the receiving scheme had all the classic hallmarks of being a scam – including the fact that the scheme had been registered as an occupational scheme and Hughes was not genuinely employed by the sponsoring employer. Exactly the same as Ark (and many of the subsequent scams).
Counsel for Royal London argued that “Hughes had to be an “earner” to be able to transfer”. He tried to support the Ombudsman’s view that the legislation required Hughes to be an earner in relation to a scheme employer”. This counsel obviously knew well that victims were made all sorts of promises and assurances and often not told the truth about the arrangements within pension scams.
Royal London’s QC would have been aware of the Ombudsman’s concerns that pension liberation may well have been behind Hughes’ enthusiasm to transfer her pension. And he will have known only too well that potential victims were systematically lied to and probably told that their “loans” (or whatever euphemism was used) were not repayable. And he would have known that the intended liberation “loans” were never intended to be repaid and that the victims would be told that the loans never needed to be repaid.
This QC will have been thoroughly briefed by his clients, Royal London, and may even have consulted with the Pensions Regulator who would have given him thorough details on how pension liberation scams worked.
Funnily enough, this same QC acted for Dalriada Trustees in the Justice Bean High Court Ark case so he knew jolly well that the Ark MPVAs were never supposed to have been repaid by the members but from the growth of the funds themselves. In fact, in November 2011, Justice Bean reported this very issue at Clause 14 of his ruling:
“The financial modeling (of the Ark schemes) assumed an average rate of return of 9% over a 25-year period for a sufficient sum to be generated to discharge the MPVA obligation“.
So this particular QC had intimate, first-hand knowledge of how pension liberation schemes worked in general and represented Royal London in their quest to defend their right to prevent further victims of pension liberation scams. He also knew intimately how Ark worked in particular.
He knew perfectly well that the victims were told they never had to repay their loans (or MPVAs/cash backs/thank you’s/trousers). And he knew that the Ark MPVAs were supposed to be “discharged” from growth in the schemes and NOT from the victims’ own pockets – as reported by Justice Bean. But he failed to bring this to the judge’s attention.
Who was this QC? I will give you a clue – he had a big, sharp stick. Perhaps he should have gone to Specsavers and read the MPVA agreement where this was clearly stated.