Investment manager jailed over £100 million ‘no win, no fee’ fraud

In a hearing at Southwark Crown Court, 61-year-old Schools, the investment manager for the Cayman Island-based Axiom Legal Financing Fund, was convicted by the presiding Jury on five counts of fraudulent trading, fraud by abuse of position and money laundering.

The Axiom Legal Financing Fund was set up by Schools in 2009 to provide loans to law firms pursuing ‘no win, no fee’ cases. The Fund secured over £100 million from approximately 500 investors, who were promised a secure return on their investment.

While investors were told their loans would be provided to a panel of high-quality law firms to fund legal cases with a high likelihood of success, the majority of the funds (amounting to circa £40 million, in fact) were paid to just three law firms – ATM Solicitors, Ashton Fox and Bracewell’s – all of which Schools either owned or in which he held an undisclosed interest.

Salary and consultancy fees

The loans provided to these law firms were siphoned off by Schools. He used funds received by ATM Solicitors to pay himself over £1 million in salary, consultancy fees and other personal benefits.

The cases that the Axiom Legal Financing Fund underpinned were not independently vetted and often failed at court. Further, case insurance policies failed to pay out when cases did not succeed.

Schools covered up these failures by arranging for the repayments of old loans with new Axiom loans. This gave the false impression to directors, administrators and auditors alike that law firms were successfully repaying their loans and achieving returns on investment.

The number of clients whose cases were affected by the fraud is believed to be in the region of 35,000.

Financial benefits

The SFO investigation found that Schools dishonestly acquired over £19.6 million from the Axiom loan monies, including more than £5.7 million from audit and management fees he dishonestly added to the law firm loans.

The monies were transferred and hidden in offshore bank accounts held within complex overseas trusts and used to finance a lifestyle that included the purchase of shares in a luxury ski hotel in France, a motor boat, luxury cars and a £5 million fishing and shooting estate in the Lake District, which was bought through an offshore company.

Commenting on the case, Lisa Osofsky (director of the SFO) stated: “Schools deliberately abused his position of trust to enrich himself. Through a complex web of lies, he attempted to hide his fraudulent activity, while spending other people’s hard-earned money.”

Specifics of the charges

Schools, David Kennedy and Richard Emmett were charged with carrying out a fraudulent scheme to divert money from the Axiom Legal Financing Fund for their own financial benefit. The Jury failed to reach a verdict on Kennedy and acquitted Emmett on all charges.

A former solicitor, Schools was charged with three counts of fraudulent trading contrary to Section 993(1) of the Companies Act 2006, one count of fraud contrary to Sections 1 and 4 of the Fraud Act 2006 and one count of transferring criminal property contrary to Section 327(1)(d) of the Proceeds of Crime Act 2002.

Kennedy, a former independent financial adviser, was charged with one count of fraudulent trading contrary to Section 993(1) of the Companies Act 2006.

Emmett, also a former solicitor, was charged with one count of fraudulent trading contrary to Section 993(1) of the Companies Act 2006 and one count of being concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property by another contrary to Section 328(1) of the Proceeds of Crime Act 2002.

The SFO was represented in this case by Miranda Moore QC, Paul Raudnitz QC and Aparna Rao.