The UK’s Serious Fraud Office (SFO) has secured the conviction of an investment manager for his role in setting up a fraudulent fund based in the Cayman Islands.
Timothy Schools established the Axiom Legal Funding Fund in 2009 to provide loans to law firms pursuing business without gain or expense. He managed to raise more than £100m ($121m, €118m) from around 500 investors, who were promised returns on the money they invested in the fund .
The SFO explained that investors were told their money would be loaned to a panel of “high quality law firms to fund legal cases with a high probability of success”. But £40million was paid to just three law firms – namely ATM Solicitors, Ashton Fox and Bracewell’s – which were either school-owned or in which he had an undisclosed interest.
According to the SFO, the loans were then misappropriated by the investment manager. He used funds donated to ATM Solicitors to pay himself over £1million in salary, consultancy fees and other personal benefits.
The Serious Fraud Office added that cases funded by the Axiom Fund were not independently reviewed, often failed in court, and insurance policies failed to pay out when cases were unsuccessful.
The schools covered up these failures by “organizing the repayment of old loans with new Axiom loans,” the SFO added, which gave the “false impression to directors, administrators and auditors that the law firms were successfully repaying their loans and getting returns on investment”. .
Investigators found that the investment manager acquired more than £19.6 million through Axiom loans, including more than £5.7 million from audit and management fees he had” dishonestly added” to the law firm’s loans.
The money was then transferred and hidden in offshore bank accounts held in complex foreign trusts and used to fund his lavish lifestyle.
This included the purchase of shares in a luxury ski hotel in France, a motorboat, luxury cars and a £5million fishing and shooting estate in the Lake District, bought through a company offshore.
Lisa Osofsky, director of the Serious Fraud Office, said: “Mr. Schools deliberately abused his position of trust to enrich himself. Through an intricate web of lies, he attempted to hide his fraudulent activity, while spending other people’s hard-earned money.
The schools were charged in August 2020 alongside two other people – David Kennedy, a former financial adviser, and Richard Emmett, a former lawyer – of carrying out a fraudulent scheme to embezzle money from the Trust Fund. Axiom legal financing.
The jury failed to reach a verdict for Kennedy and acquitted Emmett.
The SFO has confirmed International Advisor Schools was found guilty but is due to be sentenced on August 11. Judge Martin Beddoe said the investment manager was guilty of “the most serious and persistent offense involving huge sums of money” and now faces “a lengthy jail term”.