Custody remand for $17.5m Ponzi schemer

October 11, 2017 | By More

File image. © Andrew Bardwell

Paul Clifford Hibbs is in jail awaiting sentence after admitting running a Ponzi scheme that took $17.5 million – much of it from elderly victims.

The 49-year-old took the money from 16 different investors and their families, and had known many of them for 20 years, Serious Fraud Office prosecutor Mark Zarifeh said when the investment adviser pleaded guilty in the Christchurch District Court.

The SFO reported in its summary of facts: “He had complete control over his client funds. Many of his clients are elderly. Some of have lost their entire life savings and given their stage in life are not in a position to recover the capital lost. The agreed loss is not less than $17.5 million.”

Hibbs pleaded guilty to 25 representative charges of making false statements by a promoter, nine charges of theft by a person in a special relationship, two charges of forgery, and three charges of using forged documents.

Judge Paul Kellar refused him bail and remanded him in custody for sentencing on February 7. He asked for a reparation report and a pre-sentence report. Defence counsel James Rapley said Hibbs wanted to meet the victims at a restorative justice conference ahead of the sentencing.

Hibbs operated an investment advisory business called Cameron Gladstone Investments Ltd from 2002, and Hansa Ltd from 2005. Both companies are now in liquidation.

The names and details of all of his victims have been suppressed.

He attracted investors to his business and at its peak in early 2007 had about 25 clients with reported investments of $23 million.

The SFO said Hibbs reported to clients either at meetings or via email, including issuing portfolio reports listing purported investments at current value and cash management account reports detailing transactions.

From about 2008 the legitimate investment advisory businesses developed into a Ponzi scheme. Hibbs began using investors’ funds for purposes other than investments. These were:

  • Using the proceeds of sales of clients’ investments and client’s new investments to pay other investors.
  • Using client money for business expenses including paying dividends.
  • Transferring money for the benefit of companies in which he had interests.
  • Using client money for personal purposes.
  • Selling investments without the investor’s knowledge but reporting to them that they held investments which had been sold.
  • Advising that he had sold investments and reporting that he had used the proceeds of sale to purchase new investments. New investments were not purchased.
  • Reporting that he held the proceeds of share sales in cash management accounts when those accounts had nil balances.
  • Some clients received regular scheduled payments purporting to be “interest” or “dividends” on investments. However, the capital investments had already been sold, and Hibbs funded these purported investment returns using recently invested capital of other clients or from the sale of other clients’ investments which were sold without authority.

In late 2015 and early 2016 two clients requested further details of their investments.  In order to satisfy the requests of the clients, false documents were created on Hibbs’ computer in the names of the investment entity or broker. These forgeries were given to the clients.

In mid-2016, when a complaint was made to the Financial Markets Authority and then to the SFO, Hibbs was reporting to 24 investors that they held about $22million in capital investments. The SFO investigation has only identified investments with a value of about $300,000.

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