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Offshore share sharks who duped British investors jailed

23 Ebrill, 2012 | Eitemau newyddion

Today, at Southwark Crown Court, two men and a woman have been jailed for a fraud where more than £4 million was taken from private investors through share-pushing operations based in Spain and Ireland. Another man will be sentenced at a later date.

Brian O’Brien and Lynne D’Albertson controlled the operation centred around Secure Trade & Title Ltd in Sussex. James Pye was a “boiler room” manager in Barcelona, Spain.

The defendant yet to be sentenced is Damien Rodney Smith, (son of D’Albertson) who managed a boiler room in Limerick, Ireland. He pleaded guilty this morning and was remanded in custody.

The sentences are:

  • Brian James O’Brien (born 19/09/53), of Illinois USA, eight years’ imprisonment.
  • Lynne Jane D’Albertson (born 06/03/54) of East Sussex, four years and six months’ imprisonment.
  • James Pye (born 08/11/76) of Swindon, six years’ imprisonment reduced to four years’ imprisonment for an early guilty plea.

Damien Rodney Smith (born 12/07/73) of Dartford will be sentenced in May on a date to be fixed (see note for editors 8).

Confiscation and compensation proceedings are scheduled to commence against all four defendants on 8 October 2012.

Commenting on the case, senior SFO lawyer Jane de Lozey said, “Boiler rooms trade in deception and ruin lives. They misrepresent investment opportunities to prey on people who aspire to improve their lives through investment. The key players in this fraud have been brought to justice despite their attempts to disguise their identities, conceal evidence, hide assets and put themselves beyond the jurisdiction of the UK courts. Some investors have lost thousands of pounds and may have to sell their homes as a result of the deception perpetrated on them. Having brought the orchestrators of this fraud to justice we will continue to work to recover the proceeds of crime in an effort to compensate those who have lost so much.”

Detective Sergeant Sally Smith of Sussex Police said, “This was an unusual case for us and involved officers travelling abroad on several occasions to secure evidence and arrest suspects. It was a good working relationship with the SFO and it is good to see the results of this partnership.”  

Brian O’Brien and Lynne D’Albertson

Brian O’Brien, a US national and his wife Lynne D’Albertson, a UK national ran a business, Secure Trade & Title Ltd (“STT”), from their home in East Sussex. The business acted as a supposedly secure payment funnel for share purchases. The period concerned with the offences span 2005-2007.

O’Brien, who has lived in Europe (UK, Spain and Ireland) for around 20 years, was the brains behind the scheme. In addition to running STT, he controlled and operated a boiler room in Barcelona, Spain called Black & White Investments SL and later its replacement company, Cardinal Securities SL. He also controlled a boiler room, DML, in Limerick, Ireland.

O’Brien set the strategy, devised the supporting documentation, drew up the agreements and had general oversight of these share-pushing operations. He was in charge of the money though D’Albertson dealt with the administration and was very closely involved in the day-to-day running of the business, calculating commissions to sales staff and making bank payments/transfers overseas.

None of the defendants or those they employed were registered with the Financial Services Authority (“FSA”) to conduct investment business. They therefore evaded the checks and controls that regulatory scrutiny provides.  

James Pye

James Pye, a UK national, of Swindon was a senior manager at the Black & White office in Barcelona responsible for making sales and supervising a team of sales people. He used the alias James Richardson. The FSA heard from a cold-called complainant and published an alert on its website that the company was not authorised to carry on investment business. By December 2005 business through Black & White had begun to wane. Later that year, Pye bought a Spanish company, paid for by O’Brien. Renamed Cardinal Securities it replaced Black & White as the fraudsters’ vehicle in Spain and began trading in January 2006. Cardinal represents the kind of sales success these operations achieved. For example, over a three month period following its start up, Cardinal sales staff persuaded over 40 investors to part with more than £300,000.  

Damien Smith

Damien Rodney Smith is the son of D’Albertson. Before becoming involved in share sale schemes he was a chef living and working in Ireland. He moved to Spain where he worked as a salesman at Black & White learning the trade. He moved back to Ireland in order to set up a boiler room called DML which he ran for O’Brien and D’Albertson. He was the manager of DML and the main point of contact with O’Brien and D’Albertson.

DML operated as a “recovery room,” targeting victims of Black & White who had already purchased restricted Regulation S shares. Smith offered investors a cheap and quick route out of their restricted stock provided they purchased new shares via STT. In a six moth period between September 2005 and March 2006 DML had taken over £434,000 from investors.  

Outline

O’Brien had entered into exclusive agreements with two companies to help them raise capital through the sale of their shares. One was Golden Dynasty Resources Ltd, an oil and gas exploration company in Canada and already listed on the Toronto Venture Stock Exchange but seeking to avoid regulatory restrictions there on the reselling of new share issues. The other, Claimtracker Ltd, was a UK technology company. Both were small relatively obscure companies that wanted to raise capital quickly.

O’Brien set up the structure to make the fraud work. All share sales in ClaimTracker and Golden Dynasty made by the boiler rooms had to be routed via STT. O’Brien also had an arrangement with a number of boiler rooms to sell the shares of these two companies. Shares in other companies were also promoted but the prosecution case focussed on these two. O’Brien used other boiler rooms to push sales. These included “Thompson Hill Group”, “Anglo Swiss”, “DG Advisory”, “Ronnies” and “MJE”. Unknown to the two companies their shares were being sold to investors at far higher prices than had been agreed with O’Brien.

In addition to controlling STT, O’Brien also operated his own boiler room in Barcelona, Spain called Black & White Investments SL (“Black & White”) and recruited a number of telesales people including co-defendant, James Pye and his step-son, Damien Smith. Black & White started off by selling “Regulation S” shares, a type of US Security with onerous selling restrictions. Purchasers of Regulation S shares were typically unaware of the selling restrictions.

In September 2005 Black & White started selling shares in ClaimTracker and Golden Dynasty. Black & White was eventually closed following an FSA alert but the new company, Cardinal Securities, took over the selling arrangements of Black & White. Most of the Black & White sales staff, including Pye, moved to Cardinal Securities which under the control of O’Brien and D’Albertson continued to sell shares in ClaimTracker and Golden Dynasty.

O’Brien and D’Albertson were also in control of DML, a boiler room based in Limerick, Ireland which was managed by Damien Smith. This operated principally as a “recovery room” contacting previous clients of Black & White and purporting to help investors sell the Regulation S shares which Black & White had mis-sold to them. This typically involved investors having to use their old Regulation-S Shares plus extra cash to buy shares in ClaimTracker or Golden Dynasty.

Prospective investors were subject to persistent persuasion to buy shares in these companies. Shares were purportedly offered at a discount to the market price and promoted on the basis that the company in question was about to be listed on a recognised stock market, such as London’s Ofex (now Plus Markets) or AIM. The boiler room operators claimed that this would give the share value a significant boost. Consequently most of the investors were attracted by the short term, high return nature of an investment opportunity that seemingly presented little or no risk to their capital.  

Security was a sham

The key to reassuring investors was the claim that the process included a built in protection; that is, money to purchase the shares should be sent not to sales operations in Spain or Ireland but to an independent third party (ie STT in Sussex) with an escrow account in a British branch of Lloyds TSB Bank. Unwittingly however, the investors were sending money not to a safe, independent secure handler but instead straight into the hands of those controlling the fraud – O’Brien and D’Albertson.

Unknown to investors, the money received into the STT escrow account was then transferred outside the jurisdiction to a Guernsey bank account (by the name of West Addison Property Management, a Turks & Caicos registered company set up by O’Brien and D’Albertson in 2000) or other overseas bank accounts operated by other boiler rooms. The West Addison account was then used to pay O’Brien’s boiler room staff their commissions as well as being a cash pot for O’Brien and D’Albertson.

As part of the deceit STT sent to investors a Stock Purchase Agreement which deliberately contained false information, in particular, false details about the amount of money to be invested in the share issuing company. Had investors known how much money was being siphoned off by boiler rooms as “marketing costs”, they would not have invested.  

Proceedings

The case was referred to the SFO in March 2006 by the Sussex Police following the winding up of Secure Trade & Title Ltd by the FSA. The ensuing joint investigation by the SFO and the Sussex Police resulted in Brian O’Brien being arrested in the USA on 8 October 2010 and handed to the custody of Sussex Police at Chicago’s O’Hare airport on 1 December 2010.

O’Brien, D’Albertson and Pye appeared in Westminster Magistrates’ Court in December 2010 and were sent to Southwark Crown Court for trial. The trial of O’Brien and D’Albertson opened in January 2012. Pye had already pleaded guilty to the charges against him at a preliminary hearing in July 2011. Damien Smith was extradited from the Republic of Ireland following the issue of a European Arrest Warrant. He appeared at Westminster Magistrates’ Court in January 2012 and was sent to Southwark Crown Court for trial.

Shortly before a restraint order was served on O’Brien in 2009, he transferred assets out of the country and fled the UK. He failed to repatriate his assets and continued to use them in breach of the restraint order. After his subsequent return to the UK he was convicted of contempt of court for failing to comply with the restraint order, for which he served two concurrent 15-month sentences. He continues to act in contempt of the restraint order and confiscation proceedings are continuing.

Once O’Brien and D’Albertson discovered they were under investigation they tried to hide incriminating material which they should have made available to SFO investigators. They passed the material to friends intending for it to remain hidden but the material was eventually handed to the SFO and the pair were found guilty of hampering an investigation contrary to s2(16) of the Criminal Justice Act 1987.  

Notes for editors:

  1. All four defendants are guilty of conspiracy to defraud, contrary to common law. Additionally they contravened the general prohibition on carrying on a regulated activity contrary to s23 Financial Services and Markets Act 2000.
  2. O’Brien and D’Albertson were also found guilty of transferring criminal property contrary to s327(1)(d) of the Proceeds of Crime Act 2002 and hampering the investigation contrary to s2(16) Criminal Justice Act 1987 through the concealment/destruction/disposal of documents.
  3. Additionally O’Brien was found guilty of attempting to obtain a money transfer by deception contrary to s1(1) Criminal Attempts Act 1981.
  4. Compensation and confiscation proceedings have commenced to try to recover the proceeds of crime on behalf of the victims, some of whom have lost thousands of pounds.
  5. A boiler room is a shorthand term to describe an overseas business which cold calls and persistently pushes the urgent sake of over-valued or even worthless shares in a company
  6. A Recovery Room purports to offer the investor the opportunity to get rid of unsalable or restricted shares, but in order to do so he or she is required to add further funds for investment in another company. Far from offering a real recovery, this is a way for fraudsters to target the same investors twice.
  7. This note was added on 22 May 2012: Damien Smith was jailed on this date for three years and four months for conspiracy to defraud. The sentence was five years but it was reduced for pleading at the earliest opportunity. Additionally he received a one-year concurrent sentence for the Financial Services and Markets Act offence and was disqualified from acting as a company director for ten years.