Firearms merchant jailed for “Ponzi” style fraud
17 Medi, 2012 | Eitemau newyddion
A Gwent businessman and former company secretary of a firm that dealt in sporting guns has been jailed for 32 months after admitting he defrauded investors to prop up his family business. Losses are estimated to be over £8 million.
Andrew Donald Litt (dob 16/06/55), of Newport, South Wales, was sentenced today at Cardiff Crown Court after pleading guilty on 9 August 2012 to two counts of fraudulent trading. Mr Litt, a certified accountant and former director of D J Litt (Firearms) Limited (now in Administration) admitted to knowingly carrying on the business of D J Litt with the intent to defraud creditors.
He was sentenced to 32 months’ imprisonment on one count and 16 months’ on the second to run concurrently. He was also disqualified from acting as a company director for five years.
In passing sentence HHJ Patrick Curran QC took into consideration that Mr Litt had assisted the investigation. It was also acknowledged that it was not a fraud from the start and that the defendant’s actions were not motivated by personal gain but were prompted by a desire to keep the company going.
D J Litt (Firearms) Limited was a family run business, incorporated in 1976, dealing in sporting firearms and accessories. It also stored and maintained guns for clients. The company operated from a retail business park in Newport. On 6 May 2008 it ceased trading and Administrators from Deloitte LLP were appointed to wind-up the company. The Serious Fraud Office investigation, in conjunction with Gwent Police, opened in September that year.
Between January 2004 and May 2008 Mr Litt was in serious financial difficulty in relation to his business and as a result he needed to raise additional finance. In order to do this he persuaded a large number of investors to ‘loan’ him monies on the basis that it would be returned with interest within a relatively short period of time, usually between 2 – 6 months. The rates of interest, between 10% and 40%, were considerably higher than normal commercial rates. The defendant told investors that their investment monies were to be used to buy high quality firearms which would be sold on for a high profit. The profit would then, effectively, be split between the company and the investor. In fact the monies loaned were used to repay earlier investors; in effect a ‘Ponzi’ scheme.
In pleading guilty Mr Litt admitted that between 1 January 2007 and 8 May 2008 he dishonestly accepted loans and investment monies from clients knowing that he would be unable to repay them. In total, between 2004 and 2008 the defendant received approximately £57.5 million pounds in loans and investments. It is estimated that losses to investors amounted to around £8.2 million.
Mr Litt also admitted falsifying cash books and end of year accounts, falsifying company documents relating to the affairs of the company in order to induce investment, cross-firing of bank cheques, and disposing of a firearms, or retaining the proceeds of sale of firearms belonging to clients who had entrusted those guns to him. He was aware at the time that he disposed of the firearms, or retained the proceeds of sale that he did not have the consent of those clients to do so. He claimed that he had intended to return those firearms or the proceeds to their rightful owner, but in view of the company’s financial predicament this became an increasingly unrealistic aspiration.
He was made the subject of a bankruptcy order on 24 January 2011. The SFO will not be seeking a confiscation order in this case.
Mr Litt has been assisting the Gwent Police in their investigation of the location of firearms he disposed of without authority from the owners.