Ponzi 'mastermind' hit with record fine
An Australian court has handed disgraced Nelson businessman David Hobbs a record A$500,000 (NZ$615,000) fine for masterminding an international Ponzi scheme that fleeced investors of millions.
He has also been permanently banned from managing companies or providing financial services in Australia. His wife Jacqueline has been fined A$20,000 (NZ$24,500) and disqualified from offering financial services for eight years, and from managing companies for six years.
Contacted last night after the huge fine was imposed, Hobbs said: "That's pretty good, eh!"
He declined to say more, but in a statement this morning he said he was disappointed.
"The result definitely requires an appeal, and I need a Joe Karam."
The A$500,000 penalty imposed by Justice Julie Ward in the Supreme Court of New South Wales yesterday is the largest awarded in the history of the Australian Securities and Investment Commission (ASIC).
The court had described Hobbs as the mastermind behind more than a dozen unregistered offshore managed investment funds, including a NZ$36.8 million Ponzi scheme.
He was one of 13 people, including Mrs Hobbs, who operated the unlicensed funds, which targeted Australian investors and self-managed superannuation funds, the court said. More than NZ$67.5m was invested in New Zealand, the United States, Hong Kong, Vanuatu, the Bahamas, Anguilla, and the Turks and Caicos Islands.
In a decision in November, the court found that together, the funds were one large scheme, and that Hobbs either "personally chose" or "implicitly approved" the other individuals who operated it with him.
As well as the civil trial, there has been a separate criminal prosecution.
Last week NSW men Brian Wood, Jimmy Truong and Con Koutsoukos were sentenced to jail for the role they played in operating one of the funds, the Integrity Plus Fund.
In her decision, Justice Ward said the Hobbs scheme could be characterised as "one presented to unsophisticated investors as a ‘get rich quick' scheme with no risk of loss of capital and a huge upside on the profits by reason of their investment".
She said Hobbs' conduct, in directing the payment of money out of investment schemes for his own personal benefit, as well as giving directions as to the payment of returns at a fixed percentage irrespective of the existence of profits (as in a Ponzi scheme), was serious and reflected a disregard for the interests of investors.
This, along with other factors such as the targeting of superannuation money, justified the imposition of significant penalties.
ASIC first took court action against the operators of the funds in April 2010, following an investigation into the unregistered offshore fund operators after it acted to freeze eight offshore trading accounts in 2007 and 2008, and secured the payment into court of NZ$24.5m.
The scheme involved more than 500 Australian investors subscribing to so-called investment education packages and setting up personal offshore companies through which they would then stream their investments.
ASIC said they were told they would become shareholders in a company that would generate profits through investments in China, and Hobbs would give $200m from the proceeds of a sale of rights to the company.
Investors' money was transferred in a complicated international paper trail, and ASIC was assisted by New Zealand, US and Hong Kong regulators.
Today, Hobbs - who has had an office in the Stoke industrial area in recent years, and sold a string of Holden cars through a Nelson dealership - said he had never heard of several of the companies and people involved in the court proceedings before the case began.
"ASIC used three convicted fraudsters as witnesses against me, and I was able to prove by cross-examining them they admitted to stealing the funds and running the funds of which was the company that ponzied the money."
He said the case had been "not about right or wrong; this was ASIC win at all costs", and he and Mrs Hobbs had been unable to counter the large ASIC legal team.
"Actions such as ASIC have taken should also cause Kiwis migrating to Australia to take off their rose-coloured glasses."
He said the ban on his activities would have no effect on him, as he had no intention of operating in Australia.
"As to the size of the penalties, it is academic. This will no doubt become an appeal."
- © Fairfax NZ News
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