SFO: Investigation began in 2014
The solicitor mastermind of the Axiom Legal Financing Fund was yesterday found guilty on five counts of fraud, fraudulent trading and money laundering.
Timothy Schools, 61, will be sentenced on Thursday following an investigation by the Serious Fraud Office that began in 2014.
Judge Martin Beddoe said he was guilty of “egregious and persistent crime involving huge sums of money” and was facing a “very lengthy period of imprisonment”.
He refused to grant bail as “I simply don’t trust you to turn up”.
The Cayman Islands-based fund – which lent money to several law firms to pay for disbursements, mainly for personal injury cases – closed in October 2012 after four years in the wake of allegations of fraud, and went into receivership in February 2013 owing investors around £120m.
Mr Schools was struck off in 2014, although the charges did not relate to the Axiom fund.
More than 500 investors sank cash into the fund. Mr Schools received £19.5m from it, using some of the money to pay for an estate in Cumbria.
He also had a £45,000 corporate box at Blackpool FC’s home ground, claiming it was a business expense for the purpose of corporate hospitality.
He owned Preston firm ATM Solicitors, given its name because he used it as “his personal cash machine”, Southwark Crown Court heard. He claimed it was a “cashpoint” for clients to conduct their litigation and receive compensation.
He ran the scheme with Richard Emmett, 48, and David Kennedy, 69. Mr Emmett was cleared of fraudulent trading and facilitating criminal property, charges he had denied.
He and three colleagues were struck off in 2018 for their roles at Emmett Solicitors, later called Ashton Fox, which had bought ATM Solicitors and collapsed owing the Axiom fund £61m.
Mr Kennedy, a financial adviser, denied one count of fraudulent trading. The jury could not reach a verdict in his case and the prosecution has 21 days to decide on whether to seek a retrial.
Axiom’s marketing material claimed investors’ cash would be held in the Cayman Islands and forwarded to an ‘independent panel’ of law firms that would pay it back with 15% interest.
Miranda Moore QC, prosecuting, said: “It convinced a lot of investors. It was very popular and over £100m was invested by individuals. People were investing their savings, their pension pots.”
But Mr Schools only loaned money to a very limited number of firms. “In reality, from 2008 until December 2011, there was no genuine independent panel of law firms getting these loans. It was just Schools’ firms,” Ms Moore said.
“Funds like this don’t run without reports being sent back to independent directors and they were being sent, saying solicitors were winning cases, so the fund grew.”
Axiom initially highlighted the conflict of interest in Mr Schools owning or having a stake in law firms they were lending to, such as ATM. “He pretended to those at the fund that he had divested himself of ATM to avoid the conflict,” the prosecutor said.
The fund began to collapse in August 2012 after an article appeared in a business whistleblowing website called Offshore Alert. Further articles led to investors withdrawing and, to prevent a run on the fund, it was suspended.
An investigation by accountants KPMG found that 11 solicitors’ firms owed Axiom more than £123m, with the largest debt coming from Ashton Fox.
Ms Moore said: “There were offshore entities that were hiding the funds that had to be proved that they belonged to the defendants… Although £25m was retraced, the costs incurred in all the litigation and tracing meant that of all the money, only £1m was recovered. So the investors effectively lost everything.”
Only £3.1m at most could be repaid to the fund by all the panel law firms by that same deadline. Ms Moore said most of them went under.
Mr Emmett’s solicitor, Paul Schofield, head of fraud and business crime at North-West firm Farleys, said: “Richard and his family have had to endure enormous stress for almost five years. He has always protested his innocence, he has vigorously defended these proceedings and has now, at last, been vindicated by the correct verdicts returned by the jury and is delighted with the result.”
Several other solicitors have been struck off in recent years over their involvement with the Axiom fund.
Offshore Alert celebrated Mr Schools’ conviction yesterday with the headline ‘Gotcha’, recounting that he had sued it for libel.
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