The Serious Fraud Office (SFO) has laid out the complexity of its investigation into the Axiom Legal Financing Fund fraud, taking in bank accounts and companies in eight countries, from the UK to the Marshall Islands in the South Pacific.
It also highlighted the luxury lifestyle enjoyed by Timothy Schools, the former solicitor who will be sentenced today following his conviction on Tuesday on five counts of fraudulent trading, fraud by abuse of position and money laundering.
He set up the fund in 2009 to provide loans to law firms pursuing conditional fee cases – generally personal injury but also housing disrepair – securing over £100m from approximately 500 investors, who were promised a secure return on their investment.
Whilst investors were told their loans would be provided to a panel of high-quality law firms to fund legal cases with a high likelihood of success, the majority of the funds (amounting to £40m) were paid to just three law firms – ATM, Ashton Fox and Bracewell’s – all of which Mr Schools either owned or held undisclosed interest in.
The SFO said the loans were siphoned off by Mr Schools. He used funds received by ATM Solicitors to pay himself over £1m in salary, consultancy fees and other personal benefits.
The cases Axiom funded were not independently vetted, often failed at court and case insurance policies failed to pay out when cases did not succeed.
“Mr Schools covered up these failures by arranging for the repayments of old loans with new Axiom loans. This gave the false impression to directors, administrators and auditors that law firms were successfully repaying their loans and achieving returns on investment,” the SFO explained.
It found Mr Schools dishonestly acquired over £19.6m from the Axiom loan monies, including more than £5.7m from audit and management fees he dishonestly added to the law firm loans.
The monies were transferred and hidden in offshore bank accounts held within complex overseas trusts in eight countries (see illustration below), and used to finance a lifestyle that included the purchase of shares in a luxury ski hotel in France, a motor boat, luxury cars and a £5m fishing and shooting estate in the Lake District, bought through an offshore company.
SFO director Lisa Osofsky said: “Mr Schools deliberately abused his position of trust to enrich himself. Through a complex web of lies, he attempted to hide his fraudulent activity, while spending other people’s hard-earned money.”
He was found guilty of three counts of fraudulent trading, contrary to section 993(1) of the Companies Act 2006, one count of fraud, contrary to section 1 and 4 of the Fraud Act 2006, and one count of transferring criminal property, contrary to section 327(1)(d) of the Proceeds of Crime Act 2002.
The SFO was represented by Miranda Moore QC, Paul Raudnitz QC and Aparna Rao.