Judge orders return of €145,000 to cancer patient who was told that her investment was safe
A DIRECTOR of the collapsed Custom House Capital (CHC) group fraudulently misrepresented to a cancer patient that her €145,000 pension investment was safe a year before CHC's wind-up, a High Court judge said.
CHC investment director John Whyte knew as a matter of probability about "significant improper and unauthorised transfers" from CHC's client accounts to fund shortfalls in its property investments, when he was reassuring retired solicitor Tressan Scott over her investment in October 2010, Ms Justice Mary Finlay Geoghegan said.
A 2011 Central Bank inspector's report revealed that there had been a systematic and deliberate transfer of CHC client money into property in what another judge described as a "sort of Irish Ponzi scheme".
Ms Scott, who retired from her practice in Wexford in 2009, is entitled to the money which is held in trust by the liquidators of CHC, Ms Justice Finlay Geoghegan ruled yesterday.
She will now have to take steps to ascertain whether the €145,000 is traceable to a particular CHC bank account containing money given to CHC for certain higher-risk investments, the court heard.
Just prior to its winding-up, CHC was requested by the Central Bank to ask clients whose money was in these accounts if they wanted to keep it there or have it repaid immediately.
A sum of €360,000 belonging to clients who did not request payment remained in that account by the time of the wind-up ordered by the High Court on November 21, 2011.
It was as a result of fraudulent conduct by Mr Whyte that Ms Scott signed a letter leaving her €145,000 in that account, the judge found.
Ms Scott, a widow, had worked as a solicitor for nearly 30 years.
Around this time, Ms Scott had fallen ill with lymphoma (cancer of the blood) and commenced chemotherapy treatment, Ms Justice Finlay Geogeghan said.
By the time she signed the agreement to invest the €145,000, in March 2010, she was still under treatment and said she was very weak.
In September of that year, there were newspaper reports about the Financial Regulator's concerns about how CHC segregated its own assets from those of its clients.
The following October, nine months before inspectors were appointed to CHC, Mr Whyte arranged to meet with Ms Scott.
He asked her to sign a letter which the Central Bank had requested be signed by all clients with money in higher-risk CHC accounts. It stated that the money could remain there, once the investor knew the risks, or it could be repaid with interest.
Ms Scott said Mr Whyte told her that her investment was safe.
After the liquidation of CHC, Ms Scott sought a High Court declaration that liquidator Kieran Wallace held the €145,000 on trust for her.
The liquidator opposed the application, saying there was no evidence of fraud in this matter.
Yesterday, Ms Justice Finlay Geogeghan found that the liquidator was holding the money on trust for Ms Scott. The judge also concluded that CHC, through Mr Whyte, had made fraudulent representations to Ms Scott at the October 2010 meeting that her fund was safe and that she should leave it with the company.
She was also satisfied that Mr Whyte, as a matter of probability, was aware of the transfer of client monies to CHC property investments and that there was serious risk of CHC insolvency.