Mr Evan Paul Cherry (53) pleaded guilty on September 7 at the North Shore District Court to four charges laid under the Crimes Act by the Serious Fraud Office (SFO).
The charges related to misapplication of investor funds and false statements in investor reports by Mr Cherry while he was Director of the Albany based Investment Solutions Limited, ISL Nominees Limited, Trading Strategies Limited, ISL Strategic Investments Limited, and ISL Strategic Investments 100 Limited.
The ISL companies received approximately $9 million from an estimated 175 investors.
Between January 2001 and February 2007 when the majority of offending occurred, approximately $5 million of funds was invested contrary to investment instructions.
A majority of the investors involved had transferred to investments offered by Mr Cherry’s personal advisory business from those of a large institutional investment company when he terminated his association with that institution.
The SFO acknowledges the assistance of the Financial Markets Authority (FMA). Following the completion of its initial analysis, the Securities Commission (predecessor to FMA) referred the matter to SFO in May 2011, which commenced its investigation in June 2011.
Mr Cherry was remanded in custody until sentencing on December 11, 2012.
The background
Mr Cherry commenced his financial advisory career around 1997. From January 2001 to February 28, 2007, he operated his own investment and financial advisory business through the above-mentioned companies.
These companies received funds from the public either pursuant to a custodial agreement and authorisation form or pursuant to written and/or oral communications given by Mr Cherry to investors.
ISL was to invest funds only in shares, stock, notes, debentures and debenture stock of any New Zealand or foreign company (and hold such securities in their name). This was to be done in good faith.
Some common characteristics of investors were that they tended to be people who were not necessarily experienced or sophisticated investors, varying in age, and looking to invest surplus capital in order to extract profit.
A majority of the investors involved had transferred to investments offered by Mr Cherry’s from those of a large institutional investment company when he terminated his association with that institution. On some occasions, they were advised by Mr Cherry to extract equity from their homes, or otherwise borrow funds for use in his investment scheme.
Between 2001 and February 2007, Mr Cherry misapplied investor funds in breach of the custodial agreements by using funds to repay other investors’ investments for personal use, to purchase shares in ISL, to pay off personal loans and to purchase a boat.
A Serious Fraud Office Press Release
