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Ex-company director behind bars

The North Shore District Court sentenced (on December 11, 2012) Evan Paul Cherry (53) to six years and two months’ imprisonment on four charges under the Crimes Act, brought against him by the Serious Fraud Office (SFO).

The charges related to misapplication of investor funds and false statements in investor reports.

Mr Cherry commenced his financial advisory career in or about 1997 and between January 2001 and February 2007, operated his own investment and financial advisory business through Investment Solutions Limited, ISL Nominees Limited, Trading Strategies Limited, ISL Strategic Investments Limited and ISL Strategic Investments 100 Limited.

These companies received about $9 million from about 175 public investors, 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), in good faith.

Financial offences

Between January 2001 and February 2007, when a majority of offending occurred, approximately $5 million of funds were invested contrary to investment instructions.

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.

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.

Funds misapplication

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.

SFO Acting Chief Executive, Simon McArley said that the good faith that investors placed in Mr Cherry was betrayed.

“We feel for all those who lost their money through Mr Cherry’s dealings. He built up a false level of trust with them and many will never recover from their losses. This case is one of a series of similar cases we have dealt with, where trusted investment advisors have manipulated or failed to invest investors’ funds as promised and provided false statements to conceal losses or misappropriations,” he said.

The Financial Markets Authority (FMA), which completed an initial analysis, handed over the case to SFO in May 2011.

Serious Fraud Office Press Release

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