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Fraud takes pair to prison

The Auckland District Court sentenced on Friday, August 22 Gregory Alan Arnott (51) and Mark James Whelan (41) on a number of theft and false statement charges filed by the Serious Fraud Office (SFO).

Mr Arnott entered guilty pleas in June to offences under the Crimes Act, comprising five charges of theft by person in a special relationship and five charges of making a false statement. He was sentenced to six years’ imprisonment.

At trial in July, Mr Whelan faced 10 Crimes Act charges comprising three of theft by a person in a special relationship and seven of making a false statement. He pleaded guilty after giving evidence at his trial and was sentenced to two years’ imprisonment.

He will serve his sentence cumulatively with a prior sentence of four years and four months’ imprisonment which he received in May 2013. This earlier sentence was in relation to fraudulently obtaining loans totalling $4.9 million in a previous SFO prosecution.

The details

The charges brought by SFO against the pair related to their involvement with Derivatek New Zealand Limited (Derivatek) and Global Futures Trading Limited (Global Futures).

Mr Arnott was director of Derivatek and traded in options on behalf of New Zealand clients on the Australian Stock Exchange.

Between April 2008 and May 2012, he used $2.5 million received from investors for purposes other than options trading, including repaying other investors and funding a portion of an advance fee in a failed endeavour to obtain a US$20 million loan.

False statements

In order to conceal the fraud, Mr Arnott issued false statements to his investors which indicated that their investments were generating healthy profits, when in reality all invested funds had been lost by February 2009.

Mr Whelan incorporated Global Futures in November 2006 and obtained funds from high net-worth individuals to be traded through Derivatek.

Between July 2008 and February 2010, he used about $1.2 million of investors’ funds to pay for a variety of personal expenses and to fund part of the advance fee for the US$20 million loan.

To conceal this activity, Mr Whelan issued false statements to the investors.

SFO Acting Director, Nick Paterson said, “This was a case where investment was largely based on a trusted relationship with the defendants. It is a reminder that investment decisions should not be based on this factor alone and independent advice should always be taken.”

Source: Serious Fraud Office

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