Mulberry House Group – Law reports on The Pain of Being a Harlequin Investor. Mulberry House Group – team is almost relieved to announce that Harlequin’s figurehead, David Ames’ freedom has finally been curtailed. On 30 September 2022, HHJ Christopher Hehir handed down a sentence of 12 years’ custody at the adjourned sentencing hearing of Mr Ames. This comes after many years of the complicated and multi jurisdictional investigation and court processes arising from the pain Harlequin inflicted on its investors.
In his sentencing remarks, the Judge addressed the convicted defendant to say “You are a thrice-bankrupt fraudster who has caused losses of over £200m by your fraudulent conduct . . . . In short, you are a menace to anyone who was to do business with you.” The Judge also said that by 2010, Ames was “operating a gigantic Ponzi scheme”.
David Ames’ sentencing hearing eventually took place, after a much delayed and frequently adjourned trial for fraud prosecuted by the Serious Fraud Office. When Mr Ames was found guilty in the Crown Court at Southwark of two charges of defrauding by abuse of position in August 2022, the jury’s verdict was unanimous.
The Background to the trial of Harlequin’s David Ames
The background to the trial of David Ames goes back more than a decade: to the early years of the 21st century. Around 2005 and 2006, Mr Ames, who was already a former bankrupt (twice), set up a business selling of property investments. That business was the very start of what became known as the
Harlequin group of companies. David Ames, as a former bankrupt could not be a director of the companies, but styled himself as Chairman. While other members of the Ames family and several trusted-to-agree lieutenants were appointed as directors of the various companies (UK and overseas) in the nascent Harlequin business empire.
In the early days of the Harlequin business, it was based at Honywood Business Centre in the town of Basildon. These days Basildon, in the Ames’ family’s native county of Essex, is a commuter town, about 30 miles east of the City of London. Harlequin’s sales from the Basildon offices, of off-plan holiday properties need not have been problematic. All that the companies in the wanna-be Harlequin empire of Ames’ dreams, had to do was abide by legal and ethical principles. Instead the business plan adopted by Ames ensured that there was pain in being a Harlequin investor.
If deposits Harlequin took had been used towards the purchase of land, obtaining regulatory consents and building the promised holiday resorts, the project could have been a good one. But by 2012, investors were exposed to a near 100% risk of loss. Investors could have received in great measure what they bargained for and what Harlequin earnestly maintained their investors were about to receive. Instead Ames enriched himself at others’ expense to the tune of £6.2 million.
The Start of Harlequin’s Financial Problems
In 2008, financial problems hit much of the English speaking property and banking markets. That was when the Harlequin business model morphed from possible to Ponzi. From that time on, the deposits being paid by trusting investors were appropriated to pay illusory returns to earlier investors. Those supposed returns were, for the most part, paid on non-existent holiday properties. The properties were supposedly sited on resorts which never existed, planned for land which Harlequin never owned.
From as early as 2008 until the Harlequin companies began to crash into liquidation, the Harlequin business plan was all about taking money from investors, but providing no return. Ponzi scheme, posh pyramid, call it what you will! The benefit at no time enured to the investors. So who did benefit? Where did the £226 million takings from Harlequin investors, subject of the Serious Fraud Office (SFO) prosecutions, go?
We would say that the conviction and sentencing of Mr David Ames brings into focus our hard work. Mulberry House Group – Law teams, both in the UK and Caribbean have unstintingly devoted over many years. Our teams have put in great effort and careful examination of much detail, many documents; and more. Only by dint of this did Mulberry House Group reach the conclusion that much was amiss with the Harlequin business model and practice. That’s how the law teams found tentative evidence of fraud.
Is David Ames’ conviction any help to investors?
Not satisfied with that conclusion of little practical help to investors, the team worked hard to push those organisations (and others) into a position where the authorities have rightly taken notice. Subsequently, they followed the arguments raised by Mulberry House Group – Law, our colleagues, barristers and associates who have been standing up and fighting for the individual rights of many investors who were so ruthlessly exploited.
We take no pleasure in the fact that it is taken so long to bring David Ames to justice. Mulberry House Group – Law remains focused on keeping the conversation alive. Our teams are keen for the necessary changes must be made to the governance of the financial services. That aim applies both in the UK and wider business to prevent this type and scale of fraud from happening again.
Mulberry House Group’s investigations into Harlequin
From the outset, we at Mulberry House Group, were clear that this was fraud. However making that statement, it would be easy for those who are charged with watching over financial services to point the finger at lazy, clumsy, hobby investors who were sucked in to Harlequin and many other large-scale financial scams which dominated the early 2000s. And that’s exactly what the financial regulators did.
However Mulberry House Group – Law have been clear from the start that the environment created within the financial services industry, allowed the likes of David Ames (and there are many others) to create the frauds that they did. Their aim was to suck in, not hobby investors, but hard-working, intelligent, financially aware customers who up until this point had done exactly what they had been told to do by society, the Government and the financial services sector.
These investors had saved: they had put money aside; they had pensions; they had built large shrewd portfolios across a wide and varied sector; and had followed the advice of professionally licensed brokers agents and advisors.
The Littered Landscape of Alternative Investments
What nobody, including the financial services industry, had anticipated was that the financial services landscape would be littered with lots of alternative investment opportunities that were unregulated, unmanaged, and unpoliced; and that companies (in some cases very large companies) could separate themselves out into alternative investments and standard FSA (Financial Services Authority now FCA (Financial Conduct Authority)) approved investment advisors and accordingly could deal in both the regulated and unregulated market.
Would it be unkind to ask if they were running with the hare and hunting with the hound around the 2010s? We can understand why for some the temptation was too great. Remember the days of austerity? The time when money and everything else was very tight indeed? Life was hard for everyone. Income for regulated investment advisors was hard, commission income reduced dramatically at that time. The handsome sales and commissions financial advisers enjoyed had shrivelled. So when the opportunity to make up lost ground with very large commissions from unregulated investments came their way, the chance was very attractive. But . . . .
This confusion in the marketplace was not something that the average investor would have known about. To the average investor, the broker (their broker) who sold them their mortgage or pension was now offering them an insight into where the clever money went. Investing in property is solid and was encouraged, even your old stuffy bank manager would jump up and shout “invest in that” (as several did).
David Ames told truths
The key to the success (if we can crudely call it that) of the Harlequin projects was that David Ames told truths. That might seem an odd statement given the fact he’s just received 12 years for fraud. Those truths and half-truths were possibly the biggest key to the Harlequin lock. Harlequin Group’s marketing success, was run by son Matthew: himself a convicted fraudster and paid £10,000 a month by his fond father.
The environment which had been created within the financial sector saw that it was good to invest in property. In the UK, you were able to buy a property off-plan. You were able to purchase assets that in the future would bring high capital growth. You were able to purchase overseas properties. You still are, and you need to be careful. In Which? Shorts Podcast, Episode 23 of 5 October 2022, the team examines “Exotic investments which are not as they seem”.
Investors were able, too, without any real process to set up a financial investment company selling unregulated or “Alternative “ products. The so-called investments were apparently situated across the globe. Everything from overseas property on land with no provable title or owner, to agricultural land in South America. Then there were the plants that were going to grow so much oil that OPEC were terrified.
It sounds like Lignocaine. And it was, but we had an environment where you could hire out Wembley arena and shout “truths”. You could declaim your “truths” from the platform and not be arrested. That is what these promoters actually did. And it didn’t stop there. The financial establishment supported the fraudsters by enabling customers to purchase with cash loans, mortgages and even pensions.
Not only that, the government at the time had created SIPPs (self-invested personal pensions). which were well regulated. They are a good vehicle for pension planning in sound and honourable hands.
Brokers and the 2008 Crash: How they contributed to the Pain of Harlequin investors
In the climate after the 2008 crash, unscrupulous brokers and others set up SIPPs specifically in order to transfer the funds from safe pension pots. These SIPPS were high risk products because they were used to siphon money into unregulated investment. All done on the signing of an A4 piece of paper. Many investors thought that this was highly encouraged. But it was totally unregulated. Nobody questioned it.
One of the first things Mulberry House Group – Law noticed during investigations was that brokers were suddenly making thousands of pounds by introducing the alternative investments to their clients. These agents normally received a few hundred pounds’ fee. This was the industry norm for putting together a pension plan or a mortgage or other financial products Nobody in the industry questioned it.
In the early days of our investigations, we were shocked at the money passing hands. Not only sales agents, but company directors boasted about how much money they were making from the Harlequin débàcle. In some cases they were making millions.
At one point in our investigations, Mulberry House Group were shown email correspondence about an investment known as Harlequin Estates. Here the Financial Standards Authority (FSA) had quite clearly stated that they were nervous about the investment. When we questioned the Financial Conduct Authority (FCA) later about this matter they denied all knowledge. The FCA said this was an alternative investment which was outside the governance of the FCA. The FCA is successor to the FSA.
This environment was a fraudster’s playground. They were defrauding intelligent investors. Both here and in the Caribbean and beyond, pointed to, professional people (lawyers, teachers, police officers, property owners, business owners). People who sought advice from reputable advisers. That advice was not just a misrepresentation of the Harlequin (and other) scams, but was masterminded by the fraudsters themselves.
We say again Harlequin was built on truths – and half-truths.
Harlequin Sales Off-plan and Overseas
The financial environment at the time was such that you could invest in property overseas, it’s true. Investors could buy property off-plan overseas, it’s true. There are investments in various parts of the world where properties can be built and sold on; or rented out at high values, it’s true. Then, as now, however in an unregulated market anybody can make these same claims. No supporting evidence needed, fraudsters can get away with it. That’s true too.
What wasn’t true? Did Harlequin have any real intention of building the properties that they contracted for? When they made a sale and took a deposit, what was their plan? Why did they sell the same plot many times over? That they did so, was proved in court. Yet another way to ensure the pain of being a Harlequin investor.
Harlequin Caribbean companies in administration
Until the appointment of KPMG as administrators of Harlequin Property (SVG) Ltd, five years ago, the authorities hardly stirred. Only slowly did KPMG begin to unravel the mess that Harlequin had created. The mess was not just within the UK financial services industry, but for many many people who lost their life savings, pensions, and everything. That mess was highlighted time and again, by our legal team in the High Court in St Vincent and the Grenadines.
Personal tragedies and Harlequin – the ongoing pain of being a Harlequin investor
What didn’t come out in court, either in the Caribbean or the UK, was the devastation of life that arose out of Harlequin’s goings-on. Mulberry House Group – Law teams met people from around the world whose lives were shattered by the doings of David Ames and his family.
One man was persuaded by his broker to transfer pensions and savings into this great investment as he had found out he was dying from cancer. This gentleman wanted to give his family what he couldn’t give them in the long term. He desperately wanted to leave the family well provided for. With the savings he had amassed, that was a realistic wish – but for Harlequin. He died knowing he had lost everything.
Or the client who worked hard to create an investment portfolio for his sons and his grandchildren. This client, too, suffered from an incurable disease. Instead of leaving a substantial legacy for his family, he left them with the turmoil of financial and legal chaos as they were left seeing their inheritance diminish into the pockets of Harlequin businesses led by David Ames. For some investors’ families, the pain of their loved ones being a Harlequin investor will never end.
Have Ames and Harlequin “got away with it”?
Unfortunately it still feels as though, Harlequin, the perpetrators have got away with it. There may be prison for David Ames, but there is no way that he has devoured the hundreds of millions that he took from hard-working people – even some of his own employees.
The administration of the companies, here in the UK and overseas, has produced few assets. The Harlequin business held little in its coffers. So there are only a few pennies in the pound for those investors who still hold out some hope that there is a small token to be returned to them.
Still, there are stories, rumours and speculation of all the assets hidden. Yet, it is not financially viable for any of the authorities involved in this case to pursue Harlequin’s assets and money. The money which was taken from UK clients and customers.
Where Next for Scam Victims Suffering the Pain of Being a Harlequin Investor?
So what now for those who have suffered at the hands of Harlequin?
The Financial Services Compensation Scheme (FSCS) under the direction of the FCA offers small compensation which many people, but not everybody, have been able to pursue. From what we have seen, there appears very little chance of any substantial assets being recovered by the SFO and Crown Prosecution Service (CPS). This is because David Ames and his wife were declared bankrupt several years ago, while still living in a million pound house in their native Essex.
Mulberry House Group understands there still to be assets and funds worthy of investigation, but it will take a large investment to start the process of recovery which none of the stakeholders are warming to.
So while David Ames languishes in his cell it would be easy to close the book on Harlequin, but there are other people involved. In fact, many people benefited from selling and being involved with Harlequin. What about the many agents and brokers who simply shut up shop? What of those who said “I’ve made my commission now you’re on your own”?
Crumbs from the rich man’s table to assuage the pain of Harlequin investors?
Some larger organisations put their hands up and paid a small amount of money to a few select customers and continued in their business. Many directors of those companies made sizeable amounts for their businesses and for themselves and carried on regardless. Many financial institutions loaned against Harlequin off-plan contracts, without the proper (or any?) due diligence. And what about the governments of those countries who treated with David Ames? The Governments who were happy to invite David, his family, his colleagues to wine and dine at the table of power? Did they check to see Ames was already a bankrupt and not able to be a director of a company?
Those same governments who have in some cases taken over and taken back the land sites. Some have been involved in negotiating settlements of partially built and unbuilt resorts. At no point did these governments and individuals have any thought for Harlequin’s victims. Nor did they have any concern for the people who lost tens, if not hundreds, of thousands of pounds. Where is the recourse against them?
Any Lessons from Bernie Madoff?
In the United States one of the largest financial frauds was conducted by Bernie Madoff. He stole billions from financial institutions, banks, governments and latterly small individual families. Madoff went to prison with very little monehy being recovered. Over the last five years, there has been a successful recovery process for investors as US lawyers have been able to go after other parties who benefited from Madoff’s large-scale scam, continuing after his death.
As it stands right now, there is still some way to go until we have the same ability to get proper restitution. Those people who are still enjoying the fruits of David Ames’ fraud, continue to do so. Those people who are not without culpability and should equally be brought to task. They should come before the criminal or civil courts to seek recovery of compensatory awards. Why should the enduring pain of being a Harlequin investor depend on where the fraudster hails from?
Over years after Madoff’s arrest, the US Marshals Service have methodically and painstakingly distrained on all Madoff’s chattels and moveable assets. Carefully they have catalogued every item, removed them and sent items for auction to realise some redress for his calculated 40,000 victims. The auctions have included everything from jewellery to underwear and household appliances and fur coats to boats and luxury cars. The US federal government team was set up to recover assets tainted by crime and realise those assets for redress to victims. To the extent of their redress, Madoff’s victims will not suffer the long term pain of being a Harlequin investor endured by victims of David Ames.
The Role of Regulators in the Pain of Being a Harlequin Investor
Mulberry House Group – Law recognises the limits of the FCA’s statutory remit and its ability only to warn potential investors. The FCA can only do so in certain circumstances, prescribed by its remit. At the same time the financial services industry and regulators stepped back and allowed this to happen. The foundation and reputation of the UK financial sector has been rocked. The sector no longer enjoys the same high level of trust and esteem. “Investment scam victims aren’t lazy”, says Faye Lipson. “The regulator should get its own house in order before blaming inexperienced investors” (Which? Magazine October 2022, p9)
That lack of trust is reflected in the general public now being averse to putting savings and pensions into solid investments. At the present time, these are investments which the country so desperately needs. In the current economic climate, those investments are essential. The pain of being a Harlequin investor casts a long shadow.
So we challenge the financial services industry. We challenge the industry to approach us, to approach other professional advisors and to approach investigators. Let the financial services sector demonstrate that they have learnt lessons. Yet, have those lessons been learnt? There remain large parts of the financial sector which are unregulated and apparently unheeded by regulators. So many more chances for new investors to be treated to the equivalent pain of being a Harlequin investor.
More Celebrity Endorsement Scams Than Ever
One of the devices favoured by David Ames during Harlequin’s marketing was celebrity endorsement. A way to make the disreputable seem sound. Celebrity endorsement scams have surged with victims sometimes losing very large sums of money. The fake adverts are most commonly found on social media platforms, such as Instagram, Facebook and Snapchat, according to Which? Consumer Rights expert, Tali Ramsey.
Mulberry House Group’s Challenge to the Regulators
The financial services sector should now provide the correct investment choices to enable investors’ recovery of lost assets. Why is there so little redress to the pain of being a Harlequin investor? The sector should enable scammed investors to pursue those who benefited from these crimes. “It is often said City regulations and City regulators tend to focus on institutions that failed in the last crisis, blinkered to the ones likely to cause the next”, says says Philip Inman in The Guardian (12 October 2022), quoting Andy Haldane, former chief economist of the Bank of England
Financial Sector show that you care about your clients and about your reputation. Start to compensate the victims of financial fraud properly. Show that you are in earnest in rebuilding trust and values in our financial services – alleviate the misery and compensate the victims of Harlequin’s fraud. How long must the Pain of Being a Harlequin Investor last?
If you are suffering the Pain of Being a Harlequin (or any other scammed investor), contact Mulberry House Group team to see whether there is any currently available assistance
And for more information about from Mulberry House Group on investments