InvestmentsOct 9 2015

Court hears what happened to Arck cash

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Court hears what happened to Arck cash

Richard Clay promised investors their money would be put into offshore property development schemes, and that their original investment sum was safe.

In reality, he either blew the cash on his lavish lifestyle or ploughed it into various other projects – all of which were haemorrhaging money.

Mr Clay and his partner Kathryn Clark, 53, used marketing company Arck LLP to push unregulated financial products on individuals and independent financial advisers.

Investors handed over millions of pounds, which they thought would be used to fund building projects, including a golf resort on the paradise archipelago of Cape Verde, off the northwest coast of Africa.

Arck took £47.5m between 2006 and 2011 – which Clay either used to fund his spending habit or his doomed business ventures.

Ms Clark even forged a bank statement for the Arck General Client account showing a balance of £12,269,425, when in fact it had a total balance of just £25.

Jailing Clay, Judge Nicholas Lorain-Smith said: ‘No sooner is other people’s money under your control, you start treating it as your own.’

Clark was spared jail on the grounds she had been subject to extreme ‘emotional manipulation’ by Mr Clay throughout their relationship.

Mr Clay withdrew £3.4m from the company for his own personal use between 2008 and 2011, while Ms Clark withdrew £129,845 over the same period – the majority of which was her salary.

She even lost her life savings after Mr Clay talked her into sinking £625,000 into the company.

Nottingham-based Arck was set up in 2006 and described itself as a management company, Southwark Crown Court heard.

Between 2006 and 2011, Mr Clay set up three different schemes allegedly investing in different construction projects in the tourism industry.

Clients were told that their original investment had been ring fenced in a client account, and was safe from dilution or dissipation.

In fact it was being rapidly spent by Mr Clay.

When investors asked where their money was, they were provided with ‘complicated and bogus’ excuses’ for delaying repayment, the court heard.

The frauds were only discovered after civil proceedings were launched and both Mr Clay and Ms Clark later pleaded guilty to fraud charges.

The court heard Clay gambled £900,000 in foreign exchange speculation between March and August 2011.

Clay used £300,000 belonging to an investor to pay off his credit cards, top up his personal investment account and treat himself to a £33,000 Landrover.

The pair were both arrested in March 2012 and during searches of their properties police discovered a ‘confession letter’ written by Ms Clark.

The letter said Mr Clay was motivated by the twin desires to make money and conceal the reality of the financial situation from investors.

Prosecutor Sasha Wass said: ‘’It is the prosecution’s case the first defendant, Richard Clay, effectively had the mindset of a gambler, who had the unshakable belief his next investment, his next scheme, would provide a windfall.

Mr Clay spent 11 years in South Africa between 1994 and 2005, and has been subject to an arrest warrant from the South African police for over a decade.

He was accused of offering illegal money changing services to cheat South Africa’s financial controls, but lied on his job applications when he returned to the UK to get a job in the financial services industry.

Judge Lorain-Smith said: ‘There has been an issue as to whether [your first fraud] was fraudulent from the outset, and I’ve come to the conclusion that it wasn’t.

‘You may well have seen this as a way to make a lot of money, not necessarily dishonestly.

‘Your attitude is that of a gambler who’s only motivation is that of personal gain.’

‘A huge number of very experienced independent financial advisors where deceived by you, deceived into investing not only their own money but their client’s money as well.’

He continued: ‘No sooner is other people’s money under your control, you start using it as your own.’

He added that since his arrest, Mr Clay had shown ‘a truly remarkable unwillingness to accept responsibility for anything’.

Handing Ms Clark a two-year sentence suspended for two years and 300 hours unpaid work, Judge Lorain-Smith said: ‘You are 50-years-old, you had an exemplary record before you Mr Clay.’

‘Everything I have seen, and I have been provided with a lot of material, has shown you had, by dint of hard work, carved out an impressive career for yourself.’

Mr Clark and Ms Clay were both recently divorced when they met in 2006, and had been working for the same investment firm, the court heard.

Judge Lorain-Smith said: ‘I have seen a lot of evidence about that relationship, not only from your family but from the contemporaneous emails between the pair of you.’

‘You were completely infatuated with him, despite the many and obvious infidelities.’

Ms Clark wept and shook in the dock as the judge read his remarks and leap up to hug her family after leaving the dock.

Arck, which is now in liquidation, created and marketed property investment financial products, focusing on investments in overseas off-plan property – property in the very early stage of the design and planning process.

Investors were told they could make a short-term profit by selling their investment before the project was completed with a price based on the projected final value of the original plot.

Mr Clay, of John O’Gaunts Way, Belper, Derbyshire, admitted three fraud charges brought by the Serious Fraud Office.

Ms Clark, of Birkhall Village Street, Edwalton, Nottingham, admitted three charges of fraud and two counts of forgery.