A pair of directors who promised investors returns of up to 20 per cent for investing in a product that was never developed have been disqualified by the Insolvency Service.
Richard Mallett, 49, and his business partner Sharon Mallet, 48, have been banned for 13 years from being involved in the formation, promotion or management of a company without the permission of the court after consumers piled £1.38m into the fake investment opportunity.
Between December 2013 and August 2015, the duo — who ran Mallets Solicitors — secured funds from people who thought they were being offered an opportunity to invest in a 24/7 business hub.
The hub was going to provide legal insurance to members to cover legal costs of matter which could not be resolved.
But the Malletts developed nothing and instead used the cash to pay historic tax debts to stop the taxman from winding-up the company, reduce Malletts Solicitors’ overdraft and pay staff wages.
The extent of their actions was uncovered when the firm entered creditors voluntary liquidation in November 2016, which prompted the Insolvency Service to investigate the pair’s conduct as directors.
Investigators found they had spent the money from investors on running the business, had used misleading marketing and financial material to attract investment and had promised unrealistic returns.
Initially investors were offered a return of 8 per cent but, when investment slowed down, the duo increased it to 20 per cent to generate additional investments.
Further enquiries from the Insolvency Service found they could not provide evidence to support assertions they had made that a national bank had signed up to partner in the scheme of that additional solicitors had been appointed.
Mark Bruce, chief investigator for the Insolvency Service, said: “It is important that investors are provided with the right details before they spend any money.
“Sharon and Richard, however, disregarded this when they used misleading information to solicit close to £1.4m before spending it on the company’s debts rather than develop the product they had promised.
“The 13-year bans each for Sharon and Richard are substantial disqualifications, near the maximum allowable under the legislation, and should serve as a stark warning to other directors that they shouldn’t attempt to hoodwink their investors.”
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