The decision to prosecute comes two years after the regulator’s first intervention, in a case dating back to 2012.
Stuart Garner is accused of breaching employer-related investment rules by investing more than 5 per cent of the assets from each of the three schemes — Donnington 2012, Commando 2012 and Donnington MC, which have 227 members between them — into his Norton business.
The investments, between 2012 and 2013, were made in return for preference shares.
The case caused TPR to launch an internal review of its “approach and response” and “identify if there are further lessons to be learnt”, according to a letter sent by TPR chief executive Charles Counsell to Work and Pensions Committee chairman Stephen Timms in August last year.
The Pensions Ombudsman brought the seven-year long case to a close in June 2020.
The case
The three schemes were established by Garner in his capacity as director of Manorcrest, which was the schemes’ principal employer.
They were then marketed to prospective members as a means to invest in the marquee Norton Motorcycles business, of which he was a shareholder, as well as the sole director.
The scheme’s administration was initially undertaken by Peter Bradley and Andrew Meeson, directors of T12 Administration, whom Garner had approached to set up and run the schemes. They in turn introduced Garner to Simon Colfer, also known as Simon Davies, who undertook the promotion.
In 2013, both Bradley and Meeson were jailed for pensions fraud in a separate case.
Consequently, as a Guardian/ITV News investigation in January showed, 228 scheme members had their entire pension pots invested in Norton companies illegally. The ombudsman’s report confirmed that at no point was investment advice taken by Garner.
T12 folded after the imprisonment of two of its directors, and a new company, LD Administration, was brought in to administer the three schemes.
Margaret Liddell, director of LD, “agreed to take on the role of administrator in relation to approximately 300 schemes” from T12, including the three set up by Garner, the ombudsman noted.
Liddell told the Pensions Ombudsman that she and her staff “had received no training before LD was appointed as scheme administrator… and had no experience administering occupational pension schemes”.
According to the ombudsman’s report, Liddell had viewed T12’s dissolution as “a business opportunity”.
TPR appointed Dalriada Trustees to the scheme in 2019 following an earlier investigation by the ombudsman that revealed “a clear conflict of interest” in Garner’s dealings, after a number of complaints had been raised by members of the schemes, and after Norton’s deteriorating financial position became apparent.
Because of its poor financial position, Dalriada took the view that supporting Norton in its bid to raise funds represented “the best chance” of the schemes recovering their investments, arguing that “any attempt to extract funds now from the Norton business or, indeed Garner personally, are not going to generate anything close to that figure”.
Norton then fell into administration in January 2020, leaving members uncertain whether they would ever recover the £14m owed to them.
‘Clearer, quicker and tougher’
Following several complaints, including by Dalriada, the ombudsman found “a number of breaches” and maladministration on the part of Garner and LD.
At the time, the ombudsman ordered Garner to make restorative payments to all scheme members, calculated with interest, as well as an additional £180,000 to the original 30 applicants for “exceptional maladministration causing injustice”.
But the case prompted criticism from TPR, with Labour MP Timms saying in June 2020 that “this shocking case raises serious questions about the effectiveness of the regulators involved and the protections we have for people who fall victim to pension scams”.
Timms wrote twice to TPR on the subject of the Norton schemes, asking why action had not been taken earlier in the seven-year history of the case.
He wrote again following the ombudsman’s verdict requesting further answers, not least as to how many other small schemes find themselves in similar positions, how many conflicts of interest have been raised with TPR since 2013, and whether the regulator intends to carry out a wide review of the arrangements of smaller schemes with the aim of reassuring savers.
TPR said at the time: “Following an investigation, in May 2019 we appointed Dalriada as the independent trustee to three pension schemes associated with Norton Motorcycles, and that Garner was the sole trustee of, to prevent other savers being disadvantaged by transferring to the schemes.
“Following the company’s administration, we continue to be in close discussions with Dalriada and the administrators to Norton.”
Garner has been summoned to appear at Derby Magistrates’ Court on November 15 charged with three separate ERI offences under section 40(5) of the Pensions Act 1995 – one in relation to each scheme.
Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert
