Two pension trustees who pleaded guilty to making illegal loans from a company pension scheme to its employer have received suspended prison sentences.
In a prosecution brought by the Pensions Regulator, Andrew Kyprianou and Colin Werb both admitted two counts of making prohibited, employer-related investments at Leeds Crown Court on August 17.
Employer-related loans are a criminal offence and can potentially lead to an unlimited fine and/or imprisonment.
Kyprianou and Werb were also charged with providing false or misleading information to TPR contrary to section 80 of the Pensions Act 2004. The pair initially pleaded not guilty to all charges.
The regulator alleged that the pair, employees of Eastman Staples – one of Huddersfield’s oldest and largest suppliers to the textile industry – fabricated minutes of trustee meetings to disguise the loans as investments.
The loans from the Eastman Machine Company Limited Superannuation Scheme, which took place between 2017 and 2018, amounted to £236,000.
The pair were sentenced to 16 months in prison for each offence. This was suspended for two years, while they were also ordered to carry out 250 hours of unpaid work.
The court heard that the prosecution had prompted the withdrawal of banking facilities and that Kyprianou had been given until December 16 to repay £1.1mn in loans.
Judge Mushtaq Khokhar told the pair that they “ought to consider themselves lucky” they had not been immediately sent to prison.
He said they had avoided jail and disqualification from being company directors because of their guilty pleas, along with the money they repaid to the scheme and the consequences that prison could have had on Kyprianou’s businesses, which may have led to job losses.
Since the start of the proceedings, £270,000 has been paid back into the scheme, which is now broadly fully funded on a buyout basis.
TPR director of enforcement Erica Carroll said: “The pair, who were in a position of trust, recklessly used money meant for their staff’s retirements to prop up their company despite the risk to the scheme – and their employees’ pensions – if the employer failed.
“This case should serve as a reminder to all trustees on the rules around employer-related investments and a warning that we will prosecute those who ignore them.”
Alex Janiaud is deputy editor at Pensions Expert, FTAdviser's sister publication