We are people who have lost a large amount of money. We are not happy with the Scottish legal system
U.S investors on five-year £400m fraud probe that went nowhere
An American doctor who lost more than £ 100,000 after a Scots hedge fund collapsed sparking a fraud probe has revealed his anger with the Scottish legal system.
After an investigation spanning more than five years, the Crown Office has dropped the case against four men linked to the £400 million collapse of Heather Capital led by lawyer Greg King.
The decision has prompted criticism from alleged victims and warnings from finance experts that police and prosecutors are not equipped to deal with such complex fraud inquiries.
A number of US investors lost money when Heather Capital went under, including US cardiologist Dr Paul Laraia.
He has spoken of his anger at the failure of the Scottish justice system to put the the men in the dock.
Dr Laraia said: “We are very unhappy with the legal system in Scotland.”
He suggested Scots prosecutors were not“sophisticated” enough to handle the case.
“I was not surprised the case has been dropped,” Dr Laraia said. “I was disappointed, but not surprised.
“You need very sophisticated and forensic accounting and there aren’t that many specialists.”
He said handed over his money on the advice of a friend who runs a hedge fund.
Dr Laraia added he invested around $150,000 (£107,000) adding: “It was a substantial amount of money.
“There are people who lost a very large amount of money and they must be very angry. It’s terrible. He ( Greg King) is playing golf on the Costa del Sol, as I understand it.”
Theresa Payton, an expert on fraud investigation and former White House information officer, says authorities across the world are struggling to cope with complex investment funds which may be fraudulent.
Ms Payton, who was President George W. Bush’s chief information officer from 2006-08, works for security firm Fortalice Solutions, specialists in protecting against firms against cyber-crime.
She said: “Most law enforcement organisations are severely lacking in resources to combat every crime hitting their borders from physical crimes, to stopping crimes, to investigating cybercrimes and performing forensic investigations – that’s as true in Scotland as it is in the US.
“It’s a conundrum. We want to be protected, we want investigations to be thorough and to bring about justice, but how far are we willing to go to fund it?”
Lawyer Gregory King, 49, and three other men were reported by detectives who investigated Heather Capital, which was based in the Isle of Man.
The hedge fund, launched in 2005, attracted investors from around the world and loaned money to fund property deals. King grew up in Newton Mearns, Glasgow, and now lives in the gated La Zagaleta millionaire complex in Marbella, with its own golf courses, riding stables and swimming pools, where houses sell for up to £20m. He paid himself around £ 34m from Heather between 2005 and 2008.
After Heather’s collapse in 2010, Paul Duffy, the firm’s liquidator, claimed around £90 million was unaccounted for.
A fraud inquiry by police resulted in King and three other men – Andrew Sobolewski, a lawyer of Bridge of Weir, Renfrewshire; Andrew Millar, of Cambuslang, and Scott Carmichael, of Thorntonhall, near Glasgow – being reported to the Crown Office in 2013.
A court judgment in the Isle of Man likened the Heather hedge fund to a Ponzi scheme, a fraudulent operation which generates returns for older investors through revenue paid by new investors.
But after almost five years, the Crown has now dropped the case.
Brian Mcconnachie QC, a former lead prosecutor with the Crown Office, last week called for changes to the way fraud is investigated and prosecuted in Scotland.
He believes there should be a separate Serious Fraud Office north of the Border and complicated cases should be heard by a judge instead of a jury.
‘
It’s terrible... disappointing but not surprising. He’s playing golf on the Costa de Sol, as I understand it
– American doctor Paul Laraia
‘
It could be resources being stretched thin. We want protection. We want justice but how much are we willing to pay for it?
In another development linked to Heather, liquidator Mr Duffy dropped a £7.3 million claim against Burness Paull, a leading law firm connected to the hedge fund.
A spokesman for Burness Paull said: “From the outset, we considered the allegations behind these proceedings were entirely without merit and were prepared to defend the action robustly to its conclusion.
“Wearepleasedthattheseproceedings have now been dropped.”
A separate £28.4 million action by Mr Duffy against the law firm Levy & Mcrae and some of its former and present partners is due to be heard in May. The claim relates to alleged payments in 2007 of £19 million and £9.4 million which Heather allegedly made to the Glasgowbased firm’s client account and were then transferred offshore.
A Crown Office spokesman said: “A criminal case must be established beyond reasonable doubt and the Crown can only prosecute where there is sufficient credible, admissible evidence to justify a prosecution. Crown Counsel concluded this test has not been met.
“The Crown has reserved the right to take action, should further evidence become available in the future.”
‘
We can only prosecute where there is credible evidence to justify a prosecution. That test was not met