After a Crown Court trial that caught the attention of the national press due to the sheer scale of wrongdoing, a solicitor has been jailed for stealing over £20m from investors. Timothy Schools, a solicitor of Penrith, Cumbria, was jailed in August 2022 for 14 years for taking money from a legal financing fund which he used to pay for a luxury lifestyle. In this article, we will review the background of the case of Timothy Schools and why he received such a significant jail sentence.
Details of the legal financing fraud
According to the Serious Fraud Office (SFO ), between 2009 and 2012, Timothy Schools ran a legal financing scheme, Axiom Legal Financing Fund, based in the Cayman Islands. The fund was established to provide loans to law firms handling cases on a ‘no win, no fee’ basis. Over the period the fund was running, it secured in the region of £100 million from investors. Investors had placed their money into the fund on the basis of a promise by Schools of a “secure return” on their investment. Investors were told their funds would be used by a panel of high-quality law firms as a way of funding no-win-no-fee cases with a high chance of success.
Following a lengthy investigation, it was discovered that Schools had been redirecting money from the legal financing fund for his own use. Around £40 million was paid from the fund to three law firms, ATM, Ashton Fox and Bracewell’s, all of which Schools owned or had an interest in that he had failed to disclose. The money paid to each of these three law firms was then siphoned to Schools. This included a salary, consultancy fees and other benefits worth over £1 million paid from ATM to Schools.
The SFO investigation found that:
- Where funds had been used in legal cases, the cases often failed at Court, and related insurance case policies did not pay out
- The case and insurance failures were often covered up by repaying old loans with new loans from the fund. The idea of this was to give directors, administrators and auditors the false impression that the law firms were successfully repaying their loans and achieving a solid return on their investment
- In the region of 500 investors lost over £100 million during the fraud
- Around 35,000 clients were affected by the fraud
- Schools misappropriated around £20 million from the legal fund
- £5.7 million were obtained from audit and management fees which were dishonestly added to loans
- Schools transferred and hid funds in offshore bank accounts and had a “complex” network of overseas trusts spanning the Cayman Islands, Panama, the Isle of Man, Spain, the Marshall Islands, France, Switzerland, and England
- Schools used the funds he dishonestly obtained to pay for “shares in a luxury ski hotel in France, a motorboat, luxury cars and a £5 million fishing and shooting estate in the Lake District, bought through an offshore company”.
The scheme collapsed in October 2012, leaving many investors with nothing. In the words of the SFO’s Director, Lisa Osofsky, “Mr Schools deliberately abused his position of trust to enrich himself. Through a complex web of lies, he attempted to hide his fraudulent activity, while spending other people’s hard-earned money.”
The Crown Court trial
During the trial at Southwark Crown Court, Schools denied three counts of fraudulent trading, one count of fraud and one count of transferring criminal property. George Carter-Stephenson QC, acting for Schools, reasoned that the scheme was not dishonest at the outset and that those who placed their funds into the scheme were “sophisticated investors ”.
Miranda Moore QC, representing the prosecution, told the Court, “It [the Axiom legal financing fund] was very popular, and over £100mn was invested by individuals. People were investing their savings, their pension pots”. She also told the Court, “there was no genuine independent panel of law firms getting these loans. It was just Schools’ firms”.
Judge Martin Beddoe stated that Axiom Legal Financing Fund acted in a fraudulent manner “more or less from the start”. He told Schools, “Any such expressions of regret have in my judgment been insincere and disingenuous. You are an utterly dishonest man”; “You personally pocketed £20m, which for the most part you squirrelled offshore.”
According to Prosecutor Paul Raudnitz QC , only £6.8 million was ever returned to the fund of the £107 million invested, “so a net loss was something in the region of £100,536,000…Litigating the matter has resulted in no meaningful return to the investors.”
Schools was found guilty of three counts of fraudulent trading, one count of fraud and one count of transferring criminal property and jailed for 14 years.
The fraudulent actions of Timothy Schools are clearly on the extreme upper end of the scale of wrongdoing. The fact that it has taken around 12 years between the closure of the legal fund and the reaching of a conclusion by the Crown Court will no doubt have added to the distress and anger of those who lost their life savings and pensions.
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