Disorder deludes trader, cuts jail term

IN HIS own mind and maybe nobody else's, Leonard Abrahams was a master of the financial universe, a self-employed successful trader of options, shares and currencies. He believed he could make millions of dollars and do better than any puffed-up stockbroker.

IN HIS own mind and maybe nobody else's, Leonard Abrahams was a master of the financial universe, a self-employed successful trader of options, shares and currencies. He believed he could make millions of dollars and do better than any puffed-up stockbroker.

In a resume he distributed some years ago, Abrahams described how he had a suite of "skills and attributes that is almost unheard of amongst private traders or big institutional traders".

In truth, Abrahams, 47, had some inflated views about his capabilities. His trading strategies were rarely successful and, importantly, his serious bipolar disorder impaired his ability to make crucial decisions.

Now the once supremely confident trader is in jail after pleading guilty last year to a charge relating to the loss of almost $1.7 million that he cajoled from a small group of Melbourne investors in late 2005.

In sentencing comments handed down just before Christmas and obtained this week by BusinessDay, Judge Gerard Mullaly in the Victorian County Court said he considered Abrahams' case to be different from other white-collar frauds.

The judge noted that Abrahams did not concoct a scheme "to beguile investors to part with their money" nor were his actions devised to pay for an extravagant lifestyle. Instead, riddled with indecision, Abrahams failed to stop a broking house using the investors' funds to cancel margin calls against his own accounts.

"It was a genuine investment proposal that was fraught with risk," Judge Mullaly said. "Your crime was that you panicked and authorised the use of the [investors'] money to meet other debts."

Abrahams could have been jailed for up to 10 years, and the prosecution had sought at least 30 months, but Judge Mullaly decided that Abrahams' serious mental disorder and the role it played in his conduct warranted a significant discount.

Abrahams' "moral culpability" was lowered because of his mental illness, the judge said, and while the most important considerations in sentencing were general deterrence and public denunciation, in Abrahams' case his mental illness weighed strongly towards a sentence at the lower end. Judge Mullaly imposed a term of 12 months in prison plus eight months suspended.

Abrahams has left behind a trail of devastation and loss. When he was bankrupted in late 2009 Abrahams owed more than $28 million to creditors including friends and family.

Investors who trusted him with their funds have described their shame, embarrassment, their sense of hopelessness and despair at losing all their savings and superannuation. In a series of statements read to the County Court last year, some revealed how their relationships had broken down as a result of their financial losses, they had lost their homes, their businesses and self-esteem.

Some were forced to take their children out of private schools or to move interstate and some had lost all faith in the financial services industry. One admitted contemplating suicide.

Investors who spoke to BusinessDay on condition of anonymity said they were level-headed and not greedy or overly ambitious when they handed Abrahams hundreds of thousands of dollars. In a few short months in 2005, Abrahams wheedled sums ranging from $50,000 to almost $500,000 from each of them. Eight months later, all $1.7 million was gone.

What happened would cause any investor alarm. In June 2006, broking house Tolhurst Noall issued a $3.4 million margin call against Abrahams' dozen or so private trading accounts. When he failed to pay up, the broker drained a trust account holding the investors' funds to make up the deficit in Abrahams' accounts.

The court heard Tolhurst Noall did so because in November 2005 Abrahams falsely told the broker that all the accounts he opened at Tolhurst Noall, including the investors' trust account, were "solely controlled and owned by myself".

Initially charged with two counts of theft and multiple counts of obtaining financial advantage by deception, Abrahams in May 2011 pleaded guilty to a single charge of obtaining financial advantage by deceiving Tolhurst Noall.

Abrahams' counsel, Neil Clelland, SC, told Judge Mullaly that Abrahams' failure was not trickery or deceit but that he did not do his duty as a trustee and act to stop the broker from taking the investors' funds.

Investors told BusinessDay it took many months for Abrahams to admit what had happened one only learnt about it 15 months later when police contacted him.

By all accounts, Abrahams is an overly intense and anxious man, self-absorbed and obsessive. One doctor has previously described him as "the most stressed patient I have ever dealt with".

Yet the investors recall he was a polite and charming networker, someone who shifted effortlessly between social circles as he cultivated contacts. At the barbecues and parties of his wife's closest friends, he would urge others that his elite investment fund would do far better than anything the big broking houses could offer.

Exactly how much Abrahams has lost over the years is not entirely clear, but his obsessive trading strategies never made him or anyone else a fortune. Even Judge Mullaly urged Abrahams to quit dabbling in the financial markets.

"A realistic analysis of your trading career is that you lose a lot more than you make," he said. "You should, Mr Abrahams, give it away for the benefit of yourself and anyone who may be convinced in the future to allow you to be involved with any of their money."

For help or information visit beyondblue.org.au, call Suicide Helpline Victoria on 1300 651 251, or Lifeline on 131 114.

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