Flader link to father and son in $1b scam

THE suspected mastermind of a $120 million superannuation fraud, Jack Flader, has sold his company to two Liechtenstein businessmen who have been fined $157 million each for their part in a huge US loan scam.

By InvestSMART · 25 Jan 2011

By InvestSMART ·
25 Jan 2011

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Mr Flader is a US lawyer who made headlines most recently as a shareholder of the failed erectile dysfunction business Advanced Medical Institute.

In 2007 he founded a Hong Kong-based company-services business, Global Consultants and Services Ltd, which has been named in court as being instrumental in the disappearance of $120 million in Australian money invested in a hedge fund, Astarra Strategic.

The chairman of the Liechtenstein-based Jeeves Group, Bryan Jeeves, OBE, said in a media release last Thursday that his company had bought 100 per cent of GCSL's shares and that Mr Flader would act as a consultant.

In November 2009 a US investor, Kevin Campbell, won a court case arguing that a stock-loan program involving the Jeeves Group and Mr Flader had been a $1US billion Ponzi scheme that ripped off investors and paid $US100 million to its promoters.

Bryan Jeeves and his son, Alexander, were named alongside Mr Flader as "Racketeer influenced and corrupt organisations" defendants in the case before the US District Court in Charleston, South Carolina.

The Jeeveses were ordered to pay $157 million each after the court accepted evidence they had breached multiple laws by committing mail fraud, wire fraud, securities fraud and money laundering.

In April last year the court finalised default judgments against the Jeeveses and companies they own, after they failed to file a defence.

The Jeeves Group website states it offers company services, including trustee services, asset management and investment advisory services.

It operates from headquarters in Liechtenstein with a presence in Zurich, Singapore, Hong Kong and the Caribbean tax havens of St Vincent, St Lucia and St Kitts.

Alexander Jeeves is a member of the "global advisory committee" of the Asia Offshore Association, and Mr Flader is president of the association.

The NSW Supreme Court ruled last April that GCSL was responsible for directing the placement of $120 million of Australian investors' money into funds housed in little-known Caribbean tax havens.

Mr Flader has since been named by the corporate regulator as the controller of all the offshore funds.

No money has been recovered and Astarra Strategic's investment manager, Shawn Richard, is facing a sentencing hearing next week on two counts of dishonest conduct.

Mr Richards gave evidence that money sent offshore ended up with Mr Flader, but Mr Flader has accusing him of lying.

"'Every dollar' did not end up as cash with me," Mr Flader has written in a defence of his role with Astarra Strategic posted online.

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Frequently Asked Questions about this Article…

What was the suspected superannuation fraud involving Astarra Strategic and how much money was lost?

According to the article, investigators say about $120 million of Australian investors' superannuation money disappeared after being invested in the hedge fund Astarra Strategic. The NSW Supreme Court found that Global Consultants and Services Ltd (GCSL) was responsible for directing that $120 million into funds housed in small Caribbean tax havens.

Who is Jack Flader and what role did he play in the Astarra Strategic case?

Jack Flader is a US lawyer who founded Hong Kong-based Global Consultants and Services Ltd (GCSL) in 2007. GCSL has been named in court as instrumental in the disappearance of $120 million invested in Astarra Strategic. The corporate regulator has since named Flader as the controller of the offshore funds, and media reports say he sold GCSL to the Jeeves Group and would act as a consultant.

What is Global Consultants and Services Ltd (GCSL) and how is it linked to the missing investor funds?

GCSL is a company-services business founded in Hong Kong in 2007 by Jack Flader. The NSW Supreme Court ruled that GCSL was responsible for directing the placement of $120 million of Australian investors' money into offshore funds located in Caribbean tax havens, and the company has been named in the litigation around the Astarra Strategic losses.

Who are the Jeeves Group and what legal action has been taken against its owners?

The Jeeves Group is a Liechtenstein-based company-services firm that says it provides trustee services, asset management and investment advisory services and operates in Liechtenstein, Zurich, Singapore, Hong Kong and Caribbean jurisdictions such as St Vincent, St Lucia and St Kitts. The company's chairman Bryan Jeeves and his son Alexander were named alongside Jack Flader in US litigation; a US court accepted evidence they breached multiple laws and ordered them to pay $157 million each after default judgments were finalised.

Was the stock-loan program tied to Jeeves Group and Flader described as a Ponzi scheme?

Yes. The article reports that in November 2009 a US investor, Kevin Campbell, won a court case arguing that a stock-loan program involving the Jeeves Group and Jack Flader had been a US$1 billion Ponzi scheme that ripped off investors and paid about US$100 million to promoters. Bryan and Alexander Jeeves were named as defendants under RICO (Racketeer Influenced and Corrupt Organizations) provisions alongside Flader.

Have any of the missing Astarra Strategic investor funds been recovered?

No. The article states that no money has been recovered to date, despite court findings and litigation identifying parties and offshore placements connected to the missing funds.

What has happened to the Astarra Strategic investment manager mentioned in the article?

Astarra Strategic's investment manager, Shawn Richard (referred to in court reporting as Mr Richards), is facing a sentencing hearing on two counts of dishonest conduct. He gave evidence that money sent offshore ended up with Jack Flader, a claim Flader has disputed.

Where were the Australian investors' funds reportedly sent offshore?

The NSW Supreme Court found the $120 million was placed into funds housed in little-known Caribbean tax havens. The article also notes the Jeeves Group operates in Caribbean jurisdictions including St Vincent, St Lucia and St Kitts, as well as offices in Liechtenstein, Zurich, Singapore and Hong Kong.