From caviar to porridge

THE frontman for Australia's largest superannuation heist, Shawn Richard, has spent his first night in prison.

By InvestSMART · 23 Jul 2011

By InvestSMART ·
23 Jul 2011

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THE frontman for Australia's largest superannuation heist, Shawn Richard, has spent his first night in prison.

The long night with Corrective Services NSW marks the final fall from grace for the former investment manager and playboy who dishonestly received $1.3 million in investors' money.

The fall of the man known as "Shawny Cash" was witnessed by his one-time business partner, Eugene Liu, and a former Trio director, David Andrews, as they sat in the public gallery in the New South Wales Supreme Court.

Yesterday Richard, 36, was formally convicted of two counts of dishonest conduct for his role in the Trio Capital fraud, in which investors lost $180 million.

Justice Peter Garling revoked Richard's bail and confirmed he would impose a prison sentence on the counts, which carry a maximum term of 10 years. Richard is due to be sentenced on August 12.

Yesterday the court heard Richard had received $1.3 million in secret payments directed to overseas bank accounts in the exotic tax havens of Liechtenstein and Curacao, a tiny Caribbean island.

Richard then splurged

hundreds of thousands on his personal expenses.

In one instance in 2009 Richard received $250,000 in Australian investors' money for his personal expenses.

These payments were on top of his annual salary of $113,000.

The Crown showed Richard's secret payments were raked off from Australians' investments into complicated overseas funds in a system likened by Justice Garling to a Ponzi scheme.

Richard's representative, John Agius, SC, said Richard had been naive, vulnerable and greedy when he had teamed up with a US citizen based in Hong Kong, Jack Flader, who was referred to as a sophisticated fraudster.

Mr Agius tendered a psychological report, arguing Richard had acted under the influence of Flader and was not responsible for the scheme itself.

But Anthony Payne, SC, acting for the Commonwealth Director of Public Prosecutions, said Richard's behaviour showed criminality of the most serious kind.

Justice Garling said he did not understand the principle by which funds regulated by the Australian Prudential Regulation Authority could receive federal government compensation but self-managed superannuation funds could not.

In the case of Trio, the former have received $55 million and the latter have received nothing.

"So the principle is if you are bigger and regulated you get compensation . . . if you are smaller and vulnerable you don't?" he asked Mr Payne.

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Frequently Asked Questions about this Article…

What was the Trio Capital fraud and how much did investors lose?

The Trio Capital fraud was described as Australia’s largest superannuation heist. The scheme cost investors about $180 million after funds were misdirected into complicated overseas investments and secret payments, a system Justice Peter Garling likened to a Ponzi-style arrangement.

Who is Shawn Richard (aka ‘Shawny Cash’) and what was he convicted of in the Trio Capital case?

Shawn Richard, 36, was a former Trio Capital investment manager and the public ‘frontman’ in the scandal. He was formally convicted of two counts of dishonest conduct for his role in the scheme and was found to have received secret payments and misused investor money.

How much did Shawn Richard receive in secret payments and where were those funds sent?

The court heard Richard received about $1.3 million in secret payments directed to overseas bank accounts in Liechtenstein and Curacao. He then spent hundreds of thousands of dollars on personal expenses, including a $250,000 payment in 2009 on top of his $113,000 salary.

What legal outcome did Shawn Richard face after his conviction?

Justice Peter Garling revoked Richard’s bail; Richard spent his first night in prison and is due to be sentenced. The counts he was convicted of carry a maximum penalty of 10 years' imprisonment, with sentencing scheduled for August 12 (as reported).

Were other people or companies mentioned as involved in the Trio Capital scheme?

At the court hearing, former business partner Eugene Liu and ex-Trio director David Andrews were present in the public gallery. Richard’s defence said he had acted under the influence of a US citizen based in Hong Kong, Jack Flader, who was described as a sophisticated fraudster; the prosecution argued Richard’s conduct showed serious criminality.

Did any investors or funds receive compensation for losses from the Trio Capital collapse?

Yes — the article reports that APRA-regulated funds connected to the case received about $55 million, while self-managed superannuation funds (SMSFs) affected by the Trio collapse received nothing. Justice Garling questioned why larger regulated funds received compensation but smaller SMSFs did not.

How did the court describe the way investor money was handled in the Trio Capital case?

The Crown and Justice Garling described investor money as being raked off into complicated overseas funds and characterised the overall system as comparable to a Ponzi scheme, reflecting serious misuse of investor funds and opaque structures.

What practical lessons should everyday investors take from the Trio Capital scandal?

The Trio Capital case highlights risks with complex overseas investments and the importance of regulatory oversight. Everyday investors should be cautious with opaque or complicated funds, check whether a fund is regulated (for example by APRA), and understand that compensation outcomes can differ between larger regulated funds and self‑managed superannuation funds.