Robert Damon-Aspen has been jailed for two and a half years for deception conducted through his internet-based insurance intermediary business CFT Group Insurance Services.
He reportedly used the Internet to take premiums from more than 5,000 clients without obtaining cover for them at Lloyd’s and issued forged policy documents to disguise his fraud. He has also been ordered to pay more than £210,000 as confiscation.
CFT Corporate Group Insurance Services (“CFT”) operated from December 1998 (initially under the name of Contract 4 Two Insurance Services) until it ceased to trade in September 2001. CFT reportedly promoted itself as an intermediary for placing contracts for insurance for professional indemnity, public liability and employers’ liability insurance cover.
Throughout its operation Damon-Aspen, 48, of Haslemere, Surrey, (“the defendant”) was the driving force behind CFT with sole responsibility for organising and running the business. CFT’s office was in Canada Square, Canary Wharf, London. It was an unincorporated company operating as a consultancy and therefore an unregulated entity.
The defendant reportedly targeted the IT industry, mostly small businesses. His principal method of promoting CFT and attracting insurance business was to use the Internet; the rationale being that IT clients would feel comfortable with using the Internet to search for services and for conducting commercial transactions. Prospective clients searching the Internet for insurance cover were directed to a number of sites set up by the defendant. Attracted by highly competitive rates, clients would contact CFT by completing an on-line application form, receive a quotation and on acceptance would be sent a temporary cover note and an invoice for payment of the agreed premium.
During its operation around 5,000 clients placed insurance contracts through CFT. Approximately £1.3 million was paid to CFT as premiums. The total risk cover represented by these premiums amounted to tens of millions of pounds.
To create the deception, the defendant reportedly supplied his clients with insurance certificates purporting to be issued by a reputable insurance company called Iron Trades Insurance Company Ltd. He was able to arrange this because he once worked for a company called First Light Insurance Services which had an agreement with Iron Trades to issue certificates on its behalf.
When he was at First Light Insurance, the defendant reportedly had responsibility for liaison with Iron Trades and had access to the software containing its documentation and templates of the liability certificates. The agreement between Iron Trades and First Light was terminated in April 2000 but the defendant kept the templates. He was therefore able to provide CFT clients with forged certificates purporting to show that cover was in place whereas in fact Iron Trades had no agreement with CFT and was unaware of bogus certificates being issued in its name.
Following a series of administrative errors by the defendant (not solely in relation to Iron Trades), several of his clients contacted Lloyd’s of London to ask why their temporary cover notes had not been replaced with policy documents.
The non-existence of the purported cover was reported by the regulatory investigation unit at Lloyd’s to the Financial Services Authority. The City of London Police was notified and once the scale of the deception and the need for expert computing and financial analysis became clear the matter was referred to the SFO and a joint investigation with the City of London Police was launched in November 2001. This coincided with a co-ordinated announcement by Lloyd’s of London giving warning of policies being sold by CFT without cover having been arranged and advising policy holders to make alternative arrangements.
CFT’s electronic client database of around 5,000 clients was contained on a server seized during a premises search and used by the SFO investigation team to contact clients by letter or by e-mail, inviting them to access an SFO Web site page specially created for the purpose which contained a questionnaire seeking to establish the scale of their losses and to discover whether they would be prepared to assist with the criminal investigation. Nine hundred clients did so. They were then sent by e-mail a template witness statement for potential use in court proceedings. A total of 386 witness statements were collected in this manner.
An examination of the CFT bank account showed that between December 1998 and April 2002 payments were received from clients of around £1.3 million and lifestyle payments were made from the account of almost as much, some of which were for the purchase of several cars and for the redemption of the defendant’s mortgage. But, there was no evidence to show that any outgoing payments were made by CFT to brokers, underwriters or insurance companies.
In February 2004, the defendant was charged with 81 offences of deception and 9 offences of forgery committed against 44 clients. Most had paid premiums of a few hundred pounds a year. Some clients were themselves insurance intermediaries acting for their clients and the pooled premiums in these cases would amount to a few thousand pounds. The sum of the premium defrauded as set out on the indictment is more than £113,000.
At a hearing at Kingston Crown Court on Sept. 3, 2004 the defendant pleaded guilty to the charges and was sentenced at the same court this week to 2 ½ years’ imprisonment. He was ordered to pay £210,110 by way of confiscation within 12 months or in default an additional sentence of two years to apply.
HHJ Southwell said that the defendant “showed breathtaking greed and arrogance who intended to be dishonest from the start” and that it was “a serious, sophisticated and sustained fraud where many legitimate businesses were uninsured for a year, sometimes more, and were subject to possible dramatic and disastrous consequences.”
Commenting on the investigation, SFO lawyer and case controller, Andrew Sackey said “This was our first use of the Internet to reach victims on this scale. It delivered detailed information from a wide class of victims far more quickly than we might normally expect. I anticipate that we will use a similar technique on future cases where appropriate”.
Julian James, director, Worldwide Markets added, “The integrity and reputation of the financial services sector underpins confidence in the UK as a place to do business. Lloyd’s, working with the Serious Fraud Office and the City of London Police in this investigation, has demonstrated its resolve to seeking out malpractice involving the Lloyd’s name where it might occur in the insurance industry.”
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