Football box was a business expense, Axiom fund solicitor tells jurors

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A solicitor accused of dishonestly funnelling nearly £20m of investors’ money from a legal financing fund into his own pocket has defended spending £45,000 on a corporate box at a football club, telling jurors it was a ‘business expense’.

Timothy Schools, 61, is said to have received ‘just over £19.5m’ from the Cayman Islands-registered Axiom Legal Financing Fund before it collapsed in 2012.

Prosecutors say the fund – which was set up to lend money to firms pursuing no-win no-fee claims, mainly in relation to unenforceable consumer credit agreement cases – made loans only to Schools’ Preston-based ATM Solicitors in 2009, the year it commenced trading.

Co-defendant Richard Emmett, 47, allegedly received just over £1m through his firm Emmetts Solicitors, which later became Ashton Fox Solicitors. The court has previously heard this firm was ‘Emmetts plus ATM’ after it bought the latter at an allegedly ‘inflated’ value of £3.5m in 2011.

Former financial adviser David Kennedy, 69, is accused of receiving over £5m, some of which he is alleged to have used to buy property in the Swiss Alps, as well as in Tenerife and Hull.

Southwark Crown Court previously heard that ATM Solicitors was given its name because Schools used it as ‘his personal cash machine’, however Schools last week said the name was chosen in order to attract clients.

In cross-examination today, Schools was asked by prosecutor Miranda Moore QC if he accepted that he ‘personally benefitted’ to the tune of around £19.5m. He replied: ‘I can’t confirm that.’ She then asked if the figure was ‘something of that nature, 19-and-a-bit million’, to which Schools said: ‘I don’t think so.’

Moore questioned whether ‘every penny that you did take out was entirely legitimate’ and Schools replied: ‘Yes.’ Asked if he acted dishonestly or had been ‘hiding things’, Schools said: ‘No.’

She later put it to Schools that ‘you had your company, ATM, spend £45,000 on a corporate box’ at Blackpool’s home ground and that it was ‘put down as a business expense’, which he accepted.

‘The business of ATM at that point was getting in very small claims and trying to win them,’ Moore continued. ‘How could you justify £45,000 of funding money to increase that sort of business?’

Schools replied: ‘It was a loan from the fund, it wasn’t funders’ money, it was a loan from Axiom. How ATM chose to use its own money was up to ATM, subject to clarification by the firm’s accountant and part of that was corporate hospitality.’ He added that the firm had relationships with insurance companies, claims management companies and other solicitors’ firms.

It was also suggested by Moore that Schools ‘spent ATM money on a great deal of things for yourself’, to which he replied that they would have been put down as directors’ loan payments.

She added that directors’ loan payments ‘built up and built up’ while Schools was at ATM to a figure of ‘about £800,000 – something like that, certainly many hundreds of thousands’.

Schools said that he had seen ‘contrasting documents’ about the figure and, when asked if he paid off his directors’ loan account or whether it was ‘wiped out at the time of the sale of ATM’, added: ‘I can’t answer that because, as I say, there is contradictory information relating to that.’

Schools and Kennedy are charged with fraudulent trading to dishonestly enrich themselves to the detriment of Axiom investors in relation to The Synergy Solution Limited, which the court previously heard was ‘the first business’ they used to authorise loans to law firms.

Schools also faces one count of fraud for allegedly abusing his position as Axiom’s investment manager through his control of Cayman Islands-registered Tangerine Investment Management Limited, by authorising an agreement between Axiom and Ashton Fox for his own personal benefit.

He faces two further counts of fraudulent trading: one for allegedly carrying on the business of ATM Solicitors for a fraudulent purpose and a separate count along with Emmett, both of whom were solicitors at the relevant time, in relation to funds loaned to Emmetts and then Ashton Fox.

Schools is also charged with transferring criminal property in relation to just over £1.1m of alleged criminal proceeds, while Emmett is accused of being concerned in facilitating the use of criminal property in relation to the same sum. The trio deny all the charges.

Opening the prosecution case earlier this year, Moore said the Axiom fund was valued at around £120m in 2012 when it was suspended shortly after auditors discovered that Ashton Fox, which owed the fund £60m, would only be able to repay £65,000.

The court heard Axiom marketed to ‘sophisticated investors’ as offering a projected growth rate of between 10-11% a year with an expected case success rate of over 95%, lending money to a ‘genuine independent panel of law firms’ to fund ‘vetted cases’, jurors were told.

Moore said: ‘What in fact happened was that those that arranged for the loans to be paid out, Mr Schools and Mr Kennedy, made the loans to a very limited number of law firms. In fact, in 2009 loans were only made to one firm, ATM, controlled by Schools – it was his firm.’

She added that ‘later, loans were made to other firms in which he [Schools] held undisclosed interests’, including Ashton Fox and another firm called Bracewell Law.

Schools, of Penrith, Cumbria, denies three counts of fraudulent trading, one count of fraud and one count of transferring criminal property.

Emmett, of Grimsargh, Lancashire, denies one count of fraudulent trading and one count of facilitating the acquisition, retention, use or control of criminal property by another.

Kennedy, of Hetton-le-Hole, Tyne and Wear, denies one count of fraudulent trading.

The trial continues.