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17-385MR Former Principal of Sherwin Financial Planners sentenced to 10 years imprisonment for fraud
The former Principal of Sherwin Financial Planners Pty Ltd and Chairman of Wickham Securities Ltd, Bradley Thomas Sherwin, was sentenced in the Brisbane District Court today to a total of 10 years imprisonment on 25 charges, brought by the Commonwealth Director of Public Prosecutions following an ASIC investigation arising out of the collapse of his financial planning business.
On 5 September 2017, Mr Sherwin, 63, appeared in the Brisbane District Court, and pleaded guilty to:
- twenty four counts of fraud by dishonestly causing a detriment between May 2009 and December 2012 to the value of nearly $10million to a number of clients of Sherwin Financial Planners; and
- one count of breaching his duties as a director of Wickham Securities between June 2010 and October 2010 by falsely reporting nearly $4.5m of loans made by Wickham had been repaid. (17-300MR)
Mr Sherwin was sentenced to 10 years imprisonment for the fraud charges with an eligibility date for parole fixed at 14 November 2021* and 12 months imprisonment for the breach of director's duties to commence on 14 November 2020. This means Mr Sherwin will spend at least four years in prison before being eligible for release.
At the time of committing the offences, Mr Sherwin was the Principal of Sherwin Financial Planners and the director of a number of other companies into which his client's funds were invested without their knowledge and consent (Sherwin group of companies). Sherwin Financial Planners had been in operation since 1986, and by the time the Sherwin group of companies collapsed in January 2013, they owed nearly $60 million to approximately 400 clients.
The court heard that Sherwin Financial Planners recommended their clients establish a self-managed superannuation fund into which their existing superannuation funds would be rolled. The client's superannuation funds were then held in a bank account. The bank carried out transactions as requested in email instructions received from Mr Sherwin or another authorised officer at Sherwin Financial Planners. ASIC commenced an investigation into the operation of the bank accounts. In September 2015, ASIC wrote to Sherwin clients advising of its concerns in relation to the processing of transactions in those bank accounts.
Leading up to 2009, the property developing financing aspects of Mr Sherwin's business began to suffer financial difficulties and they did not have sufficient funds available to meet ongoing financial commitments. The financial difficulties continued until the companies were placed into administration in December 2012 and January 2013. Prior to the companies being placed into administration, Mr Sherwin used client funds to meet interest payments or to make capital redemptions to other clients, pay for property purchases and construction costs on behalf of his own company, and occasionally to make payments the Australian Taxation Office on behalf of one of his companies. By 2012, Mr Sherwin was constantly arranging for the transfer of money from one account to another to cover payments that were immediately due and that any plan he may have had to make good the shortfalls owed to his clients could not have been realised.
The court also heard there was a lack of disclosure from Mr Sherwin to his clients about how their money would be invested.
In August and September 2010, Mr Sherwin arranged for another company to receive nearly $4.5m from Wickham Securities on the false premise that it needed to return funds to a deceased client. The funds were then returned to Wickham Securities and falsely recorded as repayment of three non-performing loans. The court heard that if Wickham Securities' Trustee, Sandhurst Trustees Limited became aware of the three non-performing loans, then it would have taken immediate action pursuant to the terms of the Trust Deed to demand repayment by Wickham Securities of the entire amount of debenture notes outstanding.
There were a number of former clients of Mr Sherwin present in court during the sentencing hearing, including three victims who chose to read out their Victim Impact Statement to the Court. Nigel Jeffares said that as a result of losing all his superannuation, he now suffers from depression and other health issues and is unable to see his adult children and grandchild who live and work overseas.
ASIC Commissioner John Price said ASIC would not tolerate this kind of misconduct.
'Mr Sherwin's actions caused great hardship to his clients and their families,' he said.
'Today's outcome should serve as a warning to company directors and financial advisers who breach community standards - the consequences are severe.'
The Commonwealth Director of Public Prosecutions prosecuted the matter.
Wickham Securities was placed into administration on 21 December 2012 and liquidation on 6 February 2013, with Grant Sparks and David Leigh of PPB Advisory appointed as liquidators. Following the execution of search warrants at the premises of Sherwin Financial Planners on 21 January 2013, a further seven companies associated with Mr Sherwin were placed in administration on 24 January 2013 and liquidation on 27 February 2013 (Sherwin Group). Stefan Dopking, Quentin Olde and Michael Ryan of FTI Consulting (previously Taylor Woodings) were appointed as liquidators. Those companies were:
- Sherwin Financial Planners Pty Ltd (Sherwin)
- DIY Superannuation Services Pty Ltd (DIY Super)
- Wickham Capital Pty Limited
- Astor Funds Pty Ltd
- Reacroft Pty Ltd
- Blue Diamond Investments Pty Ltd, and
- SP Property Pty Ltd.
On 21 January 2013, ASIC also obtained interim injunctions in the Federal Court against Mr Sherwin and the Sherwin Companies, restraining them from dealing with money or property.
In May 2016, ASIC permanently banned Mr Sherwin from providing financial services (refer: 16-136MR).
In September 2016, the former Chief Executive Officer of Wickham Securities, Garth Peter Robertson, was sentenced to 5 years imprisonment after pleading guilty to various charged brought by ASIC, including fraud (refer: 16-288MR).
ASIC commenced an investigation into the operation of the bank accounts. In September 2015, ASIC wrote to Sherwin clients advising of its concerns in relation to the processing of transactions on the Money Market Deposit Accounts.
In June 2013, ASIC cancelled the registration of the auditor of Wickham Securities, Brian Kingston, after forming the view he failed to carry out or perform adequately and properly the duties of an auditor (refer: 13-156MR).
On 15 December 2017, Mr Sherwin filed a Notice of Appeal against sentence in the Queensland Court of Appeal.
*Editor's note 2:
On 12 June 2018, Bradley Sherwin's appeal was heard in the Queensland Court of Appeal. The appeal was granted to the extent that on the count of breaching his duties as a director of Wickham Securities (Count 25), Mr Sherwin's sentence of 12 months imprisonment was ordered to commence from 6 September 2020, which takes into account 70 days that Mr Sherwin served in pre-sentence custody. This means Mr Sherwin's parole eligibility date is now set at 6 September 2021.
Editor's note 3:
In January 2013, ASIC commenced civil penalty proceedings against a number of defendants, including Mr Sherwin and companies connected to him, including Wickham Securities and corporate entities within the Sherwin Group. As part of those proceedings, ASIC sought and was granted orders to preserve the assets of the defendants for the potential benefit of investors.
Since that time, a number of the corporate defendants have become subject to external administration and accordingly independent experts took control of the company assets and affairs and they were removed from the proceedings.
In circumstances where:
- the criminal prosecution against Mr Sherwin and Mr Robertson has concluded, which resulted in prison sentences to Mr Sherwin and to former Wickham CEO Garth Robertson; and,
- ASIC being satisfied that the remaining preserved assets could not be traced or connected to any former Sherwin client investment, and where such connection was identified by ASIC, the relevant investors were on notice of their own potential claim to assets of the defendants and therefore enabled to protect their own interests as appropriate,
ASIC concluded there was no further utility in pursuing the civil proceedings and applied to the court to discontinue the proceeding.
On 27 September 2018, the Federal Court ordered that the civil proceeding be discontinued with no order as to costs.