This CEO made a fortune pumping and dumping his company's shares.
What links Miss World, Swiss banks, the Isle of Man, and the Bulgarian health service?
All of those things are connected with a £111m fraud perpetrated by an ex-CEO of a US software company.
The criminal mastermind in question is one Roys Poyiadjis, a former CEO of AremisSoft Corporation, and chief architect of a massive pump and dump scam that saw him make a vast fortune in illegal trading in the shares of his own company.
Poyiadjis has been convicted in New York, after pleading guilty to securities fraud, after investigations that first started back in 2001, and is currently awaiting sentencing. He may possibly have his sentence reduced a little in return for his guilty pleas and his co-operation which, in 2005, led to him handing over a total of $200m of his ill-gotten gains -- one of the largest amounts of fraudulent cash that the US Securities and Exchange Commission has ever managed to recover from an individual.
Pump and dump
Poyiadjis's pump and dump scheme saw him successfully (and, of course, illegally) inflate the share price of AremisSoft all the way from $5 to $55, before he sold all his shares and hid the money away in Swiss banks.
And from there comes the Isle of Man connection, which is where Poyiadjis's money-laundering trail next led, with the money having been transferred there on his behalf by Trevor Baines, a businessman who made it to 575th position in this year's Sunday Times Rich List, with a family fortune of £95m. Baines, according to the charges brought against him, acted as Poyiadjis's agent in the Isle of Man,
In a bizarre twist at one point, two of Poyiadjis's family -- his wife and his father -- held up proceedings by fighting to keep possession of the funds in the Isle of Man, and there were suspicions at one time that some of the hot money was actually in banks in Guernsey. But nothing came of it, and the SEC was eventually able to take control of the money.
Money laundering
Trevor Baines was convicted in October 2009, on charges of money laundering and false accounting, for transferring $275m from Switzerland to accounts in the Isle of Man. He will be held in custody at the island's Jurby prison, awaiting sentencing next month, when he could face a stretch of up to 14 years. The trial found that Baines knowingly transferred the fraudulent funds to the Isle of Man in 2001; a charge that he denied during the trial, claiming that he never knew the money came from illegal activities.
Baines and his wife Wendy, who was handed a conviction for false accounting for her part in the dodgy dealings and who also awaits sentencing, shared a £2.75m Victorian mansion in Douglas, complete with all the associated luxury. Many might wonder what would motivate such a wealthy couple to risk everything in pursuit of even more cash -- especially as, at 69, Trevor Baines is no spring chicken and it's easily possible that he could now see out the rest of his life in prison.
Miss World
Baines originally amassed his fortune from his property empire, transacted through his banking and trading company, Africa House Group. But he was also one of the early investors in the Miss Word franchise, originally founded by Eric Morley in 1951, and currently still co-managed by his widow Julia.
And the Bulgarian connection? That was another bit of Poyiadjis's fraudulent accounting, after he claimed non-existence revenues from a software contract with Bulgaria's health service and faked AremisSoft's accounts to hide the fraud, with Trevor and Wendy Baines also having been implicated in faking invoices to help cover it up.
The lessons? Well, for private investors, the one lesson that stands out to me is the success that really can be achieved by a pump and dump operation. Whenever I see share ramping or boiler-room promotions, I know that people fall for them (for all sorts of reasons, from old-fashioned greed to simple misplaced trust), but I generally feel that it can't be all that many and that the practice surely can't inflate a share price very much.
But Poyiadjis managed to pump his company's shares more than ten-fold, which is really quite staggering. So beware, and never buy anything that's offered to you by a cold caller or by anyone promising insider information.
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