The Pensions Regulator (TPR) recently announced its intention to prosecute on a charge of fraud Patrick McLarry, the former Chief Executive and Chairman of Hampshire-based charity, Yateley Industries for the Disabled Limited.
The offences are said to have taken in period between April 2011 and September 2013 when Mr McLarry was also a director of the corporate trustee of the charity's pension scheme, Yateley Industries for the Disabled Limited Pension and Assurance Scheme (the 'Scheme') and the offences relate to his involvement with the Scheme. His wife, Sandra McLarry, was the secretary of the charity's board and also faces four charges of money laundering, which is the first time that TPR has brought a prosecution for this offence.
Fraud by abuse of position is a criminal offence carrying a maximum sentence of 10 years' imprisonment and money laundering offences carry a maximum sentence of 14 years' imprisonment.
The investigation into the charity's pension scheme and the McLarrys involvement has been ongoing for some time. In April 2017, TPR brought a successful prosecution against Mr McLarry for refusing to produce, without reasonable excuse, documents required to be sent to TPR under an information order issued under section 72 of the Pensions Act 2004. This was only the second time TPR had brought such a prosecution at that time.
The Pensions Regulator can issue individuals with an information notice requiring them to produce any document, or provide any other information, which is relevant to the exercise of TPR's functions. At the time, there were concerns about the management of the Scheme which led TPR to appoint an independent trustee in place of the incumbent corporate trustee of which Mr McLarry was a director. The independent trustee's investigations revealed that the former corporate trustee had arranged for the Scheme to make a loan to Plane Sailing Sales Limited and that this led to funds being transferred from the Scheme to an account in the names of Mr McLarry and his wife. TPR wanted to understand how the funds had been used and so issued Mr McLarry with an information notice on 1 May 2015 requiring him to provide copies of bank statements for the account.
Mr McLarry had refused to supply the documents by the deadline of 31 July 2015 on the basis they contained third party information and to supply them would be a breach of French privacy law. He also said that the bank statements for the French bank account, which was an account he held jointly with his wife, were protected by legal privilege, and he subsequently claimed that he was refusing to provide them on the basis he might incriminate himself. Mr McLarry was ordered to pay a fine of £6,500 for this offence, which was considered a significant financial penalty at the time to reflect his high culpability and was justified on the basis that even though the harm caused by failing to supply the documents was unknown, the elongation of TPR's investigation had caused delay and increased costs.
It may well be the case that the information which Mr McLarry may have handed over to TPR following his earlier prosecution has provided the grounds for bring these latest fraud and money laundering prosecutions against Mr McLarry and his wife. The case for these offences was heard on 19 March and the judgement is awaited.
This case highlights the need for charities operating an occupational pension schemes to stay abreast of their pensions law duties and the scope of TPR's expectation in relation to good pension scheme governance. Following some very negative publicity that TPR has attracted over the last couple of years, it has made clear in recent statements that it intends to be much more proactive when it has concerns about pension scheme governance and will seek to use the full scope of its investigatory powers and sanctions to bring pension scheme trustees and employer to account and to improve standards.