Former financial adviser jailed for $5.9 million fraud

A former financial adviser today was jailed for six years and three months for defrauding more than 150 clients of over $5.9 million over a period of 20 years.

Appearing before the NSW District Court, Ms Melinda Scott was convicted and will serve three years and ten months in jail before being eligible for parole. The non-parole period takes into account a discount for pleading guilty to the offences.

In December 2013, Ms Scott pleaded guilty to three dishonest conduct charges and four charges relating to the making and use of false documents involving $5.9 million of her clients’ money. (refer: 13-346MR).

Ms Scott’s misconduct continued over 20 years and largely involved superannuation and annuities products that were invested for the longer term.

In several cases, Ms Scott also made regular payments to some clients who were expecting an allocated pension payment, but from whom she had fraudulently obtained their money. Taking into account these regular payments made by Ms Scott, the net benefit derived by Ms Scott from her fraudulent conduct was approximately $2.9 million.

ASIC Deputy Chairman Peter Kell said, ‘Ms Scott’s actions were deliberate and deceitful and undermined the absolute trust placed in her by clients. Her jailing today should send a message that acts of fraud will not be tolerated by the community.’

The Commonwealth Director of Public Prosecutions prosecuted this matter.

Background

Ms Scott ran her own financial planning and advisory company, Roach Graham Scott Pty Ltd, between January 1989 and December 2012. For a brief period in 1992 she was a securities representative with FPI Pty Ltd and between September 1992 and June 1996, Ms Scott was a securities representative with Financial Wisdom Limited.

Ms Scott and her company became authorised representatives of Millenium3 Financial Services Pty Limited in February 2004 and continued in that capacity until the authorisations were withdrawn in May 2012.

Millennium3 is a wholly owned subsidiary of Australia and New Zealand Banking Group Limited (ANZ). ANZ and M3 fully cooperated with ASIC’s investigation, and also engaged Clayton Utz and Ernst and Young to ensure that a thorough investigation and client remediation was undertaken. In addition, immediately upon becoming aware of the issue, M3 suspended and then terminated Ms Scott’s authorisation.

Though the majority of the fraudulent conduct by Ms Scott occurred before she worked as a financial adviser at Millennium 3, ANZ commenced an independently reviewed client remediation program to ensure those who had funds misappropriated or received poor financial advice were compensated for their losses, irrespective of whether any loss was caused by conduct before ANZ and Millennium 3 were responsible for Ms Scott as a financial adviser.

The remediation program found that 157 of Ms Scott’s 1,283 clients were impacted. ANZ has approved compensation payments for losses suffered by all of these clients (including direct amount of the fraud, interest payments on stolen money and refunds of fees charged by Ms Scott).

To date, payment of $5.715 million has been paid to 140 clients and ANZ is in the process of addressing some tax issues with the ATO for the remaining clients with whom it has reached agreement on the payment of compensation.

ANZ reported regularly to ASIC throughout the remediation program on progress with client compensation. ASIC acknowledges ANZ’s significant cooperation in this matter.