Forget share ramping, creative accounting and off-balance sheet finance. 'High yield' bonds are becoming the con man's weapons of choice, according to Britain's top fraud investigators.
Police forces and the Serious Fraud Office (SFO) are being bombarded by calls from worried investors who have poured their savings into investment programmes that claim to guarantee fabulous returns. All too often, the 'financiers' behind the scheme make the first few payments on the bonds then disappear with the cash.
SFO investigators are probing a massive suspected fraud involving high-yield investments, which focuses on a Midlands-based firm of accountants. Dobb White & Co's offices in Leicester and Nottingham have been raided and Shinder Gangar, a partner at the firm, questioned on suspicion of cheating investors out of tens of millions of pounds.
He and the firm strenuously deny any wrongdoing. Gangar says he is the victim of a vendetta and insists no client has complained to police about him.
Premiership footballers are believed to be among the suspected victims of the scheme, which allegedly targeted those with at least £100,000 to spare. But the SFO is also thought to sus pect Dobb White's allegedly fraudulent activity is part of a wider, global conspiracy.
The firm is suspected of selling securities during the 1990s in a trading programme run by Vavasseur Corporation, based in the Bahamas and run by Terry Dowdell, a shadowy American financier. Within weeks of beginning their investigation into Dobb White, British detectives alerted the FBI. Meanwhile, Dowdell was arrested in Virginia. He has entered into plea-bargain with American prosecutors and is likely to face a jail sentence.
Dowdell admitted raising $70 million from investors across the world to invest in fictitious 'prime bank' securities; investigators on both sides of the Atlantic fear the figure may be much higher.
Dowdell and his accomplices told customers that the Vavasseur trading programme would provide virtually risk-free annual returns of 160 per cent.
He has admitted there was no trading programme. Instead, 'old investors were being paid with new investor money', according to the US Securities and Exchange Commission, which has launched its own inquiry.
More than $21m of investor funds diverted by Dowdell into bank accounts under his control have been frozen by a US court, and millions more frozen in Belgium, Ireland and Guernsey.
In Britain, the SFO is understood to be examining the activities of Gangar and Alan White, another partner at Dobb White. Neither is thought to have been implicated by Dowdell.
Yesterday Gangar admitted knowing Dowdell but denied selling any investment schemes on his or Vavasseur Corporation's behalf. He denied taking any deposits from investors.
'I am an accountant,' he said. 'We don't solicit for investments. This investigation has been going on for nearly two years and if they had the proof of me doing this, I would be banged up by now ... If people have been defrauded by me, then where are they?'
He added: 'I am fed up to the back teeth with this ... I have protected many clients from scamsters. A hundred clients would sing my praises to the high heavens.'
Gangar says the authorities are pursuing a vendetta against him, which stems from previous disputes. In 2000, he was fined for obstructing a FSA investigation into suspected illegal deposit-taking at Dobb White. The investigation was later dropped. A year earlier, the FSA forced his firm to return £15m to investors.
High-yield investment frauds are not new to the SFO. It is investigating a number of 'get rich quick' schemes and has just secured the conviction of Ian Burns, a Derby businessman who swindled American investors out of millions of dollars using a sham trading company based in Luxembourg. He will be sentenced next month.
In another recent case, Graham Hammond was jailed for relieving investors of £10m in a similar fraud. He was chairman of FCS Fund Management, which had offices in Norwich, Dubai and Hong Kong. Hammond promised well-heeled clients their money was being invested in a number of spectacularly successful funds.
In fact, these funds were a fiction and he paid instalments to old investors from money put in by new clients. He also took a large cut for himself and enjoyed a lavish lifestyle, which included ownership of a club in Bangkok called 'Out of Bounds'.
The consensus among police and financial regulators is that investment scams, sometimes known as pyramid or Ponzi frauds (named after a famous 1920s swindler) are on the increase.
Tap 'high-yield investment' into an internet search engine and scores of 'banks' flash up.
Virtually all of these, experts warn, are frauds. Scotland Yard has issued a list of phrases they typically use, many of them nonsensical or misspelt: 'fiduciary bank,' 'cutting house,' or 'de facto Treasury securities', among others. Many proposals refer to high-yield 'programs'.
'It's amazing how many intelligent people succumb,' a senior British investigator said. 'Our advice is simple: if it sounds too good to be true, then it almost certainly is.'