Financial regulators are to be summoned to parliament to explain how they prosecuted the case of a multimillion-pound pensions fraud whose victims have yet to receive compensation and which has not led to anyone serving prison time.
Sir Stephen Timms MP, chair of the work and pensions committee, said he was launching an inquiry into how watchdogs and prosecutors handled the case, in which £10m of pension savings disappeared after being invested in the heritage brand Norton Motorcycles.
Timms said: “I very much sympathise with the frustration of the victims of this case that justice does not appear to have been done.”
The parliamentary inquiry follows years of reporting on the scandal by the Guardian, which exposed how senior government ministers feted a businessman called Stuart Garner, who acquired Norton with £1m borrowed directly from a pension fraud, received a further £10m that was raised via a pension liberation scam a decade ago and then illegally invested that money into his own business.
During that period Garner received a series of publicly funded grants along with gushing tributes from the likes of the then chancellor George Osborne. He also managed to use Norton’s brand to secure himself a cameo role in the 2015 Bond film Spectre and travelled with a government trade mission to China on Theresa May’s jet when she was prime minister.
Garner received an eight-month suspended prison sentence last year, with the judge saying the former gamekeeper would probably have been locked up if the Pensions Regulator, which was prosecuting the case, had alleged dishonesty.
In sentencing, Judge Shant QC said: “Had this offence been put on the basis of dishonesty, or one where it was said that you had gained personally significant amounts of money, the court would have no choice but to send you to immediate custody.”
Garner has always claimed he was also a victim of fraudsters. Timms’ intervention comes as a special investigation by the Guardian’s Today in Focus podcast reveals a string of events in Garner’s career that raise questions over if he was really as clueless as he has claimed.
The new findings include allegations he:
forged the signatures of business partners in order to allow him to more easily raise Norton funds;
tapped sources of public money after making seemingly inaccurate claims to government bodies;
oversaw a business where motorbikes returned to Norton for servicing were stripped of parts – which were then used to build bikes needed for new orders;
and owned a fireworks business where about £1m of assets appear to have been transferred just prior to the company being placed into administration.
The new allegations come on top of Norton pension holders complaining for years that the businessman had repeatedly ignored their requests to return their retirement savings. It also follows a 2020 Guardian and ITV News investigation that showed how more than 200 “ordinary working people” had had their entire pension pots invested into Norton shares.
The Norton pension holders – hardly any of whom actually worked for the company – had been persuaded to switch from established pension schemes holding retirement savings built up over their working lives.
Their money was then transferred to the new Norton scheme, so that it could be invested for “the long term” in the motorcycle company. In total, savers transferred about £10m during 2012 and 2013.
However, new evidence seen by the Guardian suggests that much of that money was immediately spent by the company simply to keep Norton running.
Between August 2012 and May 2013 – the period when pension money began coming into Norton – company bank statements show about £5m in pension cash going straight into the motorcycle firm, accounting for 66% of all the cash that went into the business at that time.
Of those cash receipts, the bank statements appear to show £2.3m went to the company behind the original pensions liberation scam that raised the £10m investment for Norton.
More than £300,000 was transferred to a business called “alfa cash”, which appears to be a cryptocurrency-trading website.
A further £12,000 in cash was withdrawn from ATMs during this period while there were payments to Manchester United’s ticket office. In that same financial year, Garner also took a £40,000 loan out of Norton.
The motorcycle company slumped into administration in January 2020, leaving the pension fund holders – who had initially invested the £10m – owed about £14m at that point. In June 2020, Garner was ordered to pay the money back after the Pensions Ombudsman – which is separate from the Pensions Regulator – ruled he acted “dishonestly”.
The investments into Norton were later found to have breached technical pensions laws preventing more than 5% of an occupational scheme’s value from being invested into assets connected to the employer’s company. Three counts of that offence resulted in Garner’s suspended prison sentence last year.
The Fraud Compensation Fund has now said that victims will be eligible to apply to it. However, the fund will only compensate what was put into the Norton pension schemes at the time – so well short of what Garner had promised they would be worth now.
It is estimated that victims will receive roughly half what they thought they were owed. Secondly, the scheme cannot pay out until all avenues to claw back funds for the creditors have been exhausted.
Timms said his committee would also be examining if payments to victims of this “appalling saga” could be speeded up, saying compensation via the fund was “taking an extraordinarily long time. It is very striking that scheme members feel they are the last people to be taken account of as this process unfolds.”
He added: “Our inquiry will look at the lessons that can be learned from this experience to ensure the right regulatory arrangements are in place both to protect pension rights better and ensure compensation is paid promptly when things go wrong.”
The Pensions Regulator said: “We successfully prosecuted Stuart Garner for three serious pension-related criminal offences. Garner received an eight-month suspended jail sentence, was banned from being a company director for three years and ordered to pay costs.”
A spokesperson said the regulator’s focus would now be offering the independent pension trustee Dalriada “support necessary in pursuing compensation for Garner’s victims” including via the compensation fund.
The regulator did not respond to questions about the way in which it prosecuted Garner.
Leicestershire police said: “The conviction and sentence of Mr Stuart Garner and comments made by the sentencing judge were significant and, taken together with the amount of compensation he was ordered to pay, would undermine any further prosecution for what are extensively the same matters.”
Garner, Osborne and May did not respond to invitations to comment.