Financial advisers who persuaded unwitting clients to invest millions of pounds in unregulated offshore funds like the one chosen by Scottish Borders Council to bankroll a £23 million waste treatment facility should be banned from the sector, it has been claimed.
It follows the latest revelations involving the liquidated New Earth Recycling & Renewables [Infrastructure] fund (NERR) which loaned over £30 million to insolvent waste management contractors New Earth Solutions Group (NESG).
Back in 2011 NESG was handed a 24-year £80 million contract by Borders councillors to solve the region's refuse disposal problems before landfilling of rubbish is outlawed in a few years time.
But the deal had to be abandoned in 2015 when the local authority finally realised NESG and its "funders" NERR were incapable of delivering the planned treatment plant on a site at Easter Langlee on the outskirts of Galashiels.
While the contract was 'live' over a four year period SBC provided credibility for the useless partnership to lure hundreds, if not thousands, of investors to sink their savings and pension pots into what turned out to be a bottomless pit. At the same time the council squandered £2.4 million of taxpayers' money pursuing their dream which developed into a horrific nightmare for all concerned.
The latest tragic story resulting from Isle of Man-based NERR's collapse has been told by The Sunday Times, which had already uncovered other tales of woe linked to the New Earth businesses.
Meanwhile liquidators financed by the Manx financial services regulator continue to pore over 200,000 documents in a bid to establish the reasons for NERR's catastrophic collapse which has left more than 3,000 investors out of pocket. Action may be taken against the parties responsible.
The Sunday paper's latest expose centres on friends Jackie Naghten and Louise Brassey, two clients of adviser Terence Brimble, who lost over £650,000 of pension savings they invested on his recommendations, with fees totalling £100,000.They ended up having to claim on the Financial Services Compensation Scheme (FSCS), receiving the maximum £50,000 each.
The newspaper told how Naghten and Brassey, sought advice from Brimble in 2011 - the same year SBC awarded New Earth that £80 million deal - after their employer offered an enhanced defined benefit transfer value.
The pair described themselves as low to medium-risk investors. However, Brimble recommended they invest in a "high-risk, unregulated offshore fund called Premier New Earth Solutions Recycling Facilities". Over the following five years the fund’s value fell by 35%. The fund was suspended in 2014. It collapsed in 2016.
. According to the FSCS, Naghten’s lost a total of £471,462 and Brassey lost £181,698, as a result of Brimble’s advice.
Speaking to The Sunday Times Brassey, said: ‘At no time did [Brimble] tell me New Earth was high-risk, but actually sang its virtues, saying he had his entire pension invested in it. At no time did he say it was unregulated.’
To compound matters, Brimble is said to have applied to have his company struck off the Register of Companies in 2016 only to have it replaced by a different advice firm which means he is still advising clients on how to invest their cash.
Frank Field MPO, chairman of the Commons work and pensions committee, told the paper the Financial Conduct Authority (FCA) should 'get a grip on this scandal now and start to act like the consumer protection agency they are supposed to be’.
Only last month the same newspaper told the story of David and Sheila Solomon whose adviser Paul Herd persuaded them to invest their remaining savings of £281,000 in NERR.
At one stage Mr Herd even wrote to them advising that they ignore a written warning from their pension provider about the risks of the New Earth fund.
But sure enough, it hit financial difficulties in 2013 and was frozen – along with their money. The couple complained to the ombudsman about Herd's advice. An investigation revealed that he had also encouraged an 82-year-old woman with a "low attitude to risk" to invest £99,000 of her £125,000 savings in the fund.
The ombudsman ordered Herd's firm to pay the Solomons' £500,000 in compensation, but the business did not have insurance to cover such a vast sum.
It is worth reminding readers that Scottish Borders Council claimed to have carried out "all due diligence" before placing its faith in the New Earth companies. In fact the local authority has stated: "We do not believe that the contract with New Earth Solutions was handled badly".
When asked about the loss of £2.4 million - mainly on fees for specialist advisers and consultants - a senior officer declared: "The majority of these costs were incurred through the employment of various industry experts who provided SBC with the due diligence assurances that the processes and decisions that were being taken were sound and in the best interests of the Scottish Borders public. We view these costs as the costs associated with ensuring best value rather than failure".
The fact that not a single brick was ever laid at Easter Langlee between 2011 and 2015 appears to have been completely overlooked. And not a single Scottish politician has been prepared to back calls for an investigation into a saga which resulted in the loss of many millions of pounds for investors and taxpayers alike.