Plan Sponsors Urged to Exercise Caution When Appointing Trustees

16 July 2012 (PLANSPONSOREurope.com) – Giles Orton, Partner of Eversheds, has warned UK plan sponsors to exercise caution when appointing trustees, following the outcome of a criminal prosecution concerning the GP Noble Trustees (GPNT) case by the Serious Fraud Office (SFO).

According to reports Graham Pitcher, a director of Nottingham-based GP Noble Trustees Ltd was jailed for eight years for his part in a £52m pension fund fraud.

Orton told PLANSPONSOR Europe the case underlines just how important it is for plan sponsors to make the right decision when appointing trustees to their pension fund.

“There is a lesson for employers that if you are going to appoint a trustee above all you need to be able to trust them.

“You don’t want to appoint a trustee who is going to run away with the money because you have to pick up the deficit if it doesn’t drive you bankrupt.

“I was familiar with Pitcher after he set his business up and he was marketing aggressively that he would be more friendly to employers than other trustees. The fundamental point is you appoint a trustee to have custody of millions of pounds of pension scheme assets.

“Look at membership of professional organisations. Are they on the regulator’s panel? And track record and is there a substantial organisation behind them?”

Last week the Pensions Regulator in the UK revealed details of the action taken by to disrupt fraud and protect member benefits in the GP Noble Trustees (GPNT) case, following the outcome of the criminal prosecution.
The regulator published a report on its regulatory intervention under section 89 of the Pensions Act 2004.

In July 2008 as a result of intelligence-gathering activities, the regulator became concerned over GPNT’s investments of pension scheme assets, which was corroborated by similar concerns raised by the Pension Protection Fund (PPF) at this time. The central feature was the disinvestment of some £52m of assets belonging to nine pension schemes overseen by GPNT.

The regulator took urgent action to suspend GPNT and trustee Graham Pitcher and appointed an independent trustee to administer the nine schemes, with exclusive powers over them. The regulator also reported its concerns to the SFO, which initiated an investigation.

The appointed trustee, working with their legal advisors, undertook to recover the funds via the civil courts and has so far recouped £36m, with further action ongoing. GPNT, Graham Pitcher and Gary Cordell were subsequently prohibited by the regulator’s Determination Panel from acting as trustees of trust schemes in general. The Panel’s determinations in the case have also been published.

Pensions Regulator Chief Executive Bill Galvin said: “We gather intelligence across the pensions landscape to detect potential fraud and other risks to members. We will take swift action to disrupt fraud, protect members’ savings, and to deter such events from happening in the future. Fortunately, large scale pension fraud is rare.
“We will use our own powers to ensure that those running pension schemes are fit and proper to do so - and work with other agencies, such as the police and SFO, where there’s evidence of fraud.”

The Pensions Regulator also points out that Gary Cordell was subsequently acquitted of all charges brought by the SFO.

Three criminal trials have been completed, with two people convicted and three acquitted.

PLANSPONSOREurope Staff
editors@plansponsoreurope.com