Former ANZ financial adviser jailed for $6 million Ponzi scheme

A former Sydney financial adviser has been handed a six-year jail sentence over a 23-year-long Ponzi scheme that saw her swindle close to $6 million from more than 150 clients.

Melinda Scott operating her own financial planning and advisory business, Roach Graham Scott, between January 1989 and December 2012 and between February 2004 and May 2012, was an authorised representative of Millennium 3 Financial Services, a wholly-owned subsidiary of ANZ Bank.

The Australian Securities and Investments Commission began investigating Melinda Scott in 2011 and banned her from managing a business in 2012.

This week Scott was convicted on three charges of dishonest conduct and four charges related to making and using false documents involving $5.9 million of her clients’ money.

ASIC said in a statement Scott’s misconduct largely involved long-term superannuation and annuities products.

Scott was found to have made regular payments to some clients who were expecting pension payments, and so ASIC estimates the net benefit of the scheme to Scott was approximately $2.9 million.

The $2.9 million was reportedly spent on home renovation, holidays and school fees, as well as managing the costs of her business.

Scott pleaded guilty to deceiving her clients in December 2013, with the court hearing she convinced clients, including close friends, to have their financial documents sent directly to her. She was accused of doctoring statements to hide her client’s depleting bank balances.

A spokesperson for ANZ told SmartCompany the bank immediately suspended Scott’s authorisation to deal with clients while her conduct was investigated, and later revoked her authorisation with Millennium 3.

“A large team of people both from within ANZ and from Clayton Utz and Ernst & Young have worked tirelessly to conduct a thorough investigation into Ms Scott’s files,” the spokesperson says.

ANZ has compensated 140 of Scott’s clients who were found to have been affected by her scheme. A total of $5.715 million has been paid to date and ANZ is addressing some tax issues with the ATO to compensate a remaining 17 clients affected by the scheme.

“We have also completed a thorough review of our processes and the circumstances surrounding the incident,” says the ANZ spokesperson.

“We are committed to strong compliance and have worked to ensure we have robust processes in places across our advisory network."

Andrew Morgan, forensic services partner at BDO Australia, told SmartCompany the scheme shows how much trust individuals and business owners place in their financial advisers.

“Ordinarily you would expect to send your financial statements to your adviser and they would review is reasonably consistently,” Morgan says.

“But in this case, the clients trusted the adviser too much, which allowed them to keep on going.”

Morgan says small business owners must understand every transaction their advisers make on their behalf and although the ASIC has been taking an increasingly high-profile role in educating mum and dad investors about the risks around financial advice, the same risks apply to business owners, especially when it comes to insurance and superannuation products.

“The same rules apply as with any investment scheme,” he says.

“It’s not too different to starting a small business … you are putting a lot of faith and trust in people.”

Deborah Kent, national president of the Association of Financial Advisers, told SmartCompany small business owners should equate finding a financial adviser with hiring an employee.

“You should do reference checks, do your homework,” Kent says.

“Find out who they are licensed to, whether they are independent. Check out their education and qualifications and if they are a member of a professional association. If they are, they will be working under a code of conduct.”

While Kent says ASIC will soon oversee a register of financial advisers, often the best way to find a reputable adviser is to get a referral from a previous client or your existing accountant or lawyer.

This article first appeared on SmartCompany.