COMPLAINT TO MERYN GATES - FINANCIAL SERVICES COMPLAINTS LTD – RE EVERGREEN (ORIGINAL TRUSTEES PERPETUAL/CURRENT TRUSTEES FOUNDATION) AND MARAZION (OW

Marazion Perpetual Trust

COMPLAINT TO MERYN GATES - FINANCIAL SERVICES COMPLAINTS LTD – RE EVERGREEN (ORIGINAL TRUSTEES PERPETUAL/CURRENT TRUSTEES FOUNDATION) AND MARAZION (OWNED BY STEPHEN WARD OF PREMIER PENSION SOLUTIONS

Dear Meryn

In response to a complaint made by an Evergreen Retirement Trust (ERT - NZ QROPS) member, which was responded to by Simon Swallow, I have copied and pasted Mr. Swallow’s email response below and put my comments and responses in bold at the end of each paragraph. I have also copied and pasted the trustee’s and auditors’ statements from the Financial Report and put my comments and responses in bold. I have copied this email in to Mr. Swallow and the various parties connected to ERT and have summarized the questions which Mr. Swallow, EY, the trustee and solicitors need to respond to by return at the end of this email.
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SIMON SWALLOW, ERT: Many thanks for email below which we assume forms the basis of your compliant and that the effective compliant is that you would like to transfer out of the Evergreen Retirement Trust to another scheme and thereby break the terms of the lock-in that you signed. I am very concerned that Mr. Swallow confuses “complaint” with “compliant”. Perhaps he does not understand the difference?

The election to lock-in your funds

The election to lock-into the Evergreen Retirement Trust was a decision made by yourself. No it wasn’t. It was imposed by Stephen Ward as a condition for liberating 50% of the pension transfers through the Penrich and Spectrum-funded Marazion loans. (see question 1 below)

When Evergreen Retirement Trust received your election to lock-in we did so in good faith and it allowed Evergreen Retirement Trust’s investment committee to determine the funds that it would invest in. Nonsense. The funds included Penrich and Spectrum which formed 41% of the assets and which were used as funding for the Marazion loans. The lock-ins were designed to prevent ERT members from transferring out or receiving benefits and to ensure the loans were tied in to the ERT funds for the identical five-year period. (see question 2 below)

The election to lock-in is a binding agreement and as stated lasts for five years. The five-year “lock in” is identical to the Marazion loan term and was set up specifically to use the Evergreen funds to repay the loan. Swallow must now be aware that tPR and HMRC have formally stated that pension liberation is both a scam and a fraud. In the full knowledge that the five-year lock in letters were specifically set up to operate pension liberation, Swallow is complicit in a pension liberation scam. In fact, to quote Stephen Ward: "The cases will also get a letter which (without mentioning any loan) will ask for agreement for the client to have their fund locked into Evergreen for five years. This prevents any investment switch, transfer out or benefits being taken." (see question 3 below)

At the end of your ‘lock-in’ period you will be free to transfer out of your Evergreen Retirement Trust account. Transfer what out? Evergreen is shrinking faster than a balloon full of pricks. The loans will have increased in value by at least 50% at the end of the five-year term, so what are the chances of any of the fund being left after the loans have been repaid? Swallow must remember that the Evergreen victims have been paying huge amounts of interest to “borrow” their own pension funds i.e. Penrich and Spectrum. Now that Penrich has allegedly been redeemed in full, to whom have the Penrich-funded Marazion loans totaling £1,876,432.46 been assigned? In other words, what has Penrich been replaced by as assignee of Stephen Ward’s Marazion loans? (see question 4 below)

We stand by the lock-in and its requirements as it has shaped the investment strategy of our investment committee to invest in funds where they believe that value could be achieved for Evergreen Retirement Trusts unit holders. So why has £2,241,693 been transferred out? Was this in respect of members who did not have Marazion loans? Evergreen’s “investment committee” have known all along that Penrich and Spectrum (forming 41% of the assets) consisted of unsecured personal loans – and that the “credit checks” were a meaningless box-ticking exercise. In fact, to quote Stephen Ward: "Generally the credit check will tell us absolutely nothing which is fine." What kind of investment strategy is that? (see question 5 below)

Illiquid assets do not equate to high risk simply because they are not readily saleable (in particular commercial property). Illiquid assets within a pension fund most certainly do constitute high-risk – especially commercial property. A pension fund is supposed to be set up for the purposes of providing income in retirement. Liquidity is supposed to be preserved so that if a member reaches the age of 55, he can take out 25% tax free. What happens if a member dies? Or reaches retirement age? (see question 6 below)

As the election to lock-in has set investment strategy the removal of the election to lock-in would disadvantage all members as they would be incrementally exposed to assets that have a redemption penalty on them. As £2,241,693 has been transferred out in the past two years, Swallow appears to be admitting that the members with Marazion loans have already been substantially disadvantaged. And now Swallow is saying there’s a redemption penalty? It gets worse as this was never declared to the members. Redemption penalties constitute high risk to the members. So why are investments being chosen which have redemption penalties at all? There are plenty of investments available without redemption penalties. In 2014 and 2015, total assets of £10,084,489 were sold and assets of £7,296,796 were purchased. So were these sales subject to redemption penalties? Or is this just a dishonest ruse to protect and secure the Marazion loans? Also in 2014 and 2015, a total of £2,241,693 was indeed transferred out of Evergreen (according to the 2015 financial statement). Swallow needs to explain why these transfers out were allowed when those with 50% Marazion “loans” are denied transfers out. If the explanation is that only those with Marazion loans funded by Penrich and Spectrum are “locked in” for the same five-year period as the Marazion loan terms, then the investment strategy is clearly set up as part of a pension liberation scam. (see question 7 below)

We are not prepared to pass this additional risk onto the existing members. As above, £2,241,693 has already been transferred out, so Swallow is therefore de facto admitting that additional risk has already been passed on to existing members. There is already more than enough risk in the Evergreen fund. Evergreen was removed from the QROPS list in November 2012 and has clearly been run to facilitate a pension liberation scam. The members are exposed to the risk of a 55% unauthorised payment charge on the Marazion loans i.e. Penrich and Spectrum which constituted 41% of the fund’s “assets”. The members also run the risk of a 55% unauthorised payment charge on the entire transfers if HMRC deems that Evergreen never met the QROPS requirements from the start. (see question 8 below)

This is outlined on the HMRC website: “HMRC will usually pursue any UK tax charges (and interest for late payment) arising from transfers to overseas entities that do not meet the ROPS requirements even when they appear on this list. This includes where taxpayers are overseas. HMRC will also charge penalties in appropriate cases.”

https://www.gov.uk/government/publications/list-of-qualifying-recognised-overseas-pension-schemes-qrops

It was entirely the responsibility of Evergreen and the trustees to ensure that ERT complied with HMRC’s requirements in general, and did not involve pension liberation. To have failed so abjectly to do so is clear negligence on the part of Swallow and the trustees. Indeed, to have entered into an arrangement involving pension liberation with – of all people – Stephen Ward of Premier Pension Solutions immediately after his previous liberation scheme: Ark, had been declared a “fraud on the power of investment” defies belief. Swallow needs to explain his relationship with Ward in detail and provide complete and transparent disclosure of the fee and commission arrangement set up between ERT and PPS. (see question 9 below)

If you have issues with the advice that you received in respect of signing the lock-in then that is for you to take up with the firm responsible for providing you with that advice. Swallow knows perfectly well that the “advice” was provided by Stephen Ward of Premier Pension Solutions – a tied agent of AES Financial Services which was not regulated for pension transfers. What was Evergreen doing accepting ANY transfers from an unregulated adviser – let alone over 300 of them totaling over £10m? (see question 10 below)

Evergreen Retirement Trust has never provided advice to any member which is why all members were required to come through financial advisers. Swallow must surely know that no regulated, conscientious, ethical financial adviser would ever advise a client to transfer to a scheme which never met the HMRC QROPS requirements in the first place (a scheme involved in pension liberation with toxic, high-risk, illiquid assets is hardly compliant). (see question 11 below)

The investments of Evergreen Retirement Trust:

In February 2015 the investment in the Penrich Global Macro Trust was redeemed in full at the request of the Trustee due to the delay in the provision of audited accounts for the Penrich fund and the auditor’s inability to verify the valuation of the underlying assets. So, did the trustee and EY know that Stephen Ward had assigned 50 Evergreen members’ Marazion “loans” totaling £675,250 in November 2012 to Penrich Global Macro Fund (Cayman Islands)? And that the total amount of Marazion/Evergreen loans assigned to Penrich eventually totaled £1,876,432.46? And that those assigned to Spectrum eventually reached £2,162,996.21? Evidence shows that not only were the trustee and Evergreen fully aware of this, but also the scheme’s solicitors DLA Phillips Fox. (see question 12 below)

The proceeds of the redemption were fully paid in cash without impairment. And what happened to the £1,876,432.46 worth of loans? To whom were they assigned? (It is not hard to conclude that they were probably re-assigned to Spectrum which remains in the Evergreen fund). (see question 13 below)

The investment manager has also liquidated some of the longer dated, more illiquid investments, recognizing that the funds have limited liquidity and need to be in a position to meet member and Scheme liabilities as they occur. It would appear that pretty much the entire fund’s assets have been “churned” in the past two years. In the full knowledge that as ERT was no longer on the QROPS list and could not accept any new transfers, why is Swallow now claiming that transfers out cannot be allowed because of redemption penalties and “unfairness” to other members? (see question 14 below)

The scheme’s auditors, EY, qualified the 31 March 2014 audit opinion because the audit of Penrich Global Macro Trust, Penrich Global Macro Fund Fixed Income and Spectrum Sterling Income Fund had not been completed. It is clear that this was deliberate in order to hide the Marazion loans assigned to them which totaled £4,039,428.67 i.e. 35% of the net assets of the Evergreen GBP fund. (see question 15 below)

Subsequent to signing the Scheme’s financial statements in December 2014, the assets of Penrich were fully redeemed and cash received into the scheme’s accounts on 25th February 2015 with no impairment to the Penrich fund. The unqualified audited accounts of Spectrum y/e 30th June 2014 were received on 11th March 2015 and confirmed there is no impairment of the assets of the fund. Of course there would be no impairment to the Spectrum fund as it probably now consists of all the assigned Marazion loans. Full, immediate disclosure of the assets of the Spectrum fund is now required. (as question 15)

After Evergreen was removed from the QROPS list in November 2012, no new pension transfers from the UK have been made. There is compelling evidence that UK transfers did indeed continue well past the removal of Evergreen from the QROPS list. Furthermore, Marazion loans were arranged by Stephen Ward for many months after this date – an event which “locked” members into a pension scheme which was no longer on the QROPS list and never likely to be. Swallow needs to confirm the date of all the transfers and Marazion loans post QROPS suspension. (see question 16 below)

The scheme has therefore needed to manage liquidity by redeeming some underlying positions to generate cash to meet scheme expenses and member payments. This has had a subsequent impact on decisions of the investment committee and Evergreen has worked with legal counsel in NZ (DLA Philips Fox) and UK to resolve the issues with HMRC. HMRC are not likely to reinstate Evergreen’s QROPS status, and in fact are likely to declare that it was never a QROPS in the first place. This will expose the members to a 55% unauthorised payment charge on the entire transfers – rather than just the 50% Marazion/Penrich/Spectrum “loans”. (see question 17 below)

Service contracts entered into by Evergreen for admin, trustee and other services have minimum fixed fees. Due to the lower levels of funds under management in ERT than initially anticipated, and little prospect of new fund inflows, the absolute fee levels are high when compared with returns generated from funds under management so net returns to ERT members have been impacted. The manager is reviewing how to reduce costs of running the scheme and has closed the NZD funds following the redemption of all the members of the NZD funds as they were too small to support themselves. ERT has had three years to do this but appears to have made zero progress – hence the urgency for the members to transfer out of what is indisputably a toxic and incompetently-run scheme. (see question 18 below)

FOUNDATION CORPORATE TRUST: “We certify that all benefits required to be paid from the scheme in accordance with the terms of the trust deed have been paid”. The trustee needs to explain why benefits have been paid out when Swallow is claiming to stand by the lock-ins. Need to see the trust deed 1.12.11 and the amendments of 30.3.12, 22.6.12 and 20.3.14. (see question 19 below)

Amendments made in 2014 were to allow the scheme to receive transfers from Ireland and other jurisdictions and impose whatever conditions are necessary on those transfers to allow them to be made in accordance with the law of the transferring jurisdiction. The scheme is structured as a foreign investment zero-rate PIE and offers a tax efficient retirement savings product to NZ and offshore investors. I would hardly call 55% tax as “efficient”. A number of Evergreen members have already received letters and home visits from HMRC and it is only a matter of time before the tax demands start arriving. (see question 20 below)

Scheme owns 75% of Spectrum 2015 and 80% in 2014. By any standards, a pension fund owning 75% or 80% of a single fund is reckless in the extreme. Complete disclosure is now required as to exactly what unsecured, un-credit-checked personal loans Evergreen currently owns so that the transfer out requests can be met. (see question 21 below)

Scheme invested in funds managed by Penrich Capital Group. Penrich’s chief investment officer is also on the investment committee of the investment manager, Clearwater Capital LP. This is a clear conflict of interests – you should not have the investment manager of the scheme also being the chief investment officer of the assets. (see question 22 below)

Scheme’s investments in Penrich were fully redeemed in February 2015. The question remains: what happened to the £1,876,432.46 worth of loans assigned to Penrich by Stephen Ward – the operator and beneficial owner of Marazion? (as questions 12 and 15)

Key parties: as at 31.3.15 trustee = Foundation Corporate Trust. Investment and Admin Manager = Evergreen Capital Partners with admin delegated to Trustee Executors Ltd. And investment management to Clearwater Capital LP.

AUDITORS EY: to ERT members “summary financial statements on pages 7 to 15 are derived from the audited financial statements of ERT y/e 31.3.15 and do not contain all the disclosures required for full financial statements under accounting practice in NZ. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of ERT. So please can the full audited financial statements of ERT be provided to the members immediately – as well as a full audit trail of Penrich and Spectrum’s assets/loans. (see question 23 below)

In terms of investments made by Evergreen Retirement Trust the latest set of audited accounts clearly sets out the financial position of the scheme and the ongoing performance reports show the performance of the funds that you are invested in and their performance. As you can see the Evergreen Retirement Trust has never loaned money to members of the Scheme. This is entirely untrue and Swallow knows this as he was closely involved with Stephen Ward in the operation of the Evergreen/Marazion pension liberation structure. It beggars believe that EY were not fully aware of this as the scheme’s own solicitors were also fully aware of it from the start. (see question 24 below)

There is no qualification to the audit to any of the assets of the scheme which have been revised in accordance with the applicable regulations and accounting legislation currently applicable. The investments in Penrich were fully redeemed in cash at full value on the date of redemption.

The removal of Evergreen Retirement Trust from the QROPS list is documented in the financial statements and Evergreen Retirement Trust still meets its reporting obligations that come about as a result of having accepted funds in as a QROPS. But ERT has not reported the pension liberation structure which tied the five-year Marazion loans to the scheme. Had ERT ensured the scheme was compliant in the first place, it would not have been removed from the QROPS list. Therefore, the managers and trustee have clearly been negligent, as well as clearly involved in a pension liberation scam.

LIST OF QUESTIONS THAT ERT, THE TRUSTEE, DLA PF AND EY NEED TO ANSWER BY RETURN:

1. A full explanation as to the real purpose of the five-year lock in agreements is required. Clearly, the explanation that Swallow has given is false since £2,241,693 was transferred out in 2014 and 2015. Why was this amount allowed to be transferred out while those with Marazion loans are being denied transfers out? Also, is this reflected in the amendments to the trust deed?
2. Full disclosure is now required regarding the Spectrum and Penrich “assets”. The answer that they failed to provide annual reports is clearly false and designed to obscure the fact that the fund’s own assets were used to provide the funding for the Marazion loans.
3. As a pensions “professional”, Swallow must have been fully aware that pension liberation would expose the members to a 55% unauthorised payment charge. Pension liberation is not in itself fraud, as long as the member is fully aware of the tax consequences. But being complicit in a scheme that presents the “loans” as unconnected to the transfers is fraudulent – as well as claiming that the Marazion loans were not connected to the pension scheme when in fact they were undoubtedly so through the assignment of the loans to the underlying assets of the ERT fund i.e. Penrich and Spectrum. Swallow must now provide complete and transparent disclosure of the extent of his involvement in this scam.
4. To which party have the Penrich-assigned Marazion loans totaling £1,876,432.46 now been assigned?
5. Swallow must now explain exactly why £2,241,693 was transferred out in 2014 and 2015 and why those with Marazion loans are being denied transfers-out.
6. Swallow has stated that the ERT assets are illiquid. He must now explain EXACTLY what the assets are and have been from the start.
7. Over £10m worth of assets have been “churned” since 2014. Swallow must now explain what the redemption penalties are that the members have been and are exposed to and why investments with redemption penalties were chosen at all.
8. Swallow appears to be admitting that the £2,241,693 worth of transfers out exposed existing members to risk. Why is Swallow making a distinction between those members who already transferred out and those to whom he is refusing transfer-out requests?
9. Why did Swallow not ensure that ERT complied with HMRC’s QROPS requirements in the first place? And why did he enter into a business arrangement with Stephen Ward after the Ark debacle? What exactly were ERT’s terms of business with Premier Pension Solutions SL and Marazion Ltd?
10. Why did Swallow and the ERT trustee accept any transfers referred by an unregulated adviser? Did ERT not check the tied agent agreement between Premier Pension Solutions and AES International? (Had they done so, they would have established that pension transfers were specifically excluded – and therefore unregulated).
11. Did Swallow ensure that the members were given clear information about the ERT scheme? In particular, was he satisfied that Stephen Ward and Continental Wealth Management (introducers/advisers to the members with loans) had warned the members that ERT invested in high-risk, illiquid assets with punitive redemption penalties?
12. To which party were the Penrich-assigned loans re-assigned?
13. Were the Penrich-assigned loans assigned to Spectrum and therefore still remain as “assets” of the fund (i.e. unsecured personal loans with credit checks which were nothing more than a box-ticking exercise)?
14. Why were investments with redemption penalties chosen over those without penalties during the £10m churning exercise? Full disclosure and a full audit trail of all the investments since inception is now required – including details of all redemption penalties accepted by ERT.
15. The full audits of both Penrich and Spectrum are now required, with complete disclosure about the assignment of the Marazion loans.
16. A complete schedule of all the transfers post QROPS removal is now required as it is clear that transfers and Marazion loan agreements continued past the removal date.
17. What “member payments” have been made that necessitated the redeeming of assets? ERT is denying transfers out and claiming to “stand by” the lock in agreements. Also, what is ERT, the trustee and Stephen Ward proposing to do to protect the members in the event that they receive demands for 55% tax on the entire transfers rather than just the Marazion loans?
18. Will Swallow now confirm that he will put his firm’s professional indemnity insurers, as well as those of the trustee and Premier Pension Solutions/AES Financial Services, on notice to compensate the members for the negligence which has resulted in the poor performance of the fund which appears to be full of toxic assets?
19. Please provide a copy of the original trust deed and subsequent amendments. An explanation from the trustee is also required as to why some members have received benefits and transferred out when others are denied so. What exactly is the distinction? (Presumably, the trustee has allowed those without loans secured on the fund to transfer out while refusing those with loans).
20. What steps are ERT, the trustee and Premier Pension Solutions/AES/Marazion taking to indemnify the members against unauthorised payment tax charges? And did members from Ireland and other jurisdictions also receive Marazion loans?
21. Exactly what did Spectrum and Penrich comprise of in terms of assets. As they provided the funding for the Marazion loans in “tranches” of completing transfers, complete disclosure is now required by return.
22. Please explain exactly why the conflict of interest was allowed to arise in terms of having a manager of the fund also being a manager of an asset i.e. Penrich?
23. Please provide full audited statements for ERT for all years since 2011 – together with the audit trail showing the Marazion loans which were executed in tranches of transfers administered by Stephen Ward of Premier Pension Solutions/Marazion.
24. As the scheme clearly did loan money to the ERT members, and Swallow was fully aware that the Marazion loans were assigned to Penrich and Spectrum, and was fully complicit in the operation of the ERT-asset-funded loans operated by Stephen Ward through Marazion from the start, will he please confirm that he and his firm are now fully liable – along with the scheme trustees – for the financial loss and damage that the ERT members will now suffer.
25. What investigations did EY do into the reasons why Penrich and Spectrum failed to produce annual reports? Were EY in on this scam too?
26. Finally, complete disclosure is now required as to why Premier Pension Solutions/Marazion/AES, and ERT, and the scheme’s trustees and solicitors did not give the ERT members clear information and warnings about the structure of the Marazion loans and the risks of transferring to ERT including:
• The fact that after five years the Marazion loans of 8.5% compound would eclipse 75% of the residual fund IF the member had reached 55 – and considerably more (if not all) if the member was younger than 50 at the date of transfer
• The fact that no evidence of competent advice from a regulated adviser had been given to any of the ERT members with Marazion loans was provided in advance of the transfers to ensure a NZ QROPS was suitable
• The fact that Premier Pension Solutions/Marazion and ERT were working in collusion (with the clear knowledge of the scheme’s solicitors) that pension liberation was being operated and was likely to expose the members to unauthorised payment charges by HMRC
• That Swallow entered into the ERT/Marazion arrangement in the clear knowledge that Stephen Ward had just (in May 2011) been involved in a major pension liberation scam – Ark - which had ended in disaster and financial ruin for 487 victims – and had been declared a fraud on the power of investment by the High Court

Finally, the reality of the Marazion loans in relation to the Evergreen fund must be examined and the inevitable financial damage that the ERT members are now exposed to must be outlined in full:

Example: a member aged 45 with a £50k transfer and a £25k/50% Marazion loan will be left with £45k in the ERT fund after paying the 10% transfer fee. At the end of the five-year loan term/ERT lock-in, he will be left with a loan balance of £37k to pay off. If he cannot pay off the loan, and is forced to extend the loan/lock-in for a further five years, he will be left with a loan balance of £55k to pay off when he reaches age 55. (This assumes that the interest rate does not increase from 8.5%). Based on the zero prospect of the ERT growing (and every chance of it shrinking), the entire fund would be needed to pay off the Marazion loan with £10k still left owing.

On top of facing losing his whole pension fund and remaining £10k in debt, this member is also at risk of a 55% unauthorised payment charge of £13,750 (plus interest) on the Marazion liberation loan or £27,500 (plus interest) on the entire transfer to ERT. Therefore, this member’s original transfer of £50k and loan of £25k will have cost him his pension and ruined him financially with crippling tax liabilities.

In fact, the above example is based on the very member to whom Swallow was responding above.

If there had ever been any doubt that Stephen Ward and Simon Swallow were indeed jointly complicit in this scam, the following statement by Ward in January 2013 should dispel this misconception:

"It has become apparent that Evergreen are going to be off the HMRC QROPS list for a prolonged period. It is it seems at the very least going to require a change to the scheme rules in order to prohibit the assignment of benefits. I will shortly prepare a note to be issues to all relevant introducers.

This is frankly a big disruption for us but not anything we cannot work through. Cases seeking liquidity should be directed to the Southlands solution, 50% loan, 10% fee and (in reality) 40% investment value."

I trust you will ensure that all those who were party to the Evergreen/Marazion scam will fully and promptly answer the above 26 questions. I also trust that all Evergreen/Marazion victims will now be allowed to transfer out of this toxic, high-risk arrangement and compensated for their inevitable losses and liabilities.

Finally, it is abundantly clear that it was in none of the ERT's members' interests to transfer their pensions to a New Zealand QROPS in the first place as they were mostly resident in Spain. AES International, who had a responsibility for both compliance and lawfulness on the part of their tied agent, Premier Pension Solutions, should have put a stop to this when Stephen Ward promoted Evergreen/Marazion to an AES sales conference in 2012. Had AES taken the preventative measures they should have done at the outset, none of the 300+ Evergreen victims would be facing financial ruin today.

Regards, Angela Brooks – Chairman Ark Class Action

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