An Auckland foreign exchange broker has seen his prison sentence reduced on appeal after a court ruled it was hard to see how he could have co-operated with authorities more after alerting them to his multi-million-dollar Ponzi scheme.
Kelvin Clive Wood was sentenced to a term of six years and three months behind bars last July for his premeditated fraud and deception between 2010 and 2017.
A minimum period of imprisonment of two years and 11 months was also ordered by the late Judge Robert Ronyane in the Auckland District Court.
Wood, who has also been declared bankrupt, was once considered a highly successful financial investor and dealt with sums of up to $200m for his clients.
Last month, the man who is now in his 70s, challenged the prison sentence at the Court of Appeal.
His lawyer, barrister Kathryn Maxwell, argued a minimum period of imprisonment was not required. She also said the starting point adopted by the judge, which finished with the six year and three month term, was too high.
She said a greater discount should have been awarded to Wood for his significant co-operation with authorities and previous good character over a lengthy financial career.
Forex NZ Ltd and Forex NZ 2000 Ltd were the trading names of Wood's foreign exchange brokerage, which also had Wood's son Adam Wood as a director and shareholder until 2015.
The Court of Appeal delivered its judgment today, a copy of which was released to the Herald.
Justice Denis Clifford, Justice Simon France and Justice Graham Lang said it is "difficult to see how Mr Wood could have co-operated more fully with the authorities".
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"He made the first approach [in 2017] to the FMA (Financial Markets Authority). He then frankly acknowledged his offending in voluntary interviews by both the FMA and SFO (Serious Fraud Office."
In July and August 2018, Wood told the SFO about $9.8m of principal and interest was still owing by the two companies to some 20 investors. He also admitted providing 223 false investment reports to clients between 2008 and 2017 to enable the companies to continue to trade.
He said he knew the companies' clients would have sought to withdraw their funds if they knew the true situation regarding their investments.
Wood, who had previously worked in the banking sector and described himself as "the youngest manager in ASB", added the investment company continued to trade during this period because he believed it could trade its way out of trouble.
"The fact that Mr Wood derived no personal gain largely reflects the nature of a Ponzi scheme, in which the primary motivation of the offender will generally be the need to use incoming funds to repay existing investors," the Court of Appeal judges said.
Between 2008 and 2017, 21 clients deposited about $22m with the investment company.
All did so in reliance on assurances by Wood that their capital would not be at risk. But, Wood pooled these funds and did not separate them into different bank accounts or sub-accounts and as a result, he became unable to keep accurate records of each client's investment.
During the same period the investment company suffered losses from foreign exchange trading activities. None of the clients was aware their capital had been eroded by the foreign exchange trading losses.
Rather than advise his clients, however, Wood provided them with investment reports purporting to show the current balances of their investments. The frequency of the reports varied depending on the requirements of each client.
In some instances Wood even created fictitious returns on clients' investments, while other reports referred to foreign currency transactions which did not occur.
Wood said he had an "ultra-ego" which he was unaware of prior to his criminal charges.
Some $22.5 million was invested with Wood over about a seven-year period, with more than $7m of investment principal belonging to at least 18 investors lost, the court heard at his sentencing.
Three victims suffered losses exceeding a million dollars, with one losing $1.7m.
An elderly victim said her life savings had vanished due to the fraud. In a statement read at sentencing, she recalled when Wood was confronted he made an offhand comment about being only concerned of facing a possible prison term.
However, despite his deception and lies, Wood had led an otherwise "blameless life", the Court of Appeal judges said.
"Wood was able to rely on several mitigating factors other than his guilty pleas. The first was previous good character. He did not begin to offend until he was in his late 50s," their decision reads.
"Prior to that he had led a blameless life, and the references provided to the judge at sentencing make it clear he had undertaken many worthwhile roles in the community. We consider a greater discount than the two per cent allowed by the Judge was required to reflect this factor."
The appeal judges said combined with Wood's remorse, his age and associated health issues, a discount of at least 16 months, or 15 per cent, was required.
After being charged, the case progressed quickly through the courts and Wood promptly entered guilty pleas to two representative charges of obtaining by deception and theft by a person in a special relationship.
"This was undoubtedly a complex prosecution and we consider the entry of guilty pleas at first appearance in such a case would be unusual," the Court of Appeal said.
"In practical terms we therefore consider Mr Wood entered his guilty pleas at the earliest opportunity. Furthermore, the pleas saved the state the cost of a lengthy trial."
A further discount of 23 months, or 25 per cent, was warranted to reflect Wood's guilty pleas, the appeal judges ruled.
They quashed the existing sentence of six years and three months' imprisonment and substituted it with a total period of five years and six months' imprisonment.
However, the judges were not convinced Wood's minimum period behind bars should be completely quashed.
"If Mr Wood is not required to serve a minimum term of imprisonment (MPI) he will now be eligible to apply for parole after serving just 22 months of his sentence," they said.
"That outcome needs to be considered having regard to his overall culpability and the substantial losses he caused vulnerable victims to suffer. When that is done we consider the usual parole provisions would be insufficient to recognise the sentencing purposes of deterrence, denunciation and the need to hold Mr Wood accountable for his offending."
The Court of Appeal kept the MPI but lowered it by five months to two years and six months.