Con artists netted big-time financiers

Mark Hotchin. Photo / Brett Phibbs

A woman with a previous fraud conviction, an elderly former shoe shop manager and a female accomplice who rose no higher than a private in the army conned "savvy professional investors" Mark Hotchin and Kerry Finnigan in a $15 million Rotorua-based Ponzi scam.

Mr Hotchin and Mr Finnigan together invested $680,000 of their personal money. They did so without doing their homework, handing over large sums despite commenting that there was "bugger all information" about the schemes.

Margarite Huia Papple, known as Lee, 56, and Tina West, 51, were jailed in 2005 for the maximum five years. Former shoe salesman Bill Papple, 74, was sentenced to two years.

The scam they ran from 2000 to 2002 was like a goldmine for them but one certain to end badly.

Before they launched the schemes in 2000, the Papples lived a modest life in a rented house. Their only asset was a piece of land on the Rotorua lakefront which they sold for $50,000 to get their new lives as high-rolling business people under way.

In the next two years Lee Papple spent $2 million raised from their victims on herself, husband and family. The SFO listed these as:

* $1.4 million on building and furnishing a mansion in Rotorua

* $260,000 on general living expenses

* $186,000 on travel and accommodation

* $33,700 on jewellery

* $60,000 on art

* $7260 on a cloak

* $279,000 on a house for her son.

Prosecutor Philip Morgan, QC, told the Rotorua District Court that a suggestion West had not spent lavishly was misleading. In 2002 alone she had taken $818,000 from the two companies the schemes were operated through. Some had gone to pay interest to out-of-pocket investors in a previous company she was involved in but the SFO did not have access to her Australian bank accounts and so did not know what she spent the rest on.

The trio spent a quarter of the money the scam raised on themselves, half on paying so-called interest to investors and a quarter on "ridiculous" schemes they found on the internet, the court heard during the 2004-2005 case.

That the scam operators were themselves victims of more "sophisticated criminals" based overseas did not mean they could wash their hands of the lies they told their investors, Mr Morgan said.

They worked hard to keep up the facade that their companies were hugely successful.

Lee Papple, a Mormon, self-assured and confident, and her outgoing and friendly husband were able to get people to place their faith and trust in them and their money in their hands. What those who were duped were unlikely to have learned from Lee Papple was that she had fraud convictions from 1996 under a previous name, Marguerite Huia Seymour.

As a life insurance agent she admitted she entered bogus superannuation contracts that earned her commission of $12,000.

The stakes in her next fraud quickly became much higher.

The trio sourced "investors" from family, friends and the church, convincing people that they were fortunate to get such a ripe opportunity.

As pressure mounted to pay "interest" owed to existing victims, the rates they offered increased dramatically from 3 per cent a month up to 100 per cent. In November 2001, desperate for new funds, they went to Kaitaia to meet West's uncle, businessman Lloyd Johns, hoping to tap into his wealthy Auckland business acquaintances.

Mr Johns later testified that he was paid $75,000 for recruiting Mr Hotchin, Mr Finnigan and another businessman who together invested almost $1 million.

Mr Johns had believed the schemes were legitimate but when asked to describe to the court a particular deal that was offered, said he now thought it "absurd". That had involved US$10 million ($12.7 million) and a promised return of 120 per cent over two months.

Asked how the investment would generate such high returns, Mr Johns said the funds would be held in a New York bank account in Bill Papple's name and would be electronically canned two or three times a day and would somehow be used as security for trading.

Mr Hotchin invested $561,000 in one Papple/West scheme and made an overall loss of almost $225,000.

Mr Finnigan invested $120,000 in two instalments and made a small loss.

The SFO told the court that the money the scam operators did invest went into schemes they found on the internet, some of which were known to international fraud investigators.

Two in this category were called Volt Consortium and Monarch Investment Group. "In my experience the funds advanced to Volt and Monarch are almost certainly lost forever to unknown parties overseas," the SFO's case officer Alex Tan told the court.

Mr Hotchin told the court he did not hold responsible an acquaintance who introduced him to the papples and West.

"The error was in the people not being trustworthy and not honouring the contract."