Former CEO of Hanover Finance Mark Hotchin. Photograph / Paul Estcourt
Former CEO of Hanover Finance Mark Hotchin. Photograph / Paul Estcourt
Mark Hotchin lost $224,766 in a Ponzi scheme that was promising to return him 160 per cent over two months.
He invested $561,066 (US$250,000) into the scheme in March 2002 and received three equal "profit payments" totaling $336,600. His capital was not repaid.
In evidence during the deposition hearing in2004 Mr Hotchin said he did not fully understand the scheme but was told his money would be held in a secure account in the United States and Bill Papple (an elderly former shoe salesman who was one of three convicted in relation to the scam) would be the sole signatory.
Mr Hotchin's business acquaintance Lloyd Johns and the three people running the schemes had assured him verbally and in writing that his money would never leave Bill Papple's account.
"Loosely the understanding I had was there was an arbitrage opportunity with various large foreign investments where they had to balance their trading for the day," Mr Hotchin testified.
"If there was a shortfall, these trades took up that shortfall for large returns."
Problems occurred and profit payments were missed. Mr Hotchin telephoned Bill Papple to ask where his money was.
"He was pretty vague, could not explain why he no longer had control over it and could not say even which country it was in."
Mr Hotchin told the court he did not want the public to know he was conned. "I don't want to make that public."
Asked why a man of such financial experience and knowledge would "chuck half a million or so" into a scheme that promised returns of 160 per cent over two months, Mr Hotchin said he was used to people honouring their contracts and their word.
"That's how you survive in business."
"The error was in the people not being trustworthy and not honouring their contract. This came down to trust and I was told I could trust these people."
"I believed them and I was wrong."
Mr Hotchin told the court that he had agreed to invest the money on a personal basis and did not consider using money from one of the many financial institutions of which he was a director.
