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Regulator reveals conviction for money laundering

The UK's Financial Conduct Authority has revealed that, in 2017, it secured the conviction for money laundering of one Richard Baldwin. However, the case was kept out of the public eye due to reporting restrictions.

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The Financial Conduct Authority is responsible for, amongst other things, prosecuting cases of market abuse. On 9 May 2016, Martyn Dodgson and Andrew Hind were convicted of conspiracy to commit insider dealing between November 2006 and March 2010. They were two of six defendants originally charged but in 2015, shortly before the trial started at the beginning of January, Pegden, J at Southwark Crown Court ordered that, due to health reasons, one of the defendants, Richard Baldwin, would be excused that hearing with the proviso that he would stand trial when his health improved. Instead, Baldwin ran away. He was convicted in his absence in 2017 but remains at large.

The case caused shock in The City when 140 investigators went, mob handed, to a number of institutions across the City, including Deutsche Bank. Exane-BNP. Legal and General, Novum Securities and Moore Capital. The regulator had brought a number of insider dealing cases and in seven years secured almost 30 convictions but it was widely criticised for going after low-hanging fruit - little people: the FT described them as "pensioners and dentists." It was the fact that a so-called "ring" within the fabric of the financial sector was under investigation that caused so much surprise.

Insider dealing (called insider trading in some countries) is an offence in which, either, markets are manipulated or trades (whether those trades are profitable is irrelevant) are made by persons having commercially sensitive information about a listed company and using it before that information is made available to the public. They often, but not always, manifest themselves in abnormal volumes or price changes ahead of a large announcement, for example, a takeover bid or the announcement of major contract or significant product development.

Hind and Baldwin ran a watch trading business in London's Marylebone. Dodson's C.V., as published by the FCA, is contains a litany of big names: "Martyn Dodgson (5 October 1971) – during the period covered by the indictment Dodgson was employed by Morgan Stanley, Lehman Brothers and Deutsche Bank. He worked at Morgan Stanley as a Vice President in Global Capital Markets until January 2007, and then at Lehman Brothers as an Executive Director in the European Investment Banking Division from July 2007 to September 2008. He moved to Deutsche Bank in October 2008 as a Director in the Corporate Broking Department and was later promoted to Managing Director. Dodgson was Financial Services Authority (FSA) approved throughout the period."

The insider dealing was systematic and highly organised. Dodgson told Hind and Baldwin about private commercially sensitive information which came into his possession as a result of his employment. The FCA focussed on just five companies:

* Scottish & Newcastle plc in October 2007;
* Paragon Group of Companies plc in July 2008;
* Just Retirement plc in October 2008;
* Legal & General plc in February 2009; and
* BSkyB plc in March 2010.

"The trading profits were distributed via large cash payments and payments in kind," said the FCA when Hind and Dodgson were convicted. Reports raise the image of Dodgson earwigging at colleague's doors "Dodgson sourced inside information from within the investment banks at which he worked, either through working on transactions himself or through being able to glean what his colleagues were working on. He passed on this inside information to Hind who acted as a ‘middle man’. Hind then effected secret dealing for the benefit of Dodgson and himself. The defendants put in place elaborate strategies designed to prevent the authorities from uncovering their activities. These included the use of unregistered mobile phones, encoded and encrypted records, safety deposit boxes and the transfer of benefit using cash and payments in kind."

These two convictions – alongside those of Paul Milsom, Graeme Shelley and Julian Rifat – brings to five the number of convictions secured in the Operation Tabernula insider dealing investigation.

But at that trial, not only was Richard Baldwin not in the dock, he was absent from the case reports.

To receive some of the proceeds from the conspiracy, Baldwin set up a company in Panama and opened a company bank account in Zurich. In October 2007 Baldwin received £1.5 million into the company account in Zurich and explained the receipt of the monies by providing a false invoice to his bankers. The £1.5 million represented profit from insider dealing in Scottish & Newcastle plc. Having received the money, Baldwin, over the course of the next year or so, dissipated the vast amount of the £1.5 million through the use of his other Panamanian companies and off-shore accounts. Those off-shore companies acted as buffers, which had the effect of concealing the true source of the funds.

Following the search of Baldwin and Hind’s business premises by the FCA in March 2010, Baldwin closed the account of the Panamanian company that received the £1.5 million and of the two other Panamanian companies through which he had moved the bulk of the money.

In June 2011, Baldwin was notified of the Restraint Order. Within a fortnight he had flown twice to Geneva and withdrawn the sterling equivalent of £114,000 in cash and liquidated assets worth more than £82,500. Over the next six months Baldwin accessed safety deposit boxes in Switzerland and England and dealt with the assets contained therein. Over the next two years Baldwin failed to repatriate assets to the UK and disposed of those assets and he dealt with undisclosed income.

Then he disappeared and authorities have been unable to track him down.

Baldwin has not been convicted of insider dealing. However, on 13 July 2017, in his absence, he was convicted of laundering the proceeds of the offences of Hind and Dodgson. Now, the court has accepted that the reporting restrictions are hampering the attempts to find Baldwin and the money.

Confiscation orders were made in May 2018 against Dodgson and Hind. On 12 May 2016, Dodgson was sentenced to 4 and a half years’ imprisonment and Hind to 3 and a half years’ imprisonment. At the confiscation hearing, Pegden, J made confiscation orders in the sum of GBP1,074,236 against Martyn Dodgson and GBP624,521 against Andrew Hind. The sums were to be paid within 3 months or Dodgson would be sentenced to a further 7 and a half years in prison and Hind a further 5 and a half years.

The confiscation hearings went far beyond the original five deals. In fact, proceeds of 28 courses of conduct, from 1 November 2006 until 23 March 2010 were the subject of the confiscations hearings. "Whilst the Defendants went to great lengths in an effort to ensure that their pursuits went undetected, their meticulous record keeping ultimately proved to be their downfall in the confiscation proceedings. Those records detailed trading in a variety of stocks and the amounts that each was to benefit as a result. This made it far easier for the FCA to demonstrate the full extent of each defendant’s benefit from their criminal conduct." said the FCA.

Further reading:

World Money Lau...