Former pension trustees receive suspended sentence over illegal loans

Two former pension scheme trustees have received suspended sentences for making illegal loans of £236,000 from a company pension scheme to the scheme’s employer, following a prosecution by The Pensions Regulator (TPR).

The former company directors of Eastman Staples, Andrew Kyprianou and Colin Werb, were sentenced to 16 months in jail for each offence, suspended for two years, and were also ordered to carry out 250 hours of unpaid work.

Although the pair initially pleaded not guilty to the charges they changed their pleas to guilty at a hearing in August, admitting two counts of making prohibited employer-related investments.

Both defendants were also charged with providing false or misleading information to TPR contrary to section 80 of the Pensions Act 2004.

The charges related to two loans, an initial £96,000 loan and a second £140,000 loan, paid from Eastman Machine Company Limited Superannuation Scheme to Eastman Staples Limited, contrary to section 40(5) of the Pensions Act 1995.

During the trial, the court heard how banking facilities had been withdrawn because of the prosecution and Kyprianou had been given until the 16 December to repay £1.1m in loans.

In the sentencing, His Honour Judge Mushtaq Khokhar, described Kyprianou as “arrogant”, concluding that the defendants had put the pension scheme at risk, and that they had failed to manage the potential conflict of interest in running a business and acting as trustee.

Although he acknowledged that Werb had played “second fiddle” and Kyprianou had driven the offending, he held both defendants to be equally culpable in how they performed their roles of trustee.

"These are offences of a very serious nature because they involve a breach of trust," he stated, telling the pair that they "ought to consider themselves lucky” they had not received an immediate prison sentence.

Indeed, Judge Khokhar stated that the duo only avoided jail, and being disqualified as company directors, because of their guilty pleas, the money they had paid back to the scheme and the impact that might have on Kyprianou’s businesses.

“It seems to me that there is the livelihood of other employees that are dependent on you," Judge Khokhar stated. "I accept the submission that given the difficulties that your businesses have with banking and the facilities being withdrawn in December you’ll have to look elsewhere for those facilities and if you are incarcerated that might not be possible.

"In any case it will hamper the businesses’ ability to stay on an even keel and will result in a loss of jobs.”

TPR director of enforcement, Erica Carroll, highlighted the case as a reminder to all trustees on the rules around employer-related investments and a warning that TPR will prosecute those who ignore them.

"Despite being experienced business people and having been warned by their adviser about payments between scheme and employer, Werb and Kyprianou continued to flout laws designed to protect pension savers," she continued.

“The pair, who were in a position of trust, recklessly used money meant for their staff’s retirements to prop up their company despite the risk to the scheme – and their employees’ pensions – if the employer failed."

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios