The regulator has promised to toughen its approach against those who withhold information it needs for investigation, James Phillips writes.
The Pensions Regulator (TPR) says it will no longer "hesitate" to seek criminal convictions where individuals and firms do not hand over information it needs for an investigation.
The warning comes as it reveals the approach it took to securing its first criminal convictions where the information it needed for investigations was not provided.
In two separate cases brought by the regulator, Yateley Industries for the Disabled chief executive Patrick McLarry, Ashley Wilson Solicitors, and one of its senior partners, were found guilty of failing to produce documents "without a reasonable excuse".
The trials, which were heard by Brighton Magistrates' Court in April, were the first occasions of the watchdog using its section 72 power - under the Pensions Act 2004 - to seek criminal convictions as it toughens its regulatory approach.
In its section 89 regulatory intervention report, published 18 July, TPR executive director for frontline regulation Nicola Parish said TPR would not delay seeking further criminal convictions in similar cases.
"Our power to require companies and individuals to provide us with information is an important tool in our regulatory case work," she said. "The refusal to provide specifically requested information was the simple reason for these two recent prosecutions.
"From now on we will not hesitate to prosecute further companies or individuals if they refuse to give us the right information to investigate cases and ultimately protect pension savers."
TPR's section 89 report reveals how the regulator assessed whether each case was in line with its prosecution policy, which uses a two-stage test to determine if a conviction is realistic and in the public interest, as well as being proportionate and risk-based to maximise compliance.
TPR says it believes where documents or information are not provided, "there is always a strong public interest in bringing a prosecution because obstruction of our investigations hinders our ability to protect pension scheme members".
This power could be boosted in the near future, as the Department for Work and Pensions mulls proposing an extension to the regulator's information-gathering abilities in the upcoming white paper on defined benefit reform.
The two cases highlighted in TPR's regulatory intervention report certainly illustrate the hurdles the watchdog sometimes needs to overcome to proceed with an investigation.
In the case of Ashley Wilson Solicitors and partner Ashley Wilson, the watchdog says the failure to comply, where documents were required for a scam investigation, was "at the top end of the scale of seriousness for offences of this kind".
Namely, it cites the failure to provide the documents within eight months, with TPR then having to obtain them through a search warrant as a reason to believe this was "deliberate" and "a case of refusal rather than mere neglect".
The regulator also says it had expected "a higher standard of behaviour" from the firm and Wilson due to their profession.
In court the solicitors pleaded guilty but argued it was "oppressive" and an "abuse of process" for TPR to prosecute both the firm and Wilson, but the district judge rejected the argument.
Wilson was handed a £4,000 fine and ordered to pay £7,500 of costs as well as a £120 victim surcharge. The firm was told to pay a £2,700 fine, £2,500 of costs, and a £120 victim surcharge.
TPR warns that where it believes an offence has been committed by both an organisation and an individual, it may prosecute both "if this is in the interest of justice and will maximise the deterrent effect".
The watchdog also reveals how, in the case of McLarry, the conviction had been spurred by a refusal to comply with requests for information when the regulator was concerned about the management of the Yateley Industries for the Disabled Limited Pension and Assurance Scheme.
McLarry was director of VerdePlanet, which acted as trustee to the scheme before TPR acted on its concerns and appointed an independent trustee to manage the scheme in September 2013. This trustee then found the scheme had loaned money to Plane Sailing Sales, by transferring money to a French bank account in the name of McLarry and his wife.
Upon learning this, TPR wanted to know how the funds had then been used and requested copies of bank statements, but after 18 months McLarry failed to comply. He then pleaded not guilty, and claimed in court that the documents were legally privileged, were protected by French privacy laws, and their contents may be self-incriminating.
The district judge rejected all these claims and McLarry was told to pay a £2,500 fine, £4,000 in costs, and a £120 victim surcharge. McLarry then provided the information a week after the conviction in April.
Since these two cases, TPR has secured another criminal conviction against an office manager who withheld information needed for an investigation into a suspected £14m scam. She was ordered to pay more than £4,700.
The regulator's s89 report comes after Robin Ellison - a leading pensions lawyer, trustee and academic - blasted TPR for using "draconian" s72 powers. In his article for PP, Ellison said the current appproach forces compliance "to be strict rather than sensible" and drives up costs to members.
With the regulator seemingly ramping up its efforts to convict those who do not comply with its demands on information-gathering, it is highly likely we will soon see how far these powers extend.
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