Gold Coast money dreams … Trading-Gambling scheme comes unglued … Investors cleaned out … Identity of conman hidden … False and misleading conduct … Solicitor aware of misrepresentations … Various squirrelling activities … Appeal fails … Anna Kretowicz on the case
Fraudulent Foster has been involved in a veritable smorgasbord of deceptive escapades, with a penchant for misleading marketing and misappropriation.
After being banned from being involved in trade or commerce after a stint of price fixing over the weight loss pill TRIMit, he was sentenced to imprisonment for contempt of court after he moved into the marketing of a diet nasal spray.
This time, before the New South Wales Court of Appeal, he has been revealed as the “architect” behind the shonky betting company, The Sports Trading Club Partnership (STC).
STC was off to an inauspicious start in 2012, when Foster met the partner pinged in these proceedings, Sydney-based criminal lawyer Leigh Johnson.
They met while holidaying on the Gold Coast (cue the first eyebrow raise), shortly after which Johnson agreed to represent him in proceedings brought by the ACCC for his SensaSlim scam (cue the second).
Off the back of those glowing first impressions, Johnson agreed to sign on as a limited partner to STC (which was, “apparently by oversight”, never registered).
STC purported to play with the big wigs, allegedly operating out of London, Sydney and Hong Kong to place punters’ bets of up to $250,000 on international sporting events.
An NCIS-worthy bust by the NSW fraud squad in 2014 actually found Foster shored up in a luxury Byron Bay bungalow, controlling operations with six mobile phones and several computers – at the forefront of the “working from home” trend, perhaps?
STC sought money from prospective investors (not gamblers, remember) based on a proposal document (the proposal). But Foster was cluey enough to realise that perhaps it mightn’t be so encouraging if investors knew it was actually him behind the business – what with being outed on A Current Affair and elsewhere.
So, the proposal invited investors to call up the friendly “Mark Hughes” (Foster’s alias), and when they did they were greeted with a cheery phone script telling them:
“There is no risk and … your contribution is fully guaranteed” [and] if you go to our website and you click on our newspapers cuttings … there is a photo of [Johnson] with Julia Gillard (but don’t hold that against her) when she announced that she obtained the rights of $20 million.”
The proposal told of “savants” employed by the company, who were “mysteriously gifted at setting odds and point spreads on games such as football and basketball with extraordinary accuracy”.
But if that raised a red flag, any concerns were put to bed by assuring investors that “it may sound too good to be true. It isn’t”.
Looks like a duck, quacks like a duck, is a duck.
The proposal scooped in nearly $30 million from over 400 members of the public. True to Foster’s style, nobody was repaid the amount they had advanced to STC.
Enter Ian Mackinnon, who had advanced $200,000 and came wielding the trusty Australian Consumer Law against, among others, Johnson and Foster. One hundred and fifty two other investors joined him in a representative action anxious to get their money back.
The primary judge held that Johnson was liable for the whole $200,000, for engaging in misleading and deceptive conduct in contravention of s.18 of the ACL (misleading or deceptive conduct). The proposal had represented that its contents were true, and omitted the minor detail of Foster’s involvement.
On appeal Paul Brereton wrote the leading judgment and dismissed Johnson’s appeal.
HH was quick to conclude:
“… it was logical and reasonable that a prospective investor would be influenced by the contents of the proposal, and that knowledge of the involvement of Foster, given his reputation, would be a powerful deterrent to any investor. Indeed, it was for that very reason that … his involvement could not be and was not disclosed and he used an alias.”
Even though Julian Burnside had saddled up for Johnson, the principles of partnership proved irresistible:
“All partners in a firm are jointly and severally liable for misrepresentations made by any one of them in the ordinary course of the firm’s business … even though the partners themselves may be innocent.”
Crucially, there was ample evidence that Johnson was fully aware of her misrepresentations by silence or omission; she knew investors’ funds were being squirrelled, and actively took steps to keep Foster out of the picture.
That also supported liability for the tort of deceit, and ripped the defence of apportionment out from under her feet.
Mackinnon’s $200,000 award of damages was upheld and the question of damages for the remaining 152 plaintiffs is to be decided.
For other Justinian reports featuring Leigh Johnson, see:
Sydney lawyers and TINS
Kicking around the Calvos
Bill me, thrill me