Stone did inform the Kenches that he was being investigated, but they saw no reason to look into it as he had seemed, in the trustee’s words, “confident he would be cleared”.
Stone was sentenced in 2014 to six years in prison and received a confiscation order to pay £1,141,680 within three months or face a further seven years in prison.
Kench argued the funds invested in Realsave should be returned to the scheme in the event they were used to meet the confiscation order issued against Stone.
Realsave had been dissolved some weeks prior to Stone's court hearing, but the Kench brothers had been unaware of this fact.
D Kench told the ombudsman that he had contacted either TPR or the Financial Conduct Authority, but seemed unclear of the distinction between them and could not recall which he had written to.
The ombudsman’s investigation was further hampered by the fact that nobody, including the trustee, had a copy of the scheme’s deeds and rules.
D Kench said he did not consider it necessary to look at the scheme’s deeds and rules because it was “a mass of literature, like a phone book, that wouldn’t make a lot of sense to a lay person”.
Pension Assist continued to send annual reports to members as though Stone’s conviction had never taken place, despite it showing a financial position that was very likely untrue.
It was eventually dissolved in 2018, but members were not informed.
Multiple failings
In his decision, Pensions Ombudsman Anthony Arter found six instances where trust was breached and a further two acts that constituted maladministration.
The trustee, Kench, had breached his fiduciary duty to manage conflicts of interest and his duty not to profit from his position, and had not complied with the regulatory requirement to “have knowledge and understanding of the scheme’s documents or the law relating to pensions and trusts”.
Further breaches of trust included the transferring of “large sums of money” to his brother D Kench’s company, of which he was himself an employee.
The trustee had provided “false information to members, in breach of the trustee’s duty to act honestly and in good faith”, the ombudsman stated.
The trustee committed maladministration by failing to have regard to TPR’s code of practice, and by failing to “make the necessary enquiries to establish that the payment of members’ funds to members on joining the scheme constituted an unauthorised payment”.
The ombudsman criticised the “general blunting” of the trustee’s “moral antennae”, which he said explained “why the trustee had a lower standard of honesty, as well as his recklessness for others’ rights”.
