Ethics and governance in the European Financial centers

On 12th July 2006 the Monegasque Tribunal found William Fogwell guilty of the charges against him in relation to the collapse of Hobbs Melville in 2000 and sentenced to 5 years prison. He was also fined €500,000. Fogwell was not in court for the sentencing and an international arrest warrant was issued against him. He is now a fugitive from justice. Shelley Fogwell, the 45-year-old daughter, was also convicted of fraud charges against her. She was sentenced to four and a half years in prison and fined €300,000.
Guillaume Losada, Shelley Fogwell's former boyfriend, and Jean-Christophe Moroni, a broker, were found guilty and jailed and fined €100,000. Patrick Grasset, another broker, was discharged and released.

The criminal trial of Bill and Shelley Fogwell had started on 28 March 2006 in the Palais de Justice with a stop after concerns were raised over the impartiality and independence from Monegasque authorities of court President Gérard Launoy who was replaced after three weeks.

The Hobbs-Melville brokerage folded in 2000 leaving a EUR140 million hole in its accounts, according to Reuters
Wealthy investors had invested sums of up to EUR8 million each in the company, lured by the promise of returns of between 30% and 60%. While things appeared to be running smoothly for investors in the five years prior to the collapse of Hobbs-Melville, many suspected that things were amiss when the company began to make late payments and failed to honour other obligations to its stakeholders.
Citing one investor in the firm, Reuters reported that Hobbs-Melville made risky bets in the short-term money markets.
It is thought that around 500 investors have lost money, and 300 of them have hired 50 lawyers to press their case
Mr Hobbs was not present at the court hearing, although his daughter, Shelley, 45, was on the stand in connectionwith the collapse of the brokerage.

Monaco has renewed its determination to rid itself of the image as a haven for financial criminals and money launderers : Prince Albert II, who assumed the throne following the death in April of his father, Prince Ranier, stated in his inaugural speech last July that: “I intend that ethics always be the basis of the behaviour of the Monegasque authorities". The case illustrates the time when English author Somerset Maugham called Monaco "a sunny place for shady people" (quoted by The Times , April 07, 2005).

Lawyers representing several plaintiffs declared they will file proceedings against the Monegasque authorities.

All the steps of the trial were reported by the local media.



Know more

Articles in English :

Investment Fraud Trial Commences In Monaco
Hobbs-Melville - the final verdict

Articles in French

See L'Observateur de Monaco
See the news on TV : France 3 (in French)

Supporting actually a financial center means sentencing, especially in cases of criminal breach of fiduciary duty. This reflects need to protect reputation of Island’s financial services industry and is a positive sign of ethics all the more as issues are transparent.

FRAUDULENT CONVERSION—factors for consideration

Six years’ imprisonment is an appropriate sentence for an accused convicted of a multi-million pound series of fraudulent conversions, committed to fund his neurotic addiction to gambling. Whilst a plea of guilty (which saves time and cost) and remorse are mitigating factors, the fact that his gambling has been encouraged by others is not. Furthermore, the court should have regard to the effect of the offence on the reputation of the Island’s financial businesses (Hayden v. Att. Gen., 1985–86 JLR N–23, considered; Att. Gen. v. Delaney, Royal Court, May 13th, 1993, unreported, considered; R. v. Aucott (1989), 11 Cr. App. R. (S.) 86, dictum of Watkins, L.J. considered; R. v. Barrick (1985), 7 Cr. App. R. (S.) 142, considered).
Att. Gen. v. Hanley (Royal Ct.: Crill, Bailiff and Jurats Coutanche, Vint, Bonn, Orchard, Hamon, Le Ruez, Herbert and Rumfitt), October 14th, 1993.

FORGERY—sentence—breach of trust—mitigating factors

The appellant was an accountant who had pleaded guilty to 15 counts of forgery, uttering and obtaining money on false instructions and fraudulent conversion, involving £52,600 of funds administered on behalf of clients in England. The proceeds were used primarily to relieve his liabilities incurred mainly through unsuccessful investment. He sold his business and left the Island leaving the problems unresolved and a considerable sum of money unaccounted for. He appealed against a sentence of four years’ imprisonment.
Held: The appellant’s behaviour amounted to a gross breach of trust and it was of paramount importance that the reputation and integrity of the financial businesses on the Island should be preserved. Nevertheless, important mitigating factors were the appellant’s total co-operation with the police, his previous good behaviour and subsequent remorse, his intention to repay and his actual repayment of some of the money, and the occurrence of the offences over the relatively short period of five years. The sentence would be reduced to one of three years, based on the particular circumstances of the case, without making any comment on appropriate tariff levels (R. v. Pemberton (1982), 4 Cr. App. R. (S.) 328, distinguished).
Hayden v. Att. Gen. (C.A.: Neill, Clyde and Collins, JJ.A.): July 10th, 1985.

More cases in the financial sector

Every year, U.S. officials from agencies with anti-money laundering responsibilities meet to assess the money laundering situations in 200 jurisdictions. The review includes an assessment of the significance of financial transactions in the country’s financial institutions that involve proceeds of serious crime, steps taken or not taken to address financial crime and money laundering, each jurisdiction’s vulnerability to money laundering, the conformance of its laws and policies to international standards, the effectiveness with which the government has acted, and the government’s political will to take needed actions.

The Bureau for International Narcotics and Law Enforcement Affairs publishes a table. It assessed the actions by government :



As far as Luxembourg is concerned, the financial center has a correct legal and regulatory framework. The only weakness is the international transportation of currency : there are no law or regulation allowing the jurisdiction, in cooperation with banks to control or monitor the flow of currency and monetary instruments crossing its borders. Of critical weight here are the presence or absence of wire transfer regulations and use of reports completed by each person transiting the jurisdiction and reports of monetary instrument transmitters.

The last paragraph of the detailed report is : "The Government of Luxembourg has enacted laws and adopted practices that help to prevent the abuse of its bank secrecy laws, and has enacted a comprehensive legal and supervisory anti-money laundering regime. However, further action should be taken to address issues such as the lack of a distinct legal framework for the Financial Intelligence Unit and the small number of money laundering investigations and prosecutions. The Financial Intelligence Unit should work with regulatory agencies to formulate and issue substantive guidance to financial institutions on anti-money laundering trends and techniques. Luxembourg should continue to strengthen enforcement to prevent abuse of its financial sector, and should continue its active participation in international fora. Luxembourg should enact legislative amendments to address the continued use of bearer shares and the lack of crossborder currency reporting requirements."