Former police officers under suspicion over Gold Coast boiler room scams that raked in millions of dollars

Former police officers are in the sights of Queensland's Crime and Corruption Commission (CCC) as it investigates multi-million-dollar Gold Coast fraud syndicates.

There are allegations the syndicates may have been protected by corrupt former officers.

The CCC and police are probing a range of so-called boiler rooms, or high-pressure sales offices.

Customers across Australia invested tens of thousands of dollars in software packages on promises of high returns from sports betting.

But in the words of one insider, "it's a giant con".

In an exclusive ABC interview, CCC acting chairman Ken Levy said the crime-fighting body had found victims of the scams in Queensland, New South Wales, Victoria and Western Australia.

Do you know more about this story? Email investigations@abc.net.au

 

Dr Levy said the CCC had ruled out any improper involvement by serving officers in the boiler rooms targeted.

But former police are not off the hook.

"We have followed, over the last 12 months of the operation, all the people who could be relevant," Dr Levy said.

"There has been no involvement, no corrupt conduct from serving police in relation to the boiler rooms we're investigating.

"In relation to former police, we haven't come to a concluded view about that.

"The investigation isn't completed and because that's operational in nature I'm precluded legally and for other reasons from making any other comments at this stage."

Meet the main players

The go-to guy

Mick Featherstone was a Queensland police detective until 1996. He was investigated after $20,000 disappeared following a Gold Coast drug bust, but there were no charges. After leaving the QPS he became one of the Gold Coast's best-known private detectives, specialising in reputation management and corporate work. Many of his clients have been involved in the gambling industry or sports betting investment schemes. Featherstone is the focus of the CCC's Lima Violin II probe into cold-calling investment frauds and money laundering.

The anti-corruption boss

Crime and Corruption Commission (CCC) head Ken Levy has taken a hands-on role in the investigation of so-called boiler room fraud. He told the ABC the CCC had begun probing three Gold Coast syndicates a year ago and had since unearthed three more. Victims were typically over 50, self-employed and some had lost their entire superannuation to scammers, he said. Dr Levy wants the operations outlawed and says the CCC had not ruled out that former police could have protected some of the scams.

The former police detective

Stuart Phillis spent 17 years as a detective on the Gold Coast. Two separate cases he worked between 2007 and 2010 involving real estate fraud and extortion targeted clients of private investigator Mick Featherstone. Phillis believed Featherstone was receiving confidential police information and tipping off his clients and their lawyers. Phillis told the ABC the leaks stopped when he stopped putting information about the cases on the police computer. When he raised this and Featherstone's known connections to senior officers with his superiors, he said he was told: "Don't go there".

The cartoonist

Political cartoonist and Gold Coast racing identity Larry Pickering is alleged to have been behind a scam that took at least $5 million from hundreds of mum and dad investors between 2007 and 2009. Private investigator Ken Gamble provided the Queensland fraud squad with a 250-page brief of evidence on the scam in 2011, including a sworn statement from an insider naming Pickering, but victims claim police have failed to investigate. Police have never interviewed the insider. Pickering has denied involvement.

The investigator

Ken Gamble, a NSW private investigator now based in the Philippines, has spent five years investigating a range of frauds on the Gold Coast after being hired by dozens of victims across Australia. In 2011, after looking at one of these scams and carrying out surveillance, he provided the Queensland Police fraud squad with a 250-page brief of evidence on companies linked to cartoonist Larry Pickering alleged to have defrauded more than 30 victims of at least $5 million. Gamble and the scam victims have been pressuring the fraud squad to act ever since. Pickering has denied involvement.

The boiler room manager

A former nightclub owner with connections to the boxing industry, Phil Cropper, was acquitted of an attempted extortion on Russell Crowe in 2002. In 2005 he received a suspended sentence for shooting his girlfriend in the hand during a drunken argument. A close associate of Mick Featherstone, he has run several so-called "boiler room" operations on the Gold Coast, with a reputation for high staff turnover. He fled overseas last year in the wake of raids on Featherstone's private investigations business.

The boiler room salesman

'Jason' has worked for the last five years in a range of boiler rooms on the Gold Coast. Jason initially thought the businesses were legitimate because complaints were handled by other people in the operation. After he saw an ABC 7.30 program in September 2014 that revealed a boiler room fraud victim had committed suicide, he felt compelled to speak out. Jason said he had eventually realised the software sold by these operations didn't work, and the people running them made false claims and were "ruthless". Some had involvement in other forms of organised crime, he said.

The investment fraud victim

Small business owner Matt Jennings was looking for a second income he could earn from home and like about 300 others, signed up with a company selling sports arbitrage software called Cohen Strachan Investments, eventually putting in about $50,000. Everything went well until he tried to draw out some of the money it appeared he had earned. The company then shut up shop and the people involved disappeared. Jennings and a group of 12 other victims have been lobbying the fraud squad to investigate ever since, they claim without success.

The real estate fraud victim

Rod Lambert, a real estate agent and property developer on the Gold Coast, agreed in 2007 to buy a multi-million dollar property at a value based on previous transactions that he later discovered were fake. Two of the people involved in the deal were clients of private investigator Mick Featherstone's firm Phoenix Global. The firm tried to gather evidence that Lambert had defamed these people. Gold Coast police used a brief of evidence gathered by Phoenix Global when it prosecuted Lambert for an alleged trespass in 2010. The charge was later dropped. Lambert has been trying to get the QPS fraud squad to investigate the alleged fraud since 2008. The ABC understands the Crime and Corruption Commission is now looking into possible corruption of public records.

The sports trader

Professional poker player and sports trader Luke Brabin was hired to help set up and run a sports arbitrage company following a meeting with Larry Pickering at Jupiters Casino on the Gold Coast in 2007. He worked at the operation for five months but quit after realising all the people he was working with were using false names, making false claims about the product and ignoring customer complaints. He provided a sworn statement to investigator Ken Gamble in 2011 implicating Larry Pickering as the financier and controller of the operation, which is alleged to have defrauded victims of at least $5 million. Brabin has never been contacted by police. Pickering has denied involvement.

Detective feared information was being leaked from police computer

A former Gold Coast police detective has told the ABC's 7.30 program he tried to blow the whistle on what he saw as improper relationships between police and the private investigator at the centre of the CCC's boiler room investigation, Mick Featherstone.

Stuart Phillis, who spent 17 years as a Queensland Police Service detective on the Gold Coast, told the ABC he suspected information on the police computer system had been leaking to clients of Featherstone who were being investigated for fraud and other serious offences.

But Mr Phillis was warned off by his superiors when he raised the close links between Featherstone, himself a former detective, and senior Gold Coast officers.

What is a boiler room?

• High-pressure sales offices using telemarketers working from a carefully prepared script

• Sell software they claim can beat the odds on sports betting or other "investments" involving share trading, foreign exchange dealing or real estate

• Buy lists of people to target who are likely to be looking for a second income or interested in gambling

• People making the calls rarely use their own names; "testimonials" and "trial runs" to hook customers are often fake

• Staff usually paid a few hundred dollars a week plus commissions on each sale

• Masterminds buy old off-the-shelf companies with no complaint history and then close them down when complaints become a reputational problem

• Concentrated in Australia on the Gold Coast for the last 10 years, but target customers nationwide or even overseas

"I actually went to one of my bosses and said: 'You know, information is getting out, there's a bit of a thing going on here — Featherstone is obviously involved in it'," he said.


"I got told basically, 'don't go there'.

"From that day I decided there's nothing going on that computer."

Another former detective told the ABC he received a phone call from Featherstone around the same time seeking information about the progress of one of these investigations, during which the private eye dropped the name of a senior police officer.

"He said [the senior officer] had said it was alright," the former detective said.

The suspect, Mario Girardo, was later convicted and jailed on kidnap and extortion charges.

The ABC has established that since the mid-2000s, four former Queensland police officers have gained work at Featherstone's company Phoenix Global. Before they joined the firm three of them were caught up in separate corruption investigations and one was jailed for corruption and perjury.

The other was previously a senior fraud squad detective.

Last year 7.30 revealed that the CCC was probing allegations of fraud and money laundering by three companies linked to Featherstone.

The companies are alleged to have cold-called hundreds of people across Australia and sold them sports betting software under the guise of an investment product, with promises of high returns.

Victims claimed the software did not work; all lost their money when the companies suddenly shut up shop.

Some of the alleged frauds

Lima Violin II frauds

• Amount: At least $4 million in UK Home Based Business alone
• Location: Gold Coast
• First reported: January 2014 to Gold Coast police
• Arrests: 3 in 2015 (relating to other companies discovered during the investigation)
• Charges: Fraud, money laundering

In early 2014 the Crime and Corruption Commission began Operation Lima Violin II, investigating three Gold Coast-based cold-calling investment companies or "boiler rooms" called UK Home Based Business, Lay Trading Solutions and Pegasus Trader. They were alleged to have defrauded dozens of people around Australia. The ABC uncovered evidence showing hundreds of thousands of dollars of customers' money being withdrawn from bank accounts held by UK Home Based Business in unexplained cash withdrawals. The company was managed by former nightclub owner Phil Cropper.

Cohen Strachan Investment/Nominee Traders/International Arbitrage Strategies sports betting scheme

• Amount: At least $4.8 million
• Location: Gold Coast, Hong Kong
• First reported: March 2011 to QPS fraud squad
• Arrests: None
• Charges: None

In 2007 dozens of people across Australia were cold-called by a boiler room operation on the Gold Coast promising high returns from an investment scheme based on placing bets on horse races. The scheme was suddenly shut down and victims lost all their money, in some cases several hundred thousand dollars. A key insider implicated cartoonist Larry Pickering as being behind the scam. Investigator Ken Gamble gave a 250-page brief of evidence to the QPS fraud squad in 2011. It included a surveillance photo of private detective Mick Featherstone with one of the alleged masterminds of the scheme. The key witness has never been contacted or interviewed by police. Victims say they are still waiting for the QPS to investigate the fraud.

Proficient First/Excellence IV scam

• Amount: Up to $4 million
• Location: Gold Coast
• First reported: Referred by NSW Police to Queensland fraud squad in 2011; exposed by 7.30 in September 2012
• Arrests: 1 (John Hanneman arrested by QPS fraud squad May 2015)
• Charges: Fraud

Fake companies are alleged to have cold-called people in Queensland, New South Wales and the Northern Territory, offering software that would calculate odds on sporting events and promising to lay bets on their behalf. Police and victims suspect the money paid was simply withdrawn. Victims complained that the scammers, whose operation began in 2008, were still operating in 2012. Announcing the arrest in May 2015, Detective Superintendent Brian Hay said it was a "significant milestone ... towards identifying, disrupting and dismantling boiler room fraud operations". "We might not find out about the occurrence of these things until about two or three years after the event," he said.

Hedges Avenue 'put and call'

• Amount: About $10 million
• Location: Gold Coast
• First reported: 2008 to Gold Coast detectives who later referred it to the fraud squad
• Arrests: None
• Charges: None

Developer Rod Lambert claims he was defrauded in an elaborate scheme in which a Gold Coast luxury property he had agreed to buy had false values attributed to it based on transactions that did not take place. The people involved in the sale were clients of Mick Featherstone. His private investigations company Phoenix Global attempted to find evidence Mr Lambert was defaming the real estate agents. Phoenix Global also drew up a brief of evidence used by Gold Coast police to prosecute Lambert over an alleged trespass at the real estate agents' offices. After years of police inaction, the ABC understands the Crime and Corruption Commission is now examining claims that the public record was corrupted during the scandal.

'It's organised crime ... they think they're untouchable'

'Jason', an insider who worked in several Gold Coast boiler rooms, has revealed to the ABC how the scams worked.

"The cost of the software ranges between $20,000 to $30,000," he said.

"It's mainly horse racing software which is sold on the basis it can make people up to $80,000 a year. But it's a giant con. It doesn't work."

'Jason', who is also a key witness for the CCC, estimated the operations he knew of had netted at least $200 million in the last 10 years.

"It is organised crime, and they think they're untouchable," he said.

Video: Gold Coast Police investigated over protection racket around organised criminals (7.30)

"They pride themselves in saying they run the 'cartel'. They use the word cartel. It's an organised crime syndicate."

The ABC last year uncovered evidence showing Featherstone's key role in setting up and running some of these operations.

Dr Levy said the CCC had since unearthed a further three operations, including a fake non-sexual escort service that had collected hundreds of thousands of dollars from prospective escorts but not provided any services.

He said money laundering had "been evident" during the probe.

Dr Levy confirmed the scale of the operations, saying that a single boiler room syndicate had taken more than $100 million.

"This is clearly organised crime — and it's fraud," he said.

Victims say fraud squad failed to act

Victims of the scams complain that Queensland police have previously failed to act, despite years of complaints.

They say they have tried in vain to get the QPS fraud squad to move against the operations, which have targeted people across Australia but are based on the Gold Coast.

The ABC has obtained an audio recording in which a manager of several Gold Coast boiler room operations, Phil Cropper, even boasts to one of the victims that he operated in full view of the fraud squad.
"The police know," Mr Cropper says in the recording.

"You ring up the Queensland fraud squad, right, they know where my office is, which floor I'm on. They know which office I work in.

"They know I start at six in the morning and finish at seven at night. They know everything about me.
"If they had a problem with me ... they've been through my office before and they left and they said it was the best-run office they've ever seen."

The ABC put a series of detailed questions to the QPS about a range of complaints made to police about alleged Gold Coast frauds going back to 2008.

The QPS did not directly address the questions, saying simply that matters were under investigation.

"The QPS has acted on complaints received and information provided," it said.

"State Crime Command adopts an agile and flexible model of policing ensuring resources are attributed to those crimes and issues that pose significant threat or risk."

abc.net.au  26 May 2015

Australia's (finest) police are literally the most corrupt.

Let's see how Australia's corrupt judicature and the corrupt DPP (read police) will handle their corrupt 'brethren'.