THE ATL pension fraud case began as any other. But the fame, and in some cases, notoriety of the lawyers involved, the big money figures and the twists and turns by the defence in the trial have attracted the attention of readers who can’t seem to get enough of it.

The trial underway in the Corporate Area Resident Magistrate’s Court, Half-Way-Tree, has largely focused on operational breaches by Gorstew Limited, the holding company for the ATL/Sandals Group that includes the Jamaica Observer and is the founder of the ATL pension scheme. The apparent strategy is to shift focus from the three former ATL executives accused of fraud and to paint a David versus Goliath scenario.

The three have been accused of conspiring to produce four back-dated letters as proof of consent for the distribution of $1.7 billion in pension fund surplus, from which they allegedly benefited.

In response to the many requests for background on the case, the Observer today provides a chronology of the events and the key issues involved to help readers understand this very tortuous trial:

Gordon ‘Butch’ Stewart, the founder and chairman of the ATL Group had always wanted to ensure that the people who helped him build his super successful companies should have a steady income after their retirement. The Appliance Traders Group Pension Scheme, as it was called, was created on February 1, 1976 by a Trust Deed dated December 7, 1983 (1983 Trust Deed) and underwent several subsequent amendments.

The first amendment came on March 12, 1992 and the Amended Trust Deed and Rules for the Appliance Traders Group Pension Scheme (‘1992 Amended Trust Deed’) was signed on behalf of Gorstew by Stewart and Dr Jeffrey Pyne, the former managing director/treasurer and one of the accused in the case. Patrick Lynch, former chairman of pension fund, signed on behalf of ATL Group Pension Fund Trustees Nominee Ltd. He is a second accused in the fraud case.

The third accused is Catherine Barber, the former general manager of the pension fund and who was hired for the post by Lynch. Importantly, Clause 16 of the 1992 Amended Trust Deed stipulated that:

“The Trustees shall at any time when requested by the company or once every three years unless otherwise directed by the Company, cause an actuarial review of the Fund to be made by the actuary and shall cause a copy thereof to be supplied to the Company. Having regard to the recommendations of the actuary, the Trustees may, with the consent of the Company, credit bonuses to Members’ Accounts if a surplus is revealed by an actuarial valuation.”

A supplemental deed was created on July 2, 2000 and clause 16 of the 1992 Amended Trust Deed was deleted in its entirety and replaced with the following:

“The Trustees shall at any time when requested by the Company or once every three years unless otherwise directed by the Company, cause an actuarial review of the Fund to be made by the actuary and shall cause a copy thereof to be supplied to the Company. In the event that a surplus is revealed by the actuarial review at a particular date, such surplus may be used by the Trustees, with the consent of the Company, for any one or more of the following purposes: credit bonuses to the Members’ Accounts; augment benefits as under Rule 7(9); reduce the contributions payable by the Company provided that for the purpose of calculating the Members’ Accounts the Company’s contributions shall be credited as if the Company was still contributing to the Fund at the rate required pursuant to Rule 4, and further provided that any surplus used for this purpose shall not exceed that certified by the actuary as having been derived from those portions of the Members’ Accounts left in the Fund after the payment of benefits in accordance with Rule 7(4); be carried forward unappropriated.”

In this case, Pyne executed the supplemental deed on behalf of Gorstew and Lynch signed on behalf of ATL Group Pension Fund Trustees Nominee Ltd. There was another amendment to the Trust Deed dated January 1, 2001 but Clause 16 remained the same. Lynch again signed on behalf of the pension fund. Five years later, on October 17, 2006, the Trust Deed and Rules were again amended to say:

“The Trustees shall at any time when requested by the Founder or once every three (3) years unless otherwise directed by the Founder, cause an actuarial review of the Fund to be made by the Actuary and shall cause a copy of that actuarial review to be supplied to the Founder. In the event that a surplus is revealed by the actuarial review at a particular date, such surplus may be used by the Trustees, with the consent of the Founder, for any one or more of the following purposes…”

Fast-forward now to 2010. Lynch wrote to Stewart advising him that he would be retiring at the end of December that year. Stewart decided that the new chairman should start with a clean slate and as a result instructed then Chief Financial Officer David Davies to do an audit of the pension scheme and PriceWaterhouseCoopers (PWC) was given the job.

What PriceWaterhouseCoopers found

In its interim report dated December 8, 2010, PWC pointed out that the Rules of the Pension Scheme provided that the employer’s surplus could only be distributed by the Trustees with the Founder’s (Gorstew) consent and they indicated that Gorstew had not consented.

Concerned, Stewart called a meeting on December 15, 2010 with Davies, Lynch and Dmitri Singh, the general counsel for the Group. Lynch, at this meeting, indicated that he did not know that the consent of the Founder was necessary and he advised that the pension fund would have acted ultra vires.

Stewart, saying had he been given an opportunity he would have sought to use the surplus to assist retired pensioners who were being punished by inflation and the falling dollar and advised Lynch that he should meet with Barber to determine how the transaction could be reversed.

The chairman called a further meeting the next day, this time with Davies, Singh, Lynch and attorney-at-law Trevor Patterson, where he (Stewart) indicated that at no time was the founder consulted or approval sought from it to make the distributions.

Before that meeting, however, Patterson went to Lynch’s office where he (Lynch) told him that the consent of Gorstew was obtained but the letters of consent were signed by Dr Pyne, adding that because of the breakdown in the relationship between Stewart and Pyne, he (Lynch) was afraid to tell the chairman.

As a result, Barber was requested to join the meeting and she advised that she knew that the consent of the Founder was necessary before the disbursement could be made and that the consent was obtained. Barber also advised that she had a letter from Pyne, a director of Gorstew, consenting to the distribution.

Recall also that Pyne had resigned in May 2010.

Barber was instructed to retrieve her file and she showed the persons at the meeting letters dated June 10, 1998; June 7, 2002; May 12, 2005; and July 18, 2008, all signed by Pyne, which had to do with the distribution of surplus by the pension fund.

Kenneth Lewis, the chairman and managing director of SAS Limited which has provided secretarial services to Gorstew since 1980, states that Gorstew did not conduct any board meetings to discuss the distributions of the employer’s surplus and therefore no board resolutions were passed and/or minutes approving such distributions.

It was noticed that the file kept by Barber was properly done and all the documents were punched, except for those four letters which were sitting on the top of the file. The 2008 letter was punched but not affixed to the file. Further, the paper was crisp and they were typed with the same font and seemed to be signed with the same blue pen.

Lynch said that he knew of the letters the day before while he was at the Pension Fund office with Barber but did not raise it because the letters were signed by Dr Pyne and he thought that this would upset Stewart since Pyne had been asked to resign.

The four letters were subsequently sent to Speckin Forensic Laboratories for testing.

On January 25, 2011, Singh and Davies, while looking through a pension fund file, discovered a hand-written note dated July 18, 2007 which states: “Mr Lynch, attached are the three letters to be reproduced on Gorstew Ltd letterhead and signed by Dr Pyne.” The three letters were dated June 10, 1998, June 7, 2002 and May 12, 2005 and stapled to the note.

The Pension Fund reported a case of fraud to the police on or about December 21, 2010. As a result, Snr Supt Fitz Bailey assigned Detective Sergeant Karen Harrison to investigate the matter.

Expert report from Speckin

The suspicious letters were provided to United States-based Erich Speckin Forensic Laboratories for examination, which allegedly found:

1. The document dated 2005 contains the impressions of two signatures. These impressions were then compared to the other three submitted documents and it was determined that the impressions found were from the signature of Jeffrey Pyne from the June 10, 1998 document and the signature of Jeffrey Pyne from the June 7, 2002 document. Clearly, the 1998 and 2002 documents could not have been signed on or near their purported dates since the 2005 document was not even in existence yet to receive the impressions.

“Since impressions are left at the time of writing, the 1998 and 2002 documents had to be signed after the creation of the 2005 in order for the impressions of those signatures to appear in the 2005 document,” the investigator said.

2. The document dated 2002 contains impressions of one signature. This impression was then compared to the other three submitted documents and it was determined that the impression found was from the signature of Jeffrey Pyne from the June 10, 1998 document. Clearly, this is further evidence that the 1998 document could not have been signed on or near its purported date since the 2002 document was not even in existence yet to receive the impressions.

3. The same ballpoint ink formulation from the same manufacturer was used to create the signatures on all four documents. This is a very strong indication that the 2008 document was created at or near the same time as the other three documents that were created in a stack as described earlier. This further shows that the 1998, 2002 and 2005 documents were all created at or near the same time.

4. Furthermore, the same watermark is contained in all four documents. This is further evidence that all four documents were produced at or about the same time as one another. Examination of the documents also revealed that there was an attempt to artificially age the ink on the documents.

Prosecutors in the trial are alleging that despite the many red herrings raised by the defence, the case boils down to four points:

a. The Trust Deed and Rules provide that before the surplus is distributed the consent of Gorstew Ltd must be obtained.

b. Even though there have been several distributions for several years, the consent of Gorstew Ltd has never been obtained.

c. The defendants created four documents after the distributions and these documents fraudulently and dishonestly purport that Gorstew Ltd consented to the distribution.

d. Based on the above, the defendants are allegedly guilty of conspiracy to defraud and falsification of accounts. Dr Pyne is allegedly guilty of forgery, and Barber is allegedly guilty of uttering a forged document.

The trial continues on June 17 before Senior Resident Magistrate Lorna Shelly-Williams.