A former owner of Norton Motorcycles has been given a suspended prison sentence for illegally investing pension schemes’ money into his business. He was also the sole trustee of the three pensions schemes which invested in Norton Motorcycles.
Following a prosecution brought by The Pensions Regulator (TPR), Stuart James Garner, 53, of Park Lane, Castle Donington, Derby was today (Thursday) sentenced to eight months imprisonment, suspended for two years, for each of three counts of breaching employer-related investment (ERI) rules. He was also disqualified from acting as a company director for three years and ordered to pay TPR’s costs of £20,716.
Last month, Mr Garner pleaded guilty to three charges of breaching ERI rules by investing most of the money of each scheme into his business, Norton Motorcycle Holdings Ltd.
Derby Crown Court heard how the offences related to three defined contribution schemes: Dominator 2012, Commando 2012 and Donington MC. The investments, made between 2012 and 2013, were made in return for preference shares. These shares were issued by Norton Motorcycle Holdings Ltd for which Mr Garner was both the director and majority shareholder.
In her ruling, Her Honour Judge Nirmal Shant, told Mr Garner that while she had given him full credit for his early guilty pleas, his actions had been reckless and caused profound harm to his victims – both financially and to their mental wellbeing, as well as damaging their confidence in pension saving.
She added that Mr Garner’s victims had reported problems sleeping, relationship difficulties and some now faced the prospect of having to work longer than they had expected because of his crimes.
Judge Shant said: “This is not just financial harm. I have read statement after statement on the damage you have done to the people involved.”
Nicola Parish, Executive Director of Frontline Regulation at TPR, said: “Despite being an experienced businessman, Stuart Garner illegally took money from three pension schemes in his care to prop up his struggling business.
“As a result of Mr Garner’s criminality, savers, whose interests he was supposed to safeguard as a trustee, have been affected by substantial financial losses to their retirement savings and have been caused significant distress. It is only the right he is punished for this.
“Rules on employer-related investments are vital to protect members’ savings, and as this case proves, we will take action against those who flout them.
“Trustees must have full knowledge and understanding of the restrictions which apply to pension scheme investments. Trustees may face prosecution or regulatory action if they fail to abide by those restrictions.”
The three pension schemes were left with a shortfall of approximately £10 million.
The Pensions Ombudsman has already ordered Mr Garner to repay the amount lost on investment in preference shares, less money already recovered, plus interest.
The independent trustee firm appointed by TPR to the three schemes pursued Mr Garner for this amount, which resulted in his personal bankruptcy. TPR has today also published a Determination Notice regarding the appointment of Dalriada.
Insolvency practitioners for Norton Motorcycles Ltd are investigating how much money may be passed to the scheme following the eventual liquidation of the Norton companies.
While the insolvency process continues, Dalriada continues to investigate the most effective means to secure financial redress for the schemes, including by claims to his trustee in bankruptcy on behalf of the schemes as creditors and potential claims on the Fraud Compensation Fund.
TPR continues to support these other organisations seeking to secure financial redress for Mr Garner’s victims.
Notes to editors
- The employer related investment (ERI) rules are set out in section 40 of the Pensions Act 1995 and in the Occupational Pension Schemes (Investment) Regulations 2005. Subject to certain exceptions, not more than 5% of the current market value of pension scheme assets may at any time be invested in ERI. ERI restrictions not only apply to investments in the employer, but also to investments in parties associated or connected with the employer, and in property used by the employer or its associates. A trustee who agrees to make ERI in breach of the restrictions may be subject to prosecution.
- On 23 June 2020, the Pensions Ombudsman ordered Mr Garner to make a restorative payment. On the strength of this order, the schemes’ independent trustees issued a demand requiring the Mr Garner to pay approximately £15.7 million. The sum is higher than the £10 million shortfall because it factors in additional amounts such as interest.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund; to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
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