Daily Record expose of get-rich-quick scheme : Not content with one rogue lawyer, someone had to hire three. SCOTS CONSUMERS should be on the look out for too-good-to-be-true finance deals presented to them by familiar faces from the world of bankrupts & crooked lawyers after an investigation by Scotland’s Daily Record newspaper into Cost Reduction Services operated by “banned twice-bankrupt Stewart Kennedy” revealed some of Scotland’s more notorious ‘crooked lawyers’, John G O'Donnell, Catriona Macfarlane & Andrew Miller were linked to the "shady get-rich-quick scheme" based near Glasgow Airport.
The alarming ease of which rogue lawyers who have regularly been identified by the media in scandals involving ripping off multiple clients again raises questions over the effectiveness of the self regulation of lawyers in Scotland by the Law Society of Scotland and its ‘front company’, the Scottish Legal Complaints Commission (SLCC).
The Law Society of Scotland has unconvincingly claimed for over two decades it offers consumers & clients “ultimate protection” against Scotland’s notoriously corrupt legal services market yet the Society has binned tens of thousands of complaints over the years and allowed most rogue lawyers to escape any punishment for their crimes against clients. Recently it was even revealed the Law Society had also intervened to prevent proceedings against solicitors who stole or exaggerated their claims for taxpayer funded legal aid.
The notoriously anti-client Scottish Legal Complaints Commission, nicknamed a “Front Company for the Law Society” by some msps, equally professes its resolve to ‘independently’ investigate complaints against Scottish solicitors, yet in January it was revealed the SLCC has only managed to uphold one single complaint against an unidentified solicitor in three years, while passing most cases it receives back to the unbelievably prejudiced Law Society of Scotland for yet more slaps on the wrist.
However, while the legal profession’s self regulators spend more time counting their cash or slipping complaints under the carpet, certain parts of the media such as the Daily Record & Sunday Mail have again proved themselves a much more effective regulator & beacon of consumer protection by exposing the new bases & con-tricks of some of those solicitors & ex solicitors who the public should be on the look out to avoid.
Here follows the Daily Record’s investigation into “Cost Reduction Services”, its owner & those rogue lawyers we now know so well. If consumers have suspicions about their lawyers or these get rich quick schemes, the message is clear, you would do a lot more good reporting your concerns to the media before attempting to communicate with the self regulators who control the legal profession.
By Chris Musson Daily Record April 12 2011
THREE rogue lawyers are linked to a firm behind a shady get-rich-quick scheme, a Record investigation has revealed.
Cost Reduction Services - run by an ex-bankrupt who was accused of fraud use fake photos of "satisfied customers "and promises of £4600-a-month earnings to lure debt-hit Scots. But former staff members say the venture is a classic Ponzi scheme - in which new investors' cash is paid out to older ones with no real income being generated.
The outfit is headed by self-styled finance expert Stewart Kennedy, 46, who walked away with £100,000 of his former clients' cash. Banned Twice-bankrupt Kennedy has assembled a list of suspect characters to work for the company, which is based in a part-empty office block by the M8 near Glasgow Airport.
They include dodgy lawyers found guilty of professional misconduct by the Scottish Solicitors' Discipline Tribunal (SSDT), and several other former bankrupts. One boss at the firm is dodgy solicitor Catriona McFarlane, 50, who is banned from practising law unsupervised. Crooked lawyer Andrew Miller, 49, who was struck off and branded dishonest by the SSDT, was taken on as a salesman for the business. And John O'Donnell, 60, a third solicitor rapped by SSDT - is being styled by Kennedy as the firm's "court lawyer", sources say.
Kennedy's business targets debt-ridden homeowners and small businesses, by cold-calling them and offering to reduce their monthly outgoings. Their "solution" involves remortgaging clients' homes or properties to free up cash for clearing other debts such as loans and credit card balances. Customers are charged £3500 in fees then offered the chance of buying £15,000 "franchises" in the business - which CRS say will involve no work but bring in £4600 a month. But insiders claim nobody could have received the promised returns.
Yesterday, an expert in the franchise market said the scheme was "very suspicious" and should be avoided.
Cost Reduction Services - full name Cost Reduction Services (2010) Ltd - were registered at Companies House in April 2010, contradicting claims on their website that they have been in business for 10 years. The business has no link to Surrey firm Cost Reduction Services Ltd.
And suspicions have been raised further by our findings that the firm is using an online slideshow with phoney photos to flog the £15,000 franchises. They are marketing the deal by using glowing testimonials from people they claim are happy customers. But the satisfied "franchise holders" who are shown during the 43-minute sales presentation are actually faces from random snaps found on the internet.
Our investigators traced one of the individuals - who the firm claim is called Mandy - and found she is actually a Spanish woman from Madrid called Marta Balius. A second so-called customer, named as Andrew, is an American model posing as a businessman for promotional shots.
The slideshow is voiced by Cost Reduction Services "franchise manager" Graham Scott, 56, from Avonbridge, near Falkirk. Like Kennedy and at least one other member of staff at the firm who claim to be able to help customers with their financial problems, Scott is a former bankrupt. In the presentation, he talks up the company's EasyEarn Franchise and promises punters a return of £4600 a month for no work. When we confronted Scott with the evidence yesterday, he eventually admitted the pictures were fake. He said: "They're just, erm, erm, stock pictures." Scott refused to answer any further questions about the featured customer testimonials. He referred all further questions to managing director Kennedy, who was discharged from bankruptcy on April 1 last year, just days before he registered his company.
Former mortgage advisor Kennedy , from Quarriers Village, Renfrewshire, appeared in court charged with fraud in 2007 after walking away almost £100,000 of his clients' cash, though prosecutors later dropped the case.
Sources with knowledge of how the company works say they cold-call people from the phone book or businesses from the Yellow Pages website. Staff who were doing the cold-calling say they were working from £10 pay-as-you-go mobiles after the office phones were disconnected. And several staff have complained they were left unpaid then sacked. One former employee came back to confront Kennedy, and the doors at the office overlooking the M8 near Glasgow Airport are now kept locked.
One former staff member said: "The scheme targets homeowners who have at least 30 to 40 per cent equity. "The idea is to convince them to remortgage their home to free up some cash, which is used to pay off debts. "If we convince them to remortgage a bit higher and hand over £15,000 for a franchise, then all the better. "The remortgage is done in such a way that your payments do reduce to start with. But when interest rates go up or the fixed term ends, the payments will too."
Another source said: "The company hasn't got enough work to pay dozens of franchisees thousands of pounds a month. The only way it can pay out money to franchisees is by getting lots more people to buy franchises. Then they use the money from the new franchise owners to pay the first group, and so on. "That's called a Ponzi scheme. It might work for a while, but will eventually fall in on itself. People should be wary given Kennedy's history."
Marian Owen, of consumer website Business Opportunity Watch, said: "The franchise looks very suspicious to me because the profits they promise are so high they sound too good to be true. With a standard franchise, you may make good profits but you have to work hard for it."
She also pointed out that the franchise offer sounds more like an investment scheme. Anyone operating an investment scheme must be registered by the FSA. Cost Reduction Services are not.
Mrs Owen added: "It seems to me that this is deposit-taking activity, which is in breach of the Financial Services and Markets Act unless you have the appropriate authorisation, such as a banking licence - of which there is no sign."
Kennedy did not respond to requests for comment. Staff said he was out of the country. Scott said while he was "not privy" to details of the company's earnings, it was his "understanding" from Kennedy that Cost Reduction Services had enough work to pay franchise holders from business earnings.
SELF-STYLED finance expert Kennedy left a string of clients almost £100,000 out of pocket with his dodgy mortgage business six years ago. When Kennedy, left, went bankrupt in 2005, creditors were unable to pursue him because all his assets were in his wife's name.
He was later charged with fraud but to the dismay of victims, prosecutors dropped charges against him because of "an insufficiency of evidence". Kennedy lives in exclusive Quarriers Village, near Bridge of Weir, Renfrewshire, in a £375,000 house - which is in his wife's name.
SOLICITOR O'Donnell's Glasgow office was raided seven years ago during a gangland money laundering probe. He has been found guilty of misconduct twice and was banned from practising unsupervised for five years from 2009.
O'Donnell, 60, right, made his name conducting property transactions but later faced 21 claims for negligence. He was made bankrupt last year. He is being styled by Kennedy as CRS's "court lawyer", sources say. O'Donnell says he has nothing to do with the business - but has previously represented Kennedy in court.
MILLER, 49, has been working as a "consultant" for Cost Reduction Services.
The ex-bankrupt was struck off as a solicitor in 2005 after forging the signature of his former partner in a Dundee law firm on forms to carry out the administration of a will.
Miller, from Strathaven, Lanarkshire, has claimed to be a financial advisor but he is not registered with the Financial Services Authority. Restrictions were placed on him practising unsupervised as a lawyer in 1999 because he had been made bankrupt. The tribunal who struck him off said there there was "no place in the solicitor's profession" for someone like Miller.
MACFARLANE, 50, is banned from practising as a lawyer unsupervised until 2012.
She was fined £2500 in 2009 by the SSDT for professional misconduct - covering up for her mortgage adviser husband after he stole her client's £24,000 deposit for a home. Sources say she heads up the legal side of the Cost Reduction Services and is the boss in the office apart from Kennedy.
When confronted at the Cost Reduction Services HQ, MacFarlane, from Newton Mearns, near Glasgow, denied she was the firm's lawyer. She said her job was to write wills for customers. MacFarlane said: "I can't offer legal advice ... I've no practising certificate. I can't practise as a lawyer." She admitted knowing John O'Donnell and said he had been in the office - a claim he denies.
ARCHIE and Joyce Miller ended up los ing £20,000 to Cost Reduction Services boss Stewart Kennedy seven years ago. The couple from East Kilbride, both 72, were forced to work past retirement age to make up the cash they lost. They were cold-called by one of Kennedy's former firms in 2004 and met Kennedy face to face.
Like many other families at the time, they were facing a shortfall on endowment policies - savings intended to pay off a mortgage at the end of its term. Kennedy told them they should cash in their policies early, sign them over to him, and he would remove the shortfalls by rearranging their mortgage. They did so - and never saw a penny of their money again.
The Millers' loss formed part of a fraud case against Kennedy in 2007. The Crown Office was challenged by their local MSP, then finance minister Andy Kerr, on why the action was later dropped. In a letter to Mr Kerr, solicitor general Frank Mulholland said there was an "insufficiency of evidence".
The legal chief went on to say that for a charge of fraud to stick, the Crown had to prove the accused had the "intention to deceive" or the "intention to permanently deprive the victim of the property in question".
Yesterday, Archie and Joyce said Kennedy should be avoided at all costs. Archie said: "Given our experience, I would advise people to steer well clear of this man or anything he is involved with. It's frightening to hear he's in business again, especially the detaills about the people who are working with him."