Malta fund manager behind bars in Sweden over Falcon Funds pension fiasco

A British fund manager whose Malta asset management firm was suspended over its implication in the Falcon Funds fiasco, has been extradited to Sweden to face criminal fraud charges.

Anthony Farrell, 51, will face charges for his role in the €80 million fraud of a Swedish pension fund that was run from Malta.

The pension fund held €270 million in savings by 22,000 clients, but an investigation by the Swedish pensions authority revealed that clients from another pension fund had been misleadingly transferred into Falcon Funds.

The Swedish TV programme Kalla Fakta (Cold Facts) later crucially revealed that Farrell was facilitating a grave conflict of interest: using his firm Temple Asset Management to invest the pension’s cash into financial instruments benefiting another businessman, Max Serwin, alias Emil Ingmanson.

Serwin has since been arrested in Hungary to face seven charges of fraud and gross negligence in Sweden, after evading London Metropolitan Police while awaiting extradition.

In Malta, the pension fund was taken under the control of KPMG, which discovered that at least €60 million in savers’ cash were poured into obscure investments layered under one company after the other, to benefit Serwin.

KPMG suspects that at Serwin’s behest, Anthony Farrell invested heavily in assets in which Serwin himself had an interest, at inflated values.

Serwin was the original promoter of Falcon Funds, a pension scheme marketed to Swedish savers, that invested the cash in blue-chip investments. Although he was never its founder-shareholder, Serwin had a formal role in setting up Falcon Funds, having attended 13 board meetings of Falcon Funds together with directors Tonio Fenech, the former Nationalist finance minister, Ian Zammit, and Joseph Xuereb.

However, financial services rules require that all investment decisions are vested in a firm independent of the fund’s directors, which in this case was Temple Asset Management.

Yet KPMG discovered that Serwin was very much involved in the fund’s operation, and that he effectively took decisions related to investments, which should have been TAM’s responsibility.

Specifically, TAM invested the money in ETIs (exchange traded instruments), where the cash is invested in one company but ‘runs down’ through a chain of companies and down to the ultimate beneficiary.

KPMG said the ETIs were probably designed in such a way so as to make the initial investment appear liquid enough to merit the pension fund’s interest, “despite the fact that ultimately the beneficial company at the bottom of the chain is illiquid.”

In fact, it was in this manner that €60 million in Falcon’s cash were finally delivered to a Swedish energy firm, Werel AB. “These investments were made specifically to allow the fund to acquire shares in Werel, an unlisted company, which was not even eligible as an investment for such a pension fund,” KPMG said. “TAM did not follow the rules imposed by Falcon Funds, by investing significant amounts, indirectly, in Werel.”

KPMG also suspects the investments were charged an inflated premium for the Werel shares. “Effectively, TAM would invest some €20 million in two ETIs… for shares whose net asset value was €2.6 million. But the significant investment does not reflect the value of the Werel shares, so we cannot explain this high premium… We cannot understand TAM’s reasoning for investing such significant amounts in this company.”