HMA v Edwin McLaren and Lorraine McLaren

At the High Court in Glasgow today, 13 June 2017, Lord Stewart sentenced Edwin McLaren to 11 years’ imprisonment and Lorraine McLaren to two-and-a-half years’ imprisonment after the two accused were found guilty of fraud and money laundering.

On sentencing, Lord Stewart made the following statement in court:

“Edwin McLaren, you have been convicted by the jury of 25 charges of fraud at common law. The convictions relate to fraudulent property transactions.

You have also been convicted of three charges of money laundering in terms of the Proceeds of Crime Act 2002, section 327(1), the money you dealt with being the proceeds of the 25 fraudulent property transactions.

You have further been convicted of one charge of failing without reasonable excuse to comply with a special condition of bail in terms of the Criminal Procedure (Scotland) Act 1995, section 27(1)(b).

The jury has inevitably found that the libelled bail aggravations apply to the extent that the substantive offences were committed from and after 14 February 2013, the date when you were bailed after your first arrest.

Having reflected on Mr Moir’s well-judged plea in mitigation and having taken account of the evidence and all other relevant circumstances brought to my attention and having considered the guidance available to me on sentencing and the maximum sentences laid down for the statutory offences, I intend to impose custodial sentences which in their totality will amount to 11 years’ imprisonment.

I have had regard to section 204 of the Criminal Procedure (Scotland) Act 1995; and notwithstanding that you are a first offender, I consider that no other method of dealing with your case is appropriate.

The jury returned guilty verdicts on all of the 25 property fraud charges left for their consideration (charges 4, 5, 7, 8, 11, 12, 14, 15, 18, 19, 20, 21, 22, 23, 25, 26, 28, 30, 31, 32, 33, 34, 37, 38 and 39.) The verdicts were unanimous except in relation to charges 11 and 37 for which conviction was by a majority. The jury deleted the allegations of forgery in charges 4, 5, 8, 19, 30 and 34.

Your motivation was to obtain funds from mortgage lenders to finance an affluent lifestyle for yourself, your wife and your two children.

To do this you had to set up house purchases for which mortgage funding could be obtained and which you could control.

Your plan involved targeting house owners in financial difficulty.

You found clients, if I can call them that, by advertising in newspapers using the business names ‘Home Sale Solutions’ and ‘Property Solutions’.

You arranged for clients’ houses to be purchased in the names of members of your family and certain associates.

You instructed mortgage brokers to obtain mortgages for these purchases; and you instructed solicitors on both sides of the transactions.

You induced the clients, unknowingly, to sign away their whole right and title to your nominee purchasers. Without such outright sales, the new mortgage funds could not have been accessed.

Notwithstanding that the whole right and title with vacant possession was transferred to your nominee purchasers you induced the clients who wanted to stay put to think that they had a legal right to stay on in their houses indefinitely.

The new mortgage funds were used to pay off your clients’ existing mortgage loans.

The free balance of the purchase price consisting largely of the new mortgage funds was, by a variety of means, paid to bank accounts in the name of or notionally controlled by your wife’s uncle, the former third accused. You then directed how the funds were to be distributed.

The largest sum fraudulently obtained in this way from a single transaction was £187,846. That was the transaction referred to in charge 26, Barbara Mitchell and Stewart Mitchell, 17 South Road, Peterhead. The total cash amount fraudulently obtained by you in the four years up to January 2013 was £1,609,366.64.

You are also convicted of obtaining the transfer of ownership of the properties to your nominees by fraud. Your position in evidence is that you are personally entitled to fifty per cent of the equity when the properties come to be re-sold.

After your first arrest on 25 January 2013 you were charged and bailed by the sheriff at Paisley. It was a special condition of your bail, putting it shortly, that you were not to negotiate property deals with strangers.

You continued to engage in fraudulent property transactions using the alias Dave Johnston. You also assumed the identity of your clients by setting up email accounts in their names and sending and receiving emails on those accounts.

Charges 37, 38 and 39 relate to the post-bail frauds. In the case of charge 39, relating to 20 Debdon Gardens, Heaton, Newcastle, you masqueraded as the nephew of the owner Shona Harrison.

From this transaction you obtained cash in the sum of £74,300 by fraud. The total amount obtained by fraud while you were on bail was, I think, £112,300.

You are also convicted of obtaining the transfer of title of these properties to third parties by fraud.

Although there was prima facie evidence of mortgage fraud in relation to all the charges, the Crown has withdrawn the allegations of fraud on the mortgage lenders and I am bound to disregard the mortgage fraud elements of the charges entirely, which I do.

I also take account of the fact that you transferred sums of money back to the clients, sometimes under pressure from the clients. I calculate that the total amount transferred back was approximately £200,000.

It would have been open to the jury in my view to treat all fraudulent property transactions, both before and after your first arrest, as a single course of criminal conduct. I shall assume in your favour that this was the view taken by the jury and on that basis I shall impose a cumulative sentence for all the fraudulent transaction charges.

Proceeding in this way, I am not minded to assign any part of the penalty to the bail aggravations established in relation to charges 34, 37, 38 and 39. The bail aggravation in relation to charge 34 is in any event, I think, purely technical. The substantive criminality occurred before you were released on bail.

A serious view should be taken of the breach of the special condition of bail.

On your own evidence you wilfully and in a calculating way breached the special condition of bail which you had agreed to. You defied the order of the sheriff which was imposed for public protection.

A separate and consecutive sentence is called for. This offence is libelled under the Scottish statute only in relation to the two post-bail offences that took place in Scotland, charges 37 and 38.

I shall impose a cumulo sentence of 10-and-a-half years for the property transaction frauds, charges 4, 5, 7, 8, 11, 12, 14, 15, 18, 19, 20, 21, 22, 23, 25, 26, 28, 30, 31, 32, 33, 34, 37, 38 and 39. This works out at just over five months on average for each of 25 frauds.

I shall impose a consecutive sentence of imprisonment of six months in respect of the statutory bail offence, charge 40.

In selecting the sentences which I have done I have had regard to the number of offences, the total period of offending, which is almost six years, the amounts involved, the degree of planning, the fact that vulnerable individuals were targeted and taken advantage of, and the disruption, uncertainty and distress caused by your offending.

The evidence which the jury must have accepted demonstrated breath-taking dishonesty in every aspect of your enterprise by you personally and by your assistants and certain professional advisers acting on your directions.

I am satisfied that the jurors or a majority of them rejected your evidence on the critical issues because they have found you to be an outright liar.

The money laundering convictions, charges 36, 43 and 44, are statutory offences for which I am bound to impose distinct penalties. This offending represents the use to which you put the proceeds of your own crimes. Accordingly I shall make the penalties for the money laundering offences concurrent.

On charge 36 I shall impose a sentence of eight years imprisonment, on charge 43 I shall impose a sentence of one year imprisonment to be consecutive to the sentence imposed in respect and of charge 36, and on charge 44 I shall impose a sentence of eight months imprisonment to be consecutive to the sentence imposed in respect of charge 43 all of said sentences amounting to nine years and eight months to be concurrent with the cumulo sentence imposed in respect of the 25 property transaction frauds. Again, I do not propose to assign any part of the sentences to the bail aggravations.

The sentences selected take account of the fact that you have been remanded in custody awaiting trial and during the trial for a total period that I take to be something over four months. The sentences now imposed are backdated to the date of your conviction, namely 16 May 2017, when you were again taken into custody pending sentencing.

Edwin McLaren, in respect of your conviction on charges 4, 5, 7, 8, 11, 12, 14, 15, 18, 19, 20, 21, 22, 23, 25, 26, 28, 30, 31, 32, 33, 34, 37, 38 and 39 I impose a cumulative sentence of ten years and six months imprisonment.

In respect of your conviction on charge 40, I impose a sentence of six months imprisonment consecutive to the just-mentioned sentence of ten years and six months.

In respect of your convictions on charges 36, 43 and 44, I impose sentences of imprisonment eight years, one year and eight months respectively to be served one after the other consecutively and to be concurrent with the sentence of 10 years and six months just mentioned.

A number of matters involving potential contempt of court were reserved during the trial to be dealt with at the end of the trial. I hereby dismiss all these matters without making any finding.

Lorraine McLaren, following amendment, two charges on the indictment were left standing against you for determination by the jury. You have been convicted of both charges by a majority.

The conviction in terms of charge 1 is for common law fraud, in respect of a mortgage loan of £566,250; and the conviction in terms of charge 36 is for money laundering contrary to the Proceeds of Crime Act 2002, section 327(1). The sum involved is £128,700.

You have no previous convictions. In terms of section 204 of the Criminal Procedure (Scotland) Act 1995 I cannot impose a sentence of imprisonment unless I consider that no other method of dealing with your case is appropriate.

In your case the option of a fine is not available. I have thought very hard about a community disposal. Given the gravity of the offending I consider that a custodial disposal is called for and that no other method is appropriate.

Having reflected on Mr McCallum’s forceful plea in mitigation, having taken account of the evidence and all other relevant circumstances brought to my attention and having considered the guidance available to me on sentencing and the maximum statutory penalties, I intend to impose custodial sentences which in their totality will amount to two-and-a-half years or 30 months imprisonment.

As to charge 1, in March 2008 you contracted to buy the house at 9 Juniper Avenue, Quarrier’s Village, Bridge of Weir at a price of £762,055.00.

Your own evidence is that this was your dream house. It was to be the family home.

The jury’s verdict necessarily means that you obtained a mortgage of £566,250.00 on the basis of a declared income from employment of about £160,000.

You claim to have been working as an estate agent in or for a business of uncertain legal status called ‘1Move’. The evidence of your precise income from employment, if any, is sketchy to non-existent.

According to the HMRC records spoken to by the fraud investigator Dr Nicholas Brannigan, no employment information and no income from employment was recorded or returned for you after July 2007. For completeness there is no record of any return in respect of income from self-employment; and no national insurance contributions were paid by or for you in respect of the year ending 2007 and thereafter.

You told the police at interview, that before the housing market crash of 2007-2008 you had an income of £36,000 a year or so from employment and, as I understand it, nothing in the way of income from actual employment afterwards. No pay records or business accounts for the business have been recovered or produced. It follows that the declaration of income from employment for the purpose of the mortgage application was a very big lie.

This was to be a capital and interest repayment mortgage. After the first month, payments were to be at the fixed rate of £3,559.97 a month working out at £42,719.64 a year till the end of year three and then at the lender’s variable rate.

As I understand the evidence you had no idea of any legitimate source of income to fund the payments.

Turning to charge 36, the mortgage payments were financed or substantially financed by the proceeds of your husband’s property transaction frauds.

The Crown has proved and it is accepted by Mr McCallum on your behalf that proceeds of crime in the total sum of £118,700 were transferred to the bank account held by you from which the mortgage payments were made.

By virtue of your conviction in terms of charge 36 the jury must have found that over the four-year period from January 2009 to January 2013 you knew or suspected that the transfers to your bank account represented the proceeds of crime.

The jury has also concluded that the £10,000 payment made to enhance your diamond ring in 2012 represented the proceeds of crime and that you knew or suspected as much.

Going back to charge 1, the jury has also accepted that when the mortgage application declared the source of the purchase price deposit to be your accumulated savings, that was a lie.

The deposit was £195,805.

The case law can be understood to mean that a relatively lenient approach should be taken to mortgage fraud. This appears to be on the basis that there is no loss or a negligible risk of loss to the lenders where the loan is effectually secured over marketable land, bricks and mortar.

I take the view that mortgage fraud of the type under consideration in your case is potentially a significant economic crime even without actual loss to the mortgage lenders.

In your case you had no basis for thinking when you made the fraudulent statements, and undertook the repayment commitments that you could meet your obligations from legitimate sources.

The inference from the fact of your convictions must be that the jury found your presentation in the witness box unimpressive. I must proceed on the basis that the jury found you to be an outright liar through most of your evidence.

On the evidence your husband was the driving force. That is a factor that I accept as mitigatory.

However, you have also shown yourself to be both a strong personality with a mind of your own and to be an energetic business woman in your own right.

Your defence is that you trusted and trust your husband and left all financial matters to him. The jury rejected your defence.

My judgement is that anything less than a sentence of 30 months in custody would fail to reflect the degree of criminality involved. Accordingly I shall sentence you to a period of imprisonment of 30 months on charge 1.

I have to impose a distinct sentence for the statutory offence of money laundering in terms of charge 36. Again I shall impose a sentence of 30 months imprisonment to be concurrent with the sentence in terms of charge 1.

Mrs McLaren, in respect of your conviction on charge 1 I now do impose a sentence of imprisonment of 30 months.

In respect of your conviction on charge 36 I now impose a sentence of imprisonment of 30 months, to be served concurrently with the sentence just-mentioned in respect of charge 1.

You have been at liberty on bail since conviction. The sentences of imprisonment will commence from today’s date.

Before the Court adjourns let me thank counsel for their assistance. Let me also thank the Clerk of Court and the Macer for their support. Once again I thank the jurors.”