A SELF-styled money expert behind a financial services "Ponzi" scheme that misappropriated over £250,000 has been banned from being a company director for 12 years.
Stewart Kennedy, 48, was the sole director of Easyearn, a franchise scheme that offered Scottish investors the chance to set up professional services franchises whose offerings included insolvency management, legal services and electricity and gas saving.
The firm, registered as Cost Reduction Services (2010), invited franchisees to take the "extraordinary and unique" chance to invest £15,000 and receive £4600 a month while Kennedy's company, based in Paisley, got on with the work.
They were told customers would be charged an average of £1000 in fees per case and that they could expect on-target annual income of £60,000. Some were also told that if the scheme was unsuccessful they would get their money back within 50 to 100 days.
It was claimed on the company website the firm had been trading for 10 years, even though it was incorporated in 2010. It also said it had grown from a "one man business to a multi-million pound national company".
It raised £357,500 in six months from 20 franchisees and from customers who paid £38,750. Only five franchisees received money, most of which was from what was paid in by the 15 later entrants, who lost what they put in. Some took out multiple franchises.
According to the Insolvency Service, which raised a court action for the ban, Kennedy pocketed £105,000 in salary and expenses while a further £158,000 in cash withdrawals and unreceipted debit card expenditure has never been accounted for. This included a £14,000 withdrawal a week before it folded in April 2011.
Franchisees were informed by text message of the scheme's closure, which was blamed on a court action raised by recruitment agency Rise. They were told this had the effect of terminating all contracts with the company.
Two days earlier Kennedy had set up a new firm called Cost Reduction Services (UK and NI), but this was prevented from trading after the Insolvency Service stepped in.
Both companies were ordered into liquidation by the Court Of Session in January last year on grounds of public interest. At the height of the scheme, he was employing around one dozen staff.
Kennedy's detached house in a cul-de-sac in Bridge of Weir, Renfrewshire, most recently changed hands for £375,000 in 2006.
He did not appear at the motion to have him struck off as a director, at which the court heard "Mr Kennedy had caused 2010 to operate a Ponzi scheme" and he had "carried on 2010's business recklessly and without any regard for the interests of franchisees."
The court was also told he "caused 2010 to seek new investors despite knowing there was no prospect of them receiving any return".
The Insolvency Service said: "Mr Kennedy misled investors with fabricated testimonials and also massively overestimated the potential returns, as well as offering worthless money-back guarantees that were never honoured."
Kennedy has previously been made bankrupt twice. The second stretch was discharged two weeks before he set up his 2010 company.
He previously worked as a mortgage adviser in Paisley for firms including Mortgage Options, One Stop Mortgage Solutions and Lifestyle Marketing.
In 2007 Kennedy was charged with fraud for taking close to £100,000 from mortgage clients, but the case was eventually dropped due to lack of evidence.
He was also previously behind a Glasgow-based outfit called Hampton Trust, which described its business as "cost reduction consultants".
A police spokesman said: "A 48-year-old man is the subject of a report to the procurator-fiscal in connection with an alleged fraud."
Kennedy was unavailable for comment.
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