Ex-monk gets three years for €4.6m fraud

A former monk and partner at one of Cork's best known stockbroker firms has been jailed for three years after defrauding his clients of €4.6 million to trade on high-risk futures and options on financial markets.

Stephen Pearson (44), North Esk, Glanmire, Cork, was sentenced at Dublin Circuit Criminal Court yesterday after pleading guilty to the offences at a hearing before the court last June.

His fraudulent activity resulted in the closure in 2001 of a 114-year-old family stockbroking firm W&R Morrogh, South Mall, Cork. Many of the victims of the fraud were elderly or widowed and none have recovered any of the money Pearson lost.

Judge Desmond Hogan said while Pearson had co-operated with the Garda investigation, considerable sums of money had been lost and that "on balance" a custodial sentence was appropriate.

He suspended one year of the sentence on condition Pearson kept the peace and agreed not to practice as a stockbroker again.

He said Pearson, a 40 per cent shareholder in the firm, had breached the trust of his 60 per cent partner, Alec Morrogh. He had also breached the trust placed in him by his clients and by the regulatory authorities

He said while medical evidence of addiction had been presented to the court this "does not excuse or allow the defendant to put his hands in clients' pockets".

"And that is what happened, and that was done over a period of time and to a considerable extent, the sums of money are great," Judge Hogan said.

When an initial case of fraud came to light in 1993 Pearson was allowed remain on at the firm and the matter was not reported to the regulators. The money, on that occasion, was paid back.

He was allowed to stay after giving assurances to his own family and Mr Morrogh that he would not repeat the fraud.

"However, that does not appear to be the case and he embarked on a course which led him here today," Judge Hogan said. "It appears the defendant did not learn from his experience."

Pearson, who had trained for seven years at Glenstal Abbey to be a monk, inherited the 40 per cent stake in the firm from his father.

He had studied French and theology at university but had no specific training relevant to his role at the company, which he joined after leaving Glenstal Abbey in 1987.

He is a married father-of-three, aged four to nine. One daughter has severe Down's syndrome.

Det Sgt Denis Heneghan of the Garda Bureau of Fraud Investigation gave evidence in the case stating while Pearson had co-operated with gardaí he had answered queries "with certainty" only when documents had been produced to support specific lines of questioning.

Pearson pleaded guilty to 47 counts in relation to the illegal activity which took place between 1995 and 2001. He has since sought help for a gambling addiction. The court was told that he never used the funds he misappropriated to fund a lavish lifestyle.

Pearson sold some of his clients' shares without their knowledge. He then used the proceeds to settle debts he had incurred with a London brokerage from loss-making transactions on futures and options markets.

In some cases he was given money by clients to invest in shares but he used this to settle debts.

He then issued forged share certificates to his clients. When dividends on the nonexistent shares were due he used funds from other clients' accounts to pay them.

He concealed all of his illicit activities with false entries in electronic ledger accounts which were kept for each of the company's 9,000 clients.

The firm, which had been owned by both families since its inception, incurred losses of €7 million by the time the fraud was detected in April 2001. It was closed by the Central Bank days later and has been in receivership since.