Preston businessman arrested by FBI as part of money-laundering investigation
A Preston businessman is under arrest in the United States after an FBI investigation into a multi-million dollar healthcare racket.
David Charles Rae, 41, has been indicted before the US Grand Jury on charges relating to money laundering.
Rae, who was arrested in New Jersey, is accused of using a shell company with a bank account in Hong Kong to launder cash from the fraudulent operation.
Three other defendants - Aaron Williamsky, Nadia Levit and Albert Davydov, who are all American nationals - are accused of running the racket which allegedly creamed off millions from Medicare, a federal healthcare programme.
The arrest comes just seven months after Rae, from Grimsargh, was fined £200,000 in the UK by the Solicitors Disciplinary Tribunal for his part in a £30m loans scandal centred in the Cayman Islands and dating back to 2012.
Four solicitors from a Longridge practice - Emmetts Solicitors, which later changed its name to Ashton Fox Solicitors - were struck off by the same tribunal.
Rae, who was not a solicitor but chief executive of the law firm, and another man who was a consultant, were both hit with large financial penalties and banned from working in the legal profession.
The case in the US centres around an alleged fraud where Rae’s three other defendants are accused of setting up dozens of companies to provide orthotics, such as knee, wrist, back, shoulder and ankle braces to elderly patients on the government’s Medicare programme.
The Post has seen the Federal Indictment relating to Rae and his alleged fellow conspirators.
In Count One it says Rae was “a British citizen who owned Cargill Consulting Limited, a shell company with a bank account located in Hong Kong, China, which was used to launder money”.
In Count Eight, Rae and Williamsky are accused of conspiring together to transfer funds in seven wire payments from New Jersey to Hong Kong “knowing that the funds involved represented the proceeds of some form of unlawful activity.”
It also alleges that they knew the transfers were to “disguise the nature, source, location, ownership and control of the proceeds of specified unlawful activity, that is health care fraud.”
The purpose of the transfers was “to hide the proceeds fraudulently obtained from Medicare.” Rae is accused of investing the cash in real estate abroad.
In Count Nine, it is alleged Rae used a cover story that he was investing some of the cash in a movie business.
US Attorney Craig Carpenito has revealed that, if convicted, all the defendants will be ordered to forfeit all property gained from the fraud.
Launched in 2009 in the Cayman Islands, the Axiom Fund raised an estimated £120m to provide short-term fixed interest loans to reputable UK law firms who worked on “no win, no fee” cases.
Many British investors were tempted to invest in its offshore bonds with the promise of a good return and with the fund claiming each individual legal case being financed was rigorously vetted to ensure a high chance of success in the courts.
It was also claimed that each case was insured so that, if it wasn’t successful the fee could still be recovered.
And investors were told that the cash sent to law firms was “ring fenced” so it could only be used specifically for pursuing each case.
One of the law firms benefitting from the fund was Emmetts Solicitors in Preston, run by Richard and Louise Emmett, Matthew Stokes and Mary Hunter. Although not a solicitor, David Rae was its chief executive.
Things did not go according to plan and the Axiom Fund collapsed in October 2012 amid claims it had been poorly managed.
Individual investors lost between £15,000 and £250,000 each.
One told the Lancashire Post the collapse had forced him into bankruptcy.
Emmetts Solicitors had changed its name to Ashton Fox Solicitors in 2011, but the company went into administration in 2013.
In 2014 the Serious Fraud Office opened a criminal investigation into the collapse of the Axiom Fund. It is understood that probe is still ongoing.
It was later revealed that Emmetts Solictors, which at one time employed 80 staff, had taken 71 payments from Axiom in the space of six months in 2010 totalling almost £30m.
Cash from the fund had been improperly used to pay salaries, general running expenses and a property company in Dubai, when the cash should have been used to fund “no win, no fee” cases.
In 2018 a Solicitors Disciplinary Tribunal found Emmetts, which had offices in the Millennium City Business Park in Ribbleton and also in Longridge, had become dependent on the Axiom Fund.
The hearing was also told the firm “engaged in borrowing that was excessive and reckless.”
Richard and Louise Emmett were alleged to have benefitted personally to the tune of almost £2m. Stokes and Hunter both received £300,000.
Rae received almost £600,000 and Stephenson was paid almost £55,000 for consultancy work.
All four solicitors were struck off, while Rae was fined £200,000 and Stephenson £50,000. Both were banned from working in the legal profession.