Jean-Claude Baumgartner was sentenced to serve two years and eight months in jail after he had lied to businessmen Peter Jones and Theo Paphitis about the success of his business in order to secure a £100,000 loan from them. He then failed to repay the money lent to him. Baumgartner had previously obtained a combined £130,000 investment from Jones and Paphitis on the BBC's 'Dragons' Den' programme.
During his appearance on Dragons' Den in June 2009 Baumgartner fraudulently claimed to own "vital" software for a global positioning system (GPS) device his company Satsport used for sporting activities, such as skiing, according to the Crown Prosecution Service (CPS). However, it was March 2010 before Baumgartner bought the ownership rights to the software.
Jones and Paphitis had been sufficiently impressed to invest £65,000 each in Satsport and were convinced to loan Baumgartner a further £100,000 after the businessman had asked for the money following "several large orders".
However, Baumgartner had falsified and doctored email evidence of the orders which he had shown Jones and Paphitis, including making up "an entirely fake order" from London department store Harrods. The CPS said Baumgartner had "even falsified paperwork from his own accountants, fabricating figures for turnover, net profit and cash in the bank" to show as evidence of the orders.
Baumgartner's fraudulent activities were discovered after he failed to repay the loan to Jones and Paphitis, the CPS said. He had claimed that a power cut prevented him sending through the loan repayments electronically and sent cheques instead, but the cheques "bounced".
“This was a particularly brazen and audacious fraud, carried out on national television," Mark James-Dawson, Crown advocate for the CPS, said in a blog.
"It was clear that Baumgartner had come to rely on fraud as his only way of surviving in business, but when [Jones and Paphitis] asked for repayment of an agreed loan, his web of deceit began to unravel as it became clear that he had begun to live the life of a successful businessman before the business was a success. Faced with the strength of the prosecution case, Baumgartner ... decided to plead guilty ahead of the start of his trial and was sentenced to two years and eight months," he said.
The results of recent surveys on fraud levels, including by accountancy firms PwC and BDO, reported significant rises in the number of cases of fraud reported last year.
Anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said that tough conditions for businesses had driven the rise in fraud.
"This case underscores the need for investors to be increasingly vigilant. In a difficult economy it is a sad fact that some will resort to fraud in order to support their businesses and lifestyles,” Vitou said.