Andrew Kent and Patrick Mahon 'repeatedly deceived The Securities Association in order to present a quite false picture of the firm's financial position', said Michael Birnbaum QC, who was opening the case for the Serious Fraud Office.
Mr Kent, 46, and Mr Mahon, 53, allegedly resorted to deception to meet financial requirements introduced in 1988 under the Financial Services Act. Mr Birnbaum said TC Coombs had insufficient capital - substantial debts owed to it had gone unpaid for 'a very long period of time'.
The defendants deny two charges of conspiracy to defraud. They are accused of lying about a share deal supposedly worth pounds 2m, and about the source of pounds 3.7m made available to their firm. Mr Mahon denies a third charge of making a dishonest attempt to obtain Cdollars 2m ( pounds 1.05m) from a Swiss bank called Rahn & Bodmer.
Mr Mahon was TC Coombs's managing director. Mr Kent was corporate development manager; although he was neither a shareholder nor a director, the prosecution claim he was the man who controlled the firm.
Mr Birnbaum said the defendants falsely told their regulator that Rahn & Bodmer had agreed to pay Cdollars 5m for a block of shares in Coastline Resources, an Australian company. This sum would have substantially reduced the pounds 3m debt owed to TC Coombs by a client called Safeguard Investments, a British Virgin Islands firm.
The Securities Association was 'very suspicious' of this transaction because Rahn & Bodmer was paying more than twice the price at which Coastline shares had last changed hands. TSA refused TC Coombs authorisation, but Mr Mahon assured a tribunal that the deal was genuine.
'Unfortunately, Mr Mahon was lying,' said Mr Birnbaum. He said the true deal had been struck in Zurich at the headquarters of Rahn & Bodmer, where the Swiss had agreed to pay only Cdollars 3m.
The man behind Safeguard also controlled Coastline, said Mr Birnbaum: 'The whole transaction was circular and artificial.'
Mr Mahon later sought to obtain a further Cdollars 2m from Rahn & Bodmer, allegedly claiming the bank had agreed to pay dollars 5m.
The trial, at Middlesex Guildhall in central London, continues today.Reuse content