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Canada New Brunswick man's role in huge Australian Ponzi scheme shocks childhood friends

Shawn Richard was a "naive" business school dropout with a penchant for Johnny Cash songs when he boarded a plane for Australia in 1997 on what was meant to be the adventure of a lifetime.

Today, the New Brunswick native is in an Australian prison, serving a 30-month term for his role as the front man in what may be the largest pension-fund fraud in that country's history.

And while Mr. Richard, 36, serves his sentence in protective custody, apparently fearing retaliation for his testimony at a liquidators hearing in Sydney last year, friends and acquaintances in the Moncton area are struggling to understand how the gregarious, fun-loving young man they knew got involved in a scheme that saw more than $125-million worth of individuals' retirement funds disappear "into the ether."

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"The Shawn I knew for 20 years never, never, never had a bad bone in his body. He was blonde hair, blue eyes, a great golfer, a good hockey player, just like a poster child," said Pierre McGraw, Mr. Richard's closest childhood friend.

"That young man was straight and forward and never was in trouble. He always listened to what we told him," added Paul Cormier, who coached Mr. Richard on the New Brunswick provincial softball team in 1993. "When I heard about what happened I had to cry."

Known in Australia as Shawny Cash – after the name he used on his Facebook page – Mr. Richard traded what the Australia press has called a "playboy lifestyle" for an isolated prison cell last month, after pleading guilty to two counts of breaching Australia's Corporations Act.

New South Wales Supreme Court Judge Peter Garling said Mr. Richard was a key player in two Sydney-based investment management companies which looked after the retirement funds of at least 10,000 Australians. More than $125-million is missing and will likely never be recovered.

Judge Garling said Mr. Richard helped divert $26.6-million ($26.8-million Canadian) of investors' money to overseas hedge funds operating in the Caribbean and controlled by his boss, high-rolling New Jersey-born lawyer Jack Flader. Mr. Richard also profited handsomely from the scheme, the judge said.

In 1997, Mr. Richard went to Australia with the intention of staying for a year. Within that time, he became an office boy for an investment firm in Taiwan run by one of Mr. Flader's associates and was firmly on the path that put him in prison last month.

Although his business knowledge was limited to a year studying commerce at the Université de Moncton, he lied about his credentials and soon became a director and high-profile investment adviser who sometimes appeared on TV.

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He told a court he sent investors' funds to companies in tax haven countries in the Caribbean. Some of the investments ultimately benefited Mr. Flader's companies, and Mr. Richard received more than $1.3-million in extra payments. A company he worked for received $5.6-million.

Mr. Richard said he had no idea he was doing anything wrong, but naively took orders. He said as time went on, it became clear that some of the funds coming to him were illegal kickbacks from a Ponzi scheme.

In his ruling, Judge Garling agreed that Mr. Flader was the "architect and ultimate controller of the scheme." But he said that even if Mr. Richard was naive at first, he was mostly "motivated simply by greed."

Mr. Richard's Canadian friends, however, say they cannot accept he was anything but a pawn in a sophisticated fraud he did not understand. Simon Doucette, a childhood friend, said Mr. Richard was "overly nice to the point of being gullible," adding: "He's no finance major by any stretch of the imagination."

Mr. Doucette described his friend as a "free spirit" who liked to make people laugh and probably earned the name Shawny Cash because he loved to play the guitar and sing Johnny Cash songs. He said Mr. Richard lived a normal life in a middle-class neighbourhood in Dieppe, just outside Moncton. His father was a contractor and his mother a homemaker. Mr. Richard was an avid sportsman and in 1993 played right field for the New Brunswick softball team at the Canada Games.

He struggled when he first arrived in Australia and was ashamed to tell anyone, Mr. Doucette said. But Mr. Richard's fortunes took a turn: He eventually moved into the posh Sydney beach neighbourhood of Manly and, Mr. Doucette said, likely spent his money "on any impulse buy you can imagine."

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But Mr. Doucette said that on his frequent visits home, his friend was the modest "dude" he had known for years. And that's the memory he wants to preserve.

"Whatever he did wrong, I don't think he ever thought it was that large," Mr. Doucette said. "If he had known that a bunch of people like his mom and dad were about to lose their shirts he would not have been able to sleep at night."

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