A South Yarra accountant was today sentenced in the Melbourne County Court to five years and eight months jail on charges relating to the loss of at least $67 million dollars of investors’ money in property investment schemes controlled by him.
The accountant plead guilty to 27 charges committed over a 10 year period against 916 investors including:
- 21 counts of operating unregistered managed investments schemes;
- 1 count of carrying on a financial services business without a AFS licence; and
- 5 counts of breaching directors duties by dishonestly using his position as a director with the intent of gaining advantage for himself or others.
Specifically, 21 managed investments schemes were conducted which involved using investor funds to invest in and develop property. In addition to the schemes being unregistered (as required by the Corporations Act 2001 (Cth)), they were found to be conducted in an inadequate and inappropriate way. In particular:
- there were grossly inappropriate and inadequate accounting practices;
- the funding of each of the 21 projects was utilised in a way which made it difficult to trace the investments;
- investments offered and paid unusually high returns by way of both income and capital despite the documentation governing the schemes making no provision for any income payments to be made;
- actual projects relevant to each joint venture document failed to be properly identified;
- income payments were made to investors over and above the value of the subscribed funds in each particular scheme by way of the use of a centralised treasury (conducted by the accountant); and
- a central treasury was conducted by the accountant allowing him unfettered utility of the substantial funds invested.
Judge McEirney in sentencing the accountant found that ‘…the whole enterprise…had more structural defects than the Titanic. Like the Titanic, it sank ignominiously.’ There was a gross intermingling of assets such that it was not possible to say what assets were acquired by which of the 21 schemes, using what money.
Investors were not made aware of the risk to their individual investments by the manner in which the funds would be used and were kept totally in the dark as to the true manner of operation of the schemes.
It was found that given the background, experience and reputation of the accountant, it was difficult for Judge McEirney to contemplate how he could have been so negligent, uncaring or obdurate with the investors’ funds. The conduct of the accountant amounted to dishonesty and a breach of trust and fiduciary duties.
The accountant will serve three years jail before being eligible for release.
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