Three men deny charges of fraud involving $600,000

Press, 31 October 1979, Page 5

Three men deny charges of fraud involving $600,000

PA Wellington Three men appearing in the Supreme Court at Wellington have denied charges of conspiracy to defraud involving 8678,300. They are Rodney Graeme Hand, aged 46. an accountant; Maxxvell Sinclair Hand, aged 38, a real estate salesman; and Douglas Alexander Edwards, aged 40. an accountant. They face eight joint charges of conspiracy to defraud in respect of cont r i b u t o r v - mortgage schemes. A ninth joint charge is that being officers of Universal Nominees, Ltd, and Universal Management Holdings. Ltd, Universal Management, Ltd, and Universal Properties, Ltd, they conspired by fraudulent means to defraud the public by continuing to offer contributing mortgage investments to the public at a time when

they xvell knew there was no equity in real property

owned by any of the companies and that they were therefore unable to adequately secure such contributing investments. The trial, before Mr Justice White and a jury, is expected to last four weeks.

Opening, the Crown prosecutor (Mr K. G. Stone) said the charges against the three accused arose out of activities during 1975 and the first part of 1976 wmen they were directors and, in one

case, secretary, of the Universal Group of companies. Four companies in the group were of particular concern in the case. They xx ere Universal Properties and Universal Management — both private companies — Universal Management Holdings, a public company which became parent company of the group, and Universal Nominees, another private company, whose essential purpose was, in effect, to act as a trustee for funds invested in it bv the public.

Mr Stone said the Universal Group sought and obtained funds from members of the public on the basis that these would be invested in a contributory mortgage over lands and buildings. In most instances these properties were redeveloped and new buildings erected on them.

When investors made their contributions they signed a written form of authority addressed to Universal Nominees, or. in the case of one company, to the solicitor’s nominee company.

The written authorities took a variety of forms but fell into two categories. The first category xvas where an investor signed a form to the effect that he was contributing his money by way of mortgage over a specific property. The Crown said it was clear that in every case

where an investor signed one of these specific authorities he invested money on the basis that it would be used as part of a mortgage over the particular property named in the authority and over no other, and "that if a first mortgage was stipulated, then the money was invested on the basis that ot would be used for a first mortgage and not for any subsequent mortgage. The other board category into which the written authorities could be grouped were where investors signed authority of a more general nature, Mr Stone said. It was said that contributors’ money was advanced to Universal Holdings, on the basis it would be invested in mortgage over real property, but there was no stipulation that it was to be any particular property. Nor were the directors in those cases restricted, in most instances, to first mortgages. Mr Stone said that, broadly' put, the Crown’s case was that:

— The accused. as officers in Universal Nominees, sought and received investments on the terms specified in the investment authorities which required them to invest those funds in mortgages of land. — They were trustee for the individual investors and, in turn, became the mortgagee, or lender, and advanced investors’ funds to the three

companies who owned tne properties — Universal Properties, and. to a lesser extent, Management Holdings.

— It was implicit in every instance where investors made investments of the kind mentioned that the property securing the mortgage of xvhich those particular investments formed part was of sufficient value to cover the mortgage.

“Or to put it another way, in its simplest terms: If the property had to be sold it would be enough to repay 7 all those who had invested in it,” Mr Stone said.

It was the Crown’s case that the accused defrauded the investors by knowingly putting "the investors’ funds in jeopardy.

It xvas immaterial that the accused could have thought that an ultimate loss would not be suffered by investors, and “it is immaterial that they may not have obtained any financial gain themselves,” Mr Stone said.