Investors lose £53m in property scandal
So-called legal expert branded ‘manifestly incompetent’
INVESTORS in a property scheme thought they were in safe hands because they were being advised by a law firm and protected by an insurance policy.
But 882 people were stung for almost £53million when the scheme collapsed.
Now a report by the solicitors’ watchdog has described the damage done to their profession by the scandal as “huge”.
It involved raising money for off-plan hotels, student flats and care homes, with income supposedly coming from accommodation fees when the properties were built.
Investors dealt with a partner at Graham & Rosen Solicitors, of Hull, and its grandly titled Head of Investment Property, Sheena Taylor.
But Ms Taylor was not a qualified lawyer and she left investors in the dark about numerous obvious risks concerning Key Homes Group, according to the report.
These included the fact that Key Homes was a new company with a share capital of just £2 and run by 29-year-old director Rafik Patel, who had next to no relevant experience.
Investors were promised returns of up to 12% at a time when interest rates were 0.5%, and were told that they were buying the properties at 30% below the market price.
The report just published by the Solicitors Disciplinary Tribunal said that investors should have been warned that these claims were “too good to be true”.
Investors lost almost £39million when Key Homes collapsed, and another £12m in 21 other developments in which Graham & Rosen acted for the buyers.
An insurance company that supposedly protected deposits collapsed and failed to honour the policies.
Called Northern & Western Insurance Company (NWIC), it should have set off more alarm bells.
■ It was run from Texas by Robert Harrison who had been banned from the insurance business in the state for “fraudulent and dishonest practices”.
■ It was not regulated by the then Financial Services Authority.
■ It had capital of just £78,000, a tiny amount compared to the millions that it was meant to be covering.
Put simply, the tribunal heard, the scheme was “dubious and bore the hallmarks of fraud”.
Ms Taylor told the hearing that she would have carried out more checks if she’d had more experience in this area, saying she was acting outside her comfort zone.
So why was she given the title Head of Investment Property if she did not have the relevant experience?
She repeatedly passed the buck, saying she was acting as instructed by her boss, named in the ruling as “Solicitor X”.
Ms Taylor was cleared of dishonesty but ruled “manifestly incompetent” and fined just £7,500 “due to her limited means”, and banned from working for solicitors.
“Solicitor X” was not named, however a separate recent decision reveals him as Richard Palmer, 65, a former partner at Graham & Rosen.
In that decision, the tribunal announced that it was dropping proceedings against Mr Palmer on medical grounds on the condition that he removes his name from the Roll of Solicitors and never works in the profession again.
A statement by the NWIC Action Group for victims said: “We would certainly agree with the statement in the judgment that these various failed developments have caused huge damage to the reputation of the legal profession.”
In a statement, Graham & Rosen said it no longer works in investment property, adding: “We regret any problems arising from Ms Taylor’s actions and are working to resolve those issues.”
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The scheme was dubious and bore all the hallmarks of fraud