Disgraced Australian Capital Reserve property spruikers plead guilty and cry poverty
Three directors of collapsed property group Australian Capital Reserve have pleaded guilty on the eve of their criminal trial at the NSW District Court to providing false financial information in a prospectus.
The directors – Samuel Pogson formerly of Wahroonga, Murray Lapham of Turramurra, and Steven Martin of West Pennant Hills – headed the Estate Property Group and its fundraising arm, Australian Capital Reserve, until May 2007, when it was placed in administration.
Continuing the post-mortem of the risky boomtime property development company collapses that have ended up before the courts – such as Fincorp and Westpoint – court documents reveal EPG and ACR financial records were being manipulated from 2004 to present small investors with an encouraging picture of the group’s loss-making operations.
When it collapsed, these 7,000 note holders were owed more than $300 million. Since the deed of company arrangement its creditors have received a total of 49.4¢ on the dollar, just short of the estimated return to its unsecured note holders of 59¢ on the dollar. Further distributions are forecast until July 2013.
It was reported in 2008 that Pogson had no assets, other than a bicycle. His 1890s family home, Havelock (pictured), which was owned by his wife, was sold for $3.85 million in 2008 having cost $3.9 million in 2003. Similarly, Lapham advised he had no assets other than two leased cars. He also lived in a multimillion-dollar home owned by his wife. The latest ASIC filings for Pogson and his wife give their address as one of the two Turramurra houses bought by Lapham’s wife in 2009.
The group's sales have included a $12.1 million Newcastle building that had been bought for $6 million along with the sale to Becton of much of the partly built and greenfield development site portfolio.
It had the Greenwich Village at Waterloo; Brentwood Valley Estate at Pokolbin; Wheatsheaf Place, Parramatta; Neo200, Melbourne; Grosvenor on Queens, Melbourne; The EsCeN, Parramatta; The Sanctuary at Rumbalara, Gosford; The Grange on York, Kellyville; The Verge, Camperdown; Karinya, Wahroonga; Werrington Estate, Kingswood; and Kingfisher Grove at Shortland in its portfolio.
The mezzanine financing investors were receiving a 9.55% return a year for their 10-year unsecured notes.
Pogson pleaded guilty to providing false and misleading information by inflating profits when in fact there was a loss, and along with Lapham and Martin pleaded guilty to another charge of making a false statement to obtain an advantage by soliciting investment in Australian Capital Reserve.
At a 2004 board meeting the financial controller informed the directors that the group had posted a $7.5 million loss as at December 31, 2003.
The directors asked for a list of the loss-making ventures, which were in Pokolbin in the Hunter Valley, and Gosford.
Pogson and Lapham then purchased 26 of the unsold Gosford units, increasing the sales from $17.1 million to $30.8 million, and directed the financial controller to backdate the sales and valuations.
Similar directions were given for the Pokolbin property.
''By placing the alleged sales into the financial figures of the group it turned a pre-tax loss of $7.5 million to a pre-tax profit of $7.4 million, a turnaround of some $14.9 million,'' prosecution documents say, as reported in the Sydney Morning Herald.
The purpose ''was to entice investors to invest in the group''.
The men are due in court for sentencing submissions on October 20.
Estate Property Group Limited and its 21 subsidiaries, including ACR, went into voluntary administration in May 2007.
It raised funds through a series of nine prospectuses offering unsecured deposit notes to the investing public between April 2000 and December 2006.
ACR lent the funds it raised to other EPG subsidiaries that used the funds for the purchase and development of properties.
By May 2007, ACR had lent $332 million of note holders’ funds to 13 of EPG’s property owning subsidiaries.
