Four years in jail for property development group director

by AB09 Sep 2013

A former director of property development group Dollarforce Financial Services, Clestus Weerappah, has been jailed for four years over his role in the collapse of the company.

A second director, of a related entity, James Stephen Lewis (referred to as Stephen), of Kew, Victoria, has been convicted by jury of one charge over the collapse. Lewis pleaded not guilty to five charges.

Dollarforce collapsed in 2009 with a deficiency of $24 million with investors losing more than $8 million.

Weerappah, of Oakleigh, Victoria, pleaded guilty to the five charges below relating to the raising of more than $4 million from investors. The charges included dishonestly using his position as a director and making false and misleading statements, in particular:

  • Dishonest use of his position as a director of Ivory Property Group Pty Ltd with the intention of gaining an advantage for himself, DFS or someone else by falsely representing that $1,200,000 belonging to investors would be used for the purchase and development of properties on behalf of Ivory Property Trust investors.
  • Dishonest use of his position as a director of My Building No 1 Pty Ltd with the intention of gaining an advantage for himself, DFS or someone else by falsely representing that $1,780,000 belonging to investors would be used for the purchase and development of properties, on behalf of the My Building No1 investors.
  • Dishonest use of his position as a director of Bennett Street Developments Pty Ltd with the intention of gaining an advantage for himself, DFS or someone else by falsely representing that $1,286,950 belonging to investors would be used for the purchase and development of properties on behalf of the Bennett Street Property Trust.
  • Making a false or misleading statement or omission in a prospectus lodged with ASIC that made or authorised to his knowledge information that was false or misleading in that loans provided by related parties had been forgiven on or prior to June 30, 2006 and that the prospectus was misleading in a material respect, in that an incentive payment agreement had been entered into and that My Building No 1 Pty Ltd owed $2,955,000 to investors.
  • Engaging in conduct that falsified the books and records relating to the affairs of Altitude Property Number 1 Pty Ltd, in that he created a false deed of sale relating to the purchase of property by Bennett Street Developments Pty Ltd, of a Balwyn property for the sum of $1,300,000

In August, the County Court of Victoria sentenced Weerappah to four years jail with a non-parole period of two years. The court also ordered him to repay $3.7 million to a number of investors.

Weerappah’s plea and sentence was suppressed by an order of the Court until the end of Lewis’ trial, which concluded on Friday following the jury returning its verdict.

The charges brought against Lewis included making false statements in a prospectus and related to his role as an officer Altitude Property Limited, one of the companies in the Dollarforce group.

Lewis, an accountant, was found guilty of one charge of making a false or misleading statement or omission in a prospectus lodged with ASIC in that he made or authorised to his knowledge information that was false or misleading in that an incentive payment agreement had been entered between Altitude Property Ltd and Alamanda Property Investments No 2 Pty Ltd.

However, he was found not guilty of four charges relating to acting as an officer and falsifying the accounts of My Building No 1 Pty Ltd, as well as falsifying accounts for inclusion in a prospectus.

Lewis will be sentenced on 4 October 2013.

ASIC Commissioner Greg Tanzer said the actions of the two men were ‘reprehensible’ and represented a ‘gross breach of investors’ trust’.

“When ASIC sought information to be included in a prospectus, Mr Weerappah falsified information about the financial standing of an entity to be acquired with investor funds and Mr Lewis with Mr Weerapah failed to inform ASIC and investors in Altitude Property Ltd of an agreement they had entered into which also led to funds being paid to an entity of Mr Werrappah’s. The law is very clear, directors must act honestly and in the best interests of the company.”

COMMENTS

  • by Country Broker 9/09/2013 10:14:08 AM

    Shows that investors need to be very careful about dealing with property investors , as do Mortgage brokers !!