Ex-agent found guilty of $13m property fraud

Raghu Srinivas Aryasomayajula. Photo / Michael Craig

A former Auckland real estate agent has been found guilty of mortgage fraud totalling $13 million.

Raghu Srinivas Aryasomayajula appeared in the Auckland District Court today facing two charges of obtaining by deception, during 2005 and 2006.

He has been remanded in custody for sentencing on February 3 next year.

Aryasomayajula's co-defendant, Phillip Julian Cavanagh, was jailed for two years and five months after pleading guilty to the same Serious Fraud Office charges in October of last year.

Both Aryasomayajula and Cavanagh were former real estate agents of Barfoot and Thompson.

The Serious Fraud Office said they attempted to purchase several properties with sub-division potential and with a view to developing second dwellings on the sites and before onselling the developed property.

Neither man had the money to finance several property developments so they embarked upon a system of engaging "trustees" to purchase properties on their behalf.

Both used the trustees' names and personal circumstances in applications for finance, a fact the trustees were aware of and for which they were paid a fee.

All costs of the finance, including mortgage payments during the development, were to be met by Aryasomayajula and Cavanagh through one of their companies.

Aryasomayajula prepared and submitted loan applications to various lenders, including Westpac Bank and the Bank of New Zealand, in the names of the trustees.

The SFO said Aryasomayajula altered the trustees' personal financial situation without their knowledged and to make their position more acceptable to lenders.

In addition to false income, asset and liability information, forged valuations were also created.

Aryasomayajula also neglected to inform lenders of the arrangement with the trustees, giving the impression that the trustees were in fact genuine purchasers intending to service the debt themselves.

"As a consequence of numerous false representations and omissions made by Aryasomayajula, lenders were induced to part with approximately $13 million."

The greater part of that amount has been recovered through mortgagee sales, but the total loss incurred by all lenders is approximately $3.8 million.

SFO chief executive Adam Feeley said the case demonstrated the range of major frauds under investigation by the office.

"While we have put considerable energy into financial market frauds in recent times, this case is an example of the many different types of other frauds that continue to be perpetrated and need speedy investigations."

- NZ HERALD ONLINE