Scam victim left $600k in debt

Raghu Aryasomayajula. Photo / NZ Herald

A real estate agent who bought a $1.27 million home with a complete stranger was a victim of an elaborate property scam and has been left with a $600,000 debt.

Greg Nelson met Phil Cavanagh and Raghu Aryasomayajula when the three were real estate agents at Barfoot & Thompson.

Cavanagh and Aryasomayajula have been convicted of charges that involved deceiving banks into lending money on 10 residential properties.

In the $13 million real estate scam, Cavanagh and Aryasomayajula bought properties which could be subdivided.

To get money for the developments, Aryasomayajula filled out mortgage applications in the names of work colleagues and acquaintances.

To gain bank approval, the applications often contained false employment records, inflated wages and left out existing debt.

Judge Roy Wade heard the case against Aryasomayajula at a week-long hearing in September. In the Auckland District Court yesterday, he found him guilty of two charges of obtaining by deception.

Cavanagh pleaded guilty in October last year to three charges and was jailed for two years and five months.

His sentence was reduced after he agreed to give evidence against Aryasomayajula.

Mr Nelson went to Cavanagh and Aryasomayajula because he wanted to invest $100,000 in real estate.

The pair used his money in buying a $1.27 million property at 9a Melanesia Rd in the Auckland suburb of Kohimarama from Cavanagh.

They planned to use the mortgage money from the bank to pay for subdivision and development of the property.

Cavanagh and Aryasomayajula promised to buy Mr Nelson out in three months.

But they had to add another name to the mortgage application because the bank would not lend enough money, based on Mr Nelson's financial situation.

Cassidy Jones was promised $10,000 for adding her name to the mortgage application and Cavanagh said he would meet the mortgage payments.

The ANZ Bank was unaware of this arrangement and believed it was lending money to Mr Nelson and Ms Jones, who would pay the mortgage.

Mr Nelson said he had never met Ms Jones before buying the property.

He said yesterday that Aryasomayajula still had no idea how his actions had affected others.

Mr Nelson told the Herald he had been left with a $600,000 debt after the grossly over-valued property was sold in 2008.

According to Quotable Value, the $1.27 million property was sold for $622,000 just over a year later.

"I have less money now than I did when I left school," the 51-year-old said.

Aryasomayajula applied for bail yesterday, but Judge Wade said he would be better off in custody now because he was likely to face a sentence of imprisonment.

Cavanagh, who was in court for much of Aryasomayajula's hearing, has served his reduced term and is out of prison.

In his decision, Judge Wade said he was satisfied Aryasomayajula knew banks were being given grossly erroneous information, "much of it deriving directly from him", and that this false information was a major inducement to the ANZ Bank to grant the mortgage sought.

Aryasomayajula will be sentenced in February.

Barfoot and Thompson managing director Peter Thompson said the verdict sent a clear message to the real estate industry - "You do the crime, you do the time."