Board reserves decision on real estate scam

Former Barfoot & Thompson agent Philip Niall (left) appears before the licensing board yesterday. Photo / Brett Phibbs

The Real Estate Licensing Board has reserved its decision in one of the country's most elaborate property scams at an official inquiry this morning.

The agents are alleged to have sold properties to one another or to friends at vastly increased values, convincing the banks to lend more than the properties were worth.

The Serious Fraud Office and Inland Revenue have investigated the web of deals.

Barfoot agent Philip Niall - who was defending himself - and the Real Estate Institute's lawyer, Steve Haszard, concluded their summing up arguments this morning.

At the all-day hearing in Newmarket yesterday, Bank of New Zealand, ANZ and Westpac were all named as easy and sometimes "familiar" sources of loans to the agents, who stood to make big gains from last year's booming Auckland housing market.

The banks are said to have mostly failed to question the deals and dispensed with the usual precaution of requiring a valuation because applications came to them from Barfoot & Thompson agents on that firm's trusted letterhead.

The Real Estate Agents Licensing Board has heard the institute's case against three agents from Barfoot and Thompson's Mt Albert office: Philip Niall and two others who have subsequently been granted name suppression.

Barfoot and Thompson terminated the contracts of Mr Niall and another agent, while the third agent had already left the agency.

All are temporarily suspended as salespeople but the institute wants them permanently barred as agents.

Mr Haszard told the hearing this morning that the four examples of mortgage ramping used by the institute in their case came to a total of over $1 million in inflated property prices.

One property alone, which included three Kohimarama units on one title, was brought for $1.1 million but has since been resold for only $530,000.

Mr Haszard said a "cloak of false documents" were used to gain funding from banks. He said there were also irregularities in the sale and purchase agreements which included fake signatures and sale prices changed after the document was signed.

He said the institute's role was not to prepare a criminal prosecution of the agents but decide whether or not they were fit to be agents.

Mr Haszard said Mr Niall was complicit in the deals and allowed the use of his name by signing documents that in some cases he had never read.

In his brief summing up, Mr Niall said it was unfortunate that he was the only agent to appear at the hearing.

He said he believed "heads need to roll because the institute is under pressure from the Government".

Chairman of the hearing, Bill Jeffries said that was not the case and that the board was an independent judicial authority.

Mr Niall said he accepted some degree of negligence and trusted that the penalty to be handed down by the board would be in line with what had come before.

After the hearing Mr Niall was approached by nzherald.co.nz but declined to comment.

Yesterday the hearing took all day as witnesses were called and Mr Haszard outlined the institute's case.

He said the two agents "personally, or using corporate entitles, would purchase property that was potentially subdivisible and capable of development."

"To fund that subdivision and development, [the agents] would finance the properties for more than their actual worth by means of mortgage ramping," Mr Haszard said.

"[the agents] carried out their mortgage-ramping scheme by buying and selling a property several times among related individuals and paid associates.

"For each sale, [the agents] would increase the purchase price of the property to achieve a grossly inflated purchase price.

"This would provide them with an ability to seek a greater amount of money from the mortgagee: ultimately, being less than the loan.

"[the agents] had familiar contacts at Bank of New Zealand and Westpac. They were aware those would and could approve the mortgage without requiring a registered valuation of the property so long as the sale and purchase of the property was listed and sold using a recognised agency."

Mr Niall described how he was offered $5000 for putting his name on documents. He earned $120,000 last year but voluntarily declared himself bankrupt in February.

"I accept I've been sloppy and foolish and stupid but listening to everyone else's evidence, I'm not the only one," he said. "I'm not being a crybaby about it. I want to defend myself and what's left of my reputation. I wasn't doing this for greed. I was not the instigator. It was a favour."

The deals:

The deals were wrong because

* The agents were meant to be involved in other people's property sales, not their own - a conflict of interest.

* If buying and selling properties themselves, they were meant to tell their bosses. They didn't always do this.

* The agents claimed tax refunds on inflated values, allowing them to get more GST back.

* They altered documents to enhance their case and chances of making money.

* They tricked the banks into believing transactions were 'arms length' when the sales were to close associates.

* They offered $5000 to $20,000 to get others to put their names on property deals.

* They told associates to put their names on purchase agreements, promising to make all the repayments - which they did not do.