Business paid agent for tax purposes, court told

A witness said he signed blank mortgage application forms when buying these flats in Kohimarama. Photo / Richard Robinson

A man at the centre of an alleged real-estate scam was paid $15,000 a month by a "shelf business" in order to appear to be paying tax, a court has heard.

A former real-estate agent who has name suppression is facing Serious Fraud Office allegations that he knowingly deceived banks into lending money on 10 residential properties during the real estate boom of 2006 and 2007.

The alleged $10 million scam involved buying properties that could be subdivided.

The Crown says the man was introduced to people by his business partner and organised mortgage applications in their names. The applications often included fake income details and left off existing mortgages.

A former ASB account manager and cafe owner, who gave evidence at the Auckland District Court yesterday, said he created the business at the request of the accused.

The former banker, who has been granted permanent name suppression, said the accused man kept the reasons for the business "pretty vague" but in the end he drafted an employment agreement with the accused man's name on it.

The agreement said the accused was employed as a "consultant" at $180,000 a year.

The former banker said the man also needed to show banks that he had an income.

He said the accused man put money into the account and he paid the man back, as well as making the PAYE tax payments to the IRD.

The former banker said he made up to four payments into the accused man's account, but stopped after the accused stopped paying him.

The former banker was originally charged with the accused but the charges were dropped when he agreed to give evidence for the Serious Fraud Office.

In cross-examination by the accused man's lawyer Peter Kaye, the former banker was asked if he signed blank mortgage application forms when buying six flats in Kohimarama from the man and his business partner.

Judge Roy Wade warned the former banker that he did not have to answer the question.

The former banker confirmed that he did.

He said he signed the blank documents and handed them back to the accused man to fill in the income and debt details.

The court had previously heard that the loan application did not include between $600,000 and $700,000 worth of existing mortgages held by the former banker.

The former banker said he agreed to sell his struggling cafe for $100,000 in exchange for agreeing to apply for mortgage finance in his name for the flats.

The flats were bought on November 12, 2006 for $1.6 million by the accused and his business partner. Twelve days later, they were sold to the former banker, his business partner and family trust for $2.2 million.