Julian King and Charlotte Rimmer prosecute Property Investment Fraud case
June 7, 2019
Julian King from Exchange Chambers, instructed by the Insolvency Service, led Charlotte Rimmer, also from Exchange Chambers, in a student property investment fraud case. Liam Collins (45 years old) and David Bone (37 years old) both appeared for a trial due to last 5 weeks on 16th May 2019. On that day they entered guilty pleas to an offence of Participating in a fraudulent business by a sole trader, contrary to section 9 of the Fraud Act 2006.
The sentence hearing of both defendants took place over Thursday and Friday of this week, at Manchester Crown Court, Crown Square. Both defendants were handed custodial sentences of 21 months imprisonment. Both were subject to extended bankruptcy restrictions.
The court heard that Liam Collins and David Bone had been directors of a number of companies, known as the CBS Group. The enterprise secured funds from investors to purchase and renovate student housing.
In 2009, however, these companies failed and entered into voluntary liquidation, owing over £3 million to investors. But rather than allow the investors to become creditors in the liquidation, the pair gave promissory notes promising to pay back their investments with interest in a number of years.
Liam Collins and David Bone then immediately set-up a new investment enterprise, called the Collins and Bone Partnership (CBP), and from January 2010 offered new investors the opportunity to finance the purchase and refurbishment of student accommodation.
Just a few months later in May 2010, however, Collins and Bone were given legal advice from solicitors after financial regulators claimed that what they were doing was in breach of the law. The financial regulators also advised the directors to warn their investors they wouldn’t be able to seek financial redress if things went wrong.
Despite promising to stop accepting new clients and investments, as well as warn their investors, the pair elected to continue sourcing further investments.
Between May 2010 and April 2011, the pair secured approximately £274,000 from new financiers, attracted by exaggerated interest payments and promises that the investments would be safe.
However, investors did not see any returns because instead of using the funds to invest in new property, Liam Collins and David Bone used the money to pay-off their original investors. This included settling debts on 27 properties with negative equity that they had carried over from the previous enterprise – the CBS Group.
In sentencing, it was recognised that the business did not start with a fraudulent intention, that the defendants did not have a lavish lifestyle as a result of the investments, and that there was a significant amount of time from the date of the offences and the date of sentence. That was balanced by the very serious impact on the investors who had lost significant funds.