Guilty verdict on $13 million mortgage frauds

Thursday 11th November 2010 1 Comment

A former Barfoot & Thompson estate agent has been found guilty for his part in a series of $13 million mortgage frauds.

Raghu Srinivas Aryasomayajula was found guilty at Auckland District Court on two counts of obtaining money by deception after charges were brought by the Serious Fraud Office (SFO).

He has been remanded in custody and is scheduled to be sentenced on February 3 2011.

Aryasomayajula’s co-defendant, Phillip Julian Cavanagh, also a former Barfooot and Thompson estate agent, had previously pleaded guilty to the same charges in October 2009 and was sentenced to two years and five months imprisonment.

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

"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."

The case related to attempts by Aryasomayajula and Cavanagh to acquire several properties with sub-division potential in 2005 and 2006 with a view to developing second dwellings on sites and selling the developed property for a profit.

Neither man had sufficient wealth to finance, or obtain finance, for several property developments simultaneously so they embarked on a system of engaging trustees to purchase the property on their behalf.

Aryasomayajula and Cavanagh then used the trustees’ names and personal circumstances to apply for finance, which the trustees were aware off and for which they had been paid a fee.

However, Aryasomayajula submitted the loan applications with alterations the trustees were unaware of to make their position more acceptable to the lenders.

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, with the loss incurred approximately $3.8 million.

Comments from our readers

On 11 November 2010 at 7:14 pm sally said:

This is absolutely wrong. how can a person not see what is disclosed on a loan application.I work for a bank and we take full care to make sure the customer understands thier statement of position. An innocent man is punished with no fault of his own. Deception?? how can that be proved... This is what i call injuctice..