Agent gets jail term for $13.5m real estate scam

Raghu Aryasomayajula. Photo / Steven McNicholl

A man has been sentenced to 4 years' jail for running a $13.5 million real estate scam that left at least three victims bankrupted and their credit ratings in tatters.

Raghu Aryasomayajula, 38, appeared in the Auckland District Court yesterday, having been found guilty in November of two charges relating to deceiving banks into lending him money.

Judge Roy Wade said he had read statements from three of Aryasomayajula's victims.

"All three were made bankrupt and all three lost their employment because they had been employed as real estate agents. Not only were they made bankrupt but they have also lost their previously good credit ratings."

The judge gave no discount to Aryasomayajula for his clean record because his offending was not a "one-off" but instead involved 15 properties across Auckland.

However, the judge said he recognised Aryasomayajula had been supporting family members overseas and that pressure might have "fuelled" the offending.

Aryasomayajula and his business partner Phil Cavanagh bought properties that could be subdivided and would then on-sell them to friends at inflated prices.

But the properties never really changed hands.

Through an elaborate scheme, the pair added their friends' and colleagues' names to sale-and-purchase agreements and used the mortgage money from the bank to develop the property. They also agreed to meet mortgage payments.

The friends and associates who agreed to participate were promised a cut of the profit or cash. But the scam collapsed and many were left owning properties with mortgages hanging over their heads which were for more than the property was worth.

Greg Nelson told the court at Aryasomayajula's trial that he ended up buying a $1.27 million property with a complete stranger.

He has been left with a debt of more than $600,000.

Lending institutions lost more than $3.8 million in the deals that exceeded $13.5 million, according to documents presented in court.

Judge Wade noted that Aryasomayajula had shown no remorse for his offending and always maintained his innocence.

"I read in your pre-sentence report that you have become depressed, but you are not the only one. Your victims suffered just as much as you, if not more," Judge Wade said.

Aryasomayajula and Cavanagh were real estate agents with Barfoot & Thompson, as were some of their victims.

Barfoot & Thompson director Peter Thompson told the Herald outside court that the case had damaged the reputation of his company, whose roots go back to 1923.

But he said the case showed that the company's own checks and balances ultimately detected the scam.

"We can't ever say it wouldn't happen again but all parties involved have learned some things and made changes to policy," Mr Thompson said. Any abnormal activity was checked.

Cavanagh pleaded guilty in 2009 to three charges and was jailed for two years and five months.

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