Real estate scammers await penalty

The Real Estate Agents Licensing Board has ruled against three former Barfoot & Thompson agents who carried out one of the country's most elaborate mortgage scams.

The board found against two agents who have been granted name suppression and Philip Niall, ruling they were unfit to be agents but it is yet to decide on a penalty.

Last year, the Real Estate Institute applied for suspension of these agents and fellow Barfoot agents Faizel and Margot Jassat. The Jassats have not sought to return to the sector.

The board, headed by Bill Jeffries, ruled that the two agents and Niall had acted in a way which meant it was in the public interest that their salesperson's certificate be canceled or suspended.

In August, Steve Haszard of the Crown Law Office acting for the institute, told the board how the agents had capitalised on the once-rising Auckland housing market by using a 'pass-the-parcel' scam which made $330,000 for them as they bought and sold properties they were meant to be selling as agents.

They bought the properties or sold them to friends at inflated prices. That technique tricked banks into granting more mortgage finance than the properties were worth. The agents then on-sold the houses for huge gains, pocketing the profits.

Bank of New Zealand, ANZ and Westpac were all named as easy and sometimes "familiar" sources of finance for the agents and associates.

When the case was heard, only Niall appeared before the board in Newmarket. The board rejected his defence that he was acting as a trustee for a company when he bought a property, noted that one agent reserved the right to be heard on a penalty but said the other had not communicated with it.

Barfoot's brand name and reputation was used to get bank mortgages, documents were altered and Barfoot's letterhead was used fraudulently, the board found.

"The public interest is damaged by such conduct. Public statistics are polluted by the input of false real estate values," the board found.

"The victims of such a scheme were the paid intermediaries who have been left as the legal mortgagors, owing funds to the banks with properties valued less than the mortgage advances," the board found.

Banks were also victims because they had "impaired loans". Barfoots suffered when their commercial reputation was used to give credence to a loan application.

"The ultimate victim is the New Zealand public who rely upon the integrity of the land transfer system," the board ruled.

The Serious Fraud Office has been investigating the case for the last few months and is expected to lay charges early next year.

Clayton Cosgrove, Associate Justice Minister, said the new Real Estate Agents Act 2008 would come into effect on November 17 next year.

That will impose much tougher financial penalties against agents and give consumers more rights.

WHAT PENALTY?
Real Estate Agents Licensing Board:
* Can cancel an agent's certificate.
* This bars an agent from the sector.
* Can impose maximum fine of $750.
* The board must uphold "public interest".
* Agents must be "of good character".