At Southwark Crown Court 49-year oldf Saghir Ahmed Afzal from Birmingham was sentenced to 13 years imprisonment. He pleaded guilty on 17 January 2011 to two counts of conspiracy to obtain money transfers by deception and four counts of obtaining a money transfer by deception, contrary to section 15A of the Theft Act 1968.
Ian McGarry, 42, a chartered surveyor from Hertfordshire was sentenced to seven years imprisonment. He pleaded guilty on 24 September 2010 to two counts of conspiracy to obtain money transfers by deception and four counts of obtaining a money transfer by deception,.
Saghir Afzal and Ian McGarry were charged in 2009 together with six others. Afzal and McGarry pleaded guilty to all six counts on the indictment prior to the trial, which commenced in January 2011.
In sentencing yesterday afternoon, HHJ Beddoe described how Saghir Afzal was the head of the team that operated a "massive and carefully orchestrated confidence trick" over two years that duped banks and buildings societies of almost £50 million, very little of which has been recovered. The Judge said that the value of the fraud meant that the case was off the scale in terms of the sentencing guidelines for fraud cases.
HHJ Beddoe highlighted several aggravating features that impacted on the sentence handed down to Saghir Afzal. These include the fact that Saghir Afzal personally benefited from the fraud and sent over £26 million to Pakistan, where it remains under his control, or that of his brother Nisar Ahmed Afzal. The evidence before the court was that there was a close partnership between the Afzal brothers such that their roles in the fraud could not be distinguished.
Richard Alderman, director of the Serious Fraud Office, said: "I am pleased with the result; the principle defendants have received hefty sentences which reflect the seriousness of the offences."
Investigation
The case came to the attention of West Midlands Police (WMP) following an anonymous tip off from a member of the public who reported their suspicions about the sale of a property to the Cheshire Building Society. Due to the scale and complexity of the case, WMP referred the case to the Serious Fraud Office and the SFO began an investigation in March 2006.
During the course of the investigation over 40 residential and commercial premises in Birmingham, Berkshire and London were searched by officers of the SFO and WMP. As a result, a large volume of documents were seized, including over 100 items of digital material e.g. computer hard drives, mobile phones and memory sticks.
The SFO's enquiries revealed that in addition to the Cheshire Building Society, the Bank of Ireland, Société Générale and the Nationwide Building Society had also been defrauded.
The role of the defendants
The ringleaders were Saghir Ahmed Afzal and his brother Nisar who recruited a dishonest surveyor, Ian McGarry, to produce false valuations based on fictitious leases. The valuations were used to support fraudulent mortgage applications on six commercial properties. Companies controlled by the Afzals bought the properties from genuine sellers for a total of £5,688,125. This figure represented the true market value of the properties. However, using McGarry's false valuations the Afzals were able to deceive lenders to loan £49,287,000 which represents a mortgage loan to value ratio of 866%.
How the deception was carried out
The way the fraud worked was similar in each case. A company controlled by the Afzal brothers bought a property, usually an old industrial building in a dilapidated state, from a genuine seller. The property was then bought and sold a number of times over a short period of time, each time for an apparently higher price. The only money that the Afzals paid out was for the initial purchase. This meant that when the final purchase of each property was completed the Afzals obtained a huge "profit" by virtue of receiving the fraudulent mortgage loans. After making one or two early mortgage payments, the companies controlled by the Afzals stopped paying the mortgage and the Afzals disappeared with all the money. This left the lenders to try to recover their losses by selling the properties following repossession. It was then that the lenders discovered that the properties were worth only a fraction of what they had leant, in some cases as little as 10% of the monies advanced.
Fake leases and fraudulent valuations
The applications for mortgages were supported by fake documents, including forged identification documentation, false leases and fraudulently inflated property valuations.
The Afzals used fake leases to create the impression that the properties were occupied by good corporate tenants paying high rents. These fake leases then gave the illusion that the owner of the property could expect a good income from which to meet the mortgage re-payments. The fraudsters used the names of genuine companies as tenants on the fake leases, but in reality these companies were totally unaware of the leases.
Ian McGarry accepted bribes from the Afzal brothers totalling over £1 million, including lavish overseas holidays in Dubai, an Aston Martin car, cash in brown paper envelopes and the purchase of three properties in London. In return he prepared inflated valuations for each property which the lenders relied on when advancing the mortgages. In one instance McGarry valued a property at £19 million that had been purchased for just £1 million. This represents an overvaluation of 1800%. In another instance, McGarry produced three difference valuations of the same property, on the same day, for three separate financial institutions.
In sentencing in McGarry, HHJ Beddoe stated that McGarry was vital to the fraud, which could not have happened without him and that he had betrayed the trust of his former employer Dunlop Hayward Lorenz and the banks that paid him. The Judge was satisfied that McGarry knew from the outset that the leases referred to in his valuation reports and the rental income from them were "complete works of fiction". The Judge concluded that McGarry behaved in a totally dishonest way for period of two years and his involvement was motivated by simply by "rampant greed".
Involvement of others
Saghir Afzal and Ian McGarry were charged along with six solicitors who conducted the property transactions on their behalf. The six solicitors were tried in relation to their role in the fraud in January to May 2011. Three were acquitted of the charges against them but the jury was unable to reach a verdict in respect of the other three. Following the verdicts the SFO determined it was not in the public interest to proceed with a retrial of the remaining three defendants and this was communicated to the court on 13 June 2011.
During the course of the case the Prosecution acknowledged that there were a number of other people who were involved with the fraud. These include members of the Afzal family and their associates, who lent their names and identities to front companies controlled by the Afzals. This prosecution focused on the professional advisers whose services were used by the Afzals to buy and sell properties between inter-related companies and who transferred funds out of the jurisdiction on the instructions of the Afzals.
