An Auckland High Court jury yesterday found the owner of Waldorf Celestion apartment hotel developer Emily Projects Ltd, Leonard John Ross (51), and a small shareholder & representative of it, Michael James Wehipeihana (46), guilty of fraudulently obtaining a large bank loan to build the downtown Auckland block.
Mr Ross & Mr Wehipeihana were convicted on 3 charges of obtaining by deception & 2 representative charges of using forged documents, brought by the Serious Fraud Office.
They made false statements and used forged documents relating to apartment unit purchases to obtain a $41 million development loan from ANZ Bank NZ Ltd to allow Emily Projects to construct the building between Emily Place & Anzac Avenue, on the eastern fringe of Auckland’s central business district.
They’ve been remanded on bail until sentencing on 26 September.
2 other men associated with the project were both sentenced to 10 months’ home detention after each pleaded guilty to one representative charge of obtaining by deception.
The lawyer who acted for Emily Projects, Timothy Upton Slack (56), was sentenced last September. He was adjudicated bankrupt in 2013 and automatically discharged in April 2016.
Vaughn Stephen Foster (56), a self-employed consultant to Emily Projects, pleaded guilty just before the 8-week trial began and was sentenced in June.
Site bought from Blue Chip mortgagee
The site was already controversial, because Mr Ross, who’d developed property for Mark Bryers’ Blue Chip NZ Ltd, acquired the Celestion site at mortgagee sale from a lender to Blue Chip.
A Blue Chip company bought the 1081m² site for $4 million in 2004 and it was transferred in 2006 for $10.9 million to another of Mr Bryers’ companies.
Under Blue Chip, the development was known as the Emily and it was to have had 149 units. 85 were sold and investors paid an estimated $11.2 million in deposits.
Emily Projects bought the property after it was put up for mortgagee sale in 2008 by The NZ Guardian Trust Co Ltd, owed $4.475 million. The purchase price covered the Guardian Trust debt and Guardian Trust stayed in behind ANZ Bank as second mortgagee on the new project.
The Celestion was developed as an apartments hotel, containing 119 non-permanent-stay apartments and run by NZ Waldorf Apartments Ltd. It has 16 levels fronting Anzac Avenue and 18 levels in a second tower on Emily Place.
Emily Projects, 88% owned by Mr Ross, 3% by Mr Wehipeihana, went into voluntary liquidation on 22 December 2011. Liquidators Tim Downes & Greg Sherriff (Grant Thornton) said in their final report in 2015 they’d recovered $610,244 of assets. 2 unsecured creditors claimed $671,000 and 53 investor claims totalled $2,890,951.
The one distribution to unsecured creditors was 11.8c in the dollar for a total $420,310.
26 September 2017: Lawyer gets home detention for Celestion project finance deception
12 April 2017: Remand on Celestion development fraud allegations
17 February 2017: SFO alleges fraud in Celestion development loan deal
8 May 2009: Ross’ Emily Projects starts work on ex-Blue Chip site
Attribution: SFO release, Companies Register.