Buy-to-let developed as an alternative to more conventional forms of investment. Based in Gateshead, Practical Property Portfolio Ltd was one such business, attracting investors from around the UK through its national press advertising. It sold around 4,000 residential properties in the north of England to over 1,750 investors, taking in funds of around £80 million. Though mostly from small private investors for single properties there were also some investment companies who would multi-buy.
The PPP scheme was that properties, typically urban "Coronation Street" type houses, would be offered at a package price of £25,000 to include refurbishment and letting to vetted tenants to provide rental income as well as profit on eventual re-sale.
However, what started seemingly as a genuine commercial venture sank into one of deliberate fraud and misrepresentation. Buyers, many of whom did not inspect the properties were receiving some rental income but it was coming from new money put into the PPP scheme by other investors. Properties were not being refurbished or let. The shocking standard of some houses was filmed by an investor who had used her pension savings and wanted to see what she had bought. Instead of an asset upgraded to provide her with an income she saw a burnt out derelict shell in a row of houses vandalised and graffiti marked.
Complaints led Northumberland Police and the SFO to look into PPP. The investigation culminated in five people being charged in 2007. When the case came to trial, all five pleaded guilty to conspiracy to defraud investors. Investor claims when the company was wound up totalled £16 million. It is thought that almost £65 million of funds was providing no real return on investment.
The chief offenders were John Potts, PPP's chairman and Peter Gosling, managing director. They and the three others used PPP funds for their own extravagant use; luxury cars, racehorses, a villa, antiques, art and high salaries. All were given prison sentences (Potts five years and a fifteen year directorship ban.)
Update as of 23/09/10
At Newcastle Crown Court today, confiscation proceedings were concluded by HHJ Whitburn with the five defendants ordered to pay approximately £1.7 million.
Proceedings
Details of the confiscation orders are as follows;
On 23 September 2010 Natalie Laverick was ordered to pay £173,000 within 18 months or will face two and half years imprisonment in default.
On 22 September 2010 Eric Armstrong, who has been declared bankrupt, was given a nominal order of £1 after the court concluded that he had no realisable assets.
On 6 August 2010 Peter Graham, who has been declared bankrupt, was given a nominal order of £1 after the court concluded that he had no realisable assets. John Potts was ordered to pay £1.5 million within two years or will face six years imprisonment in default.
On 6 November 2009 Peter Gosling was to pay £2000 by April 2010 or face 30 days imprisonment in default.
