11th June 2009
The Gold Coast Bulletin
Directors probed on $30m loss
THE directors of Gold Coast-based Selection One Finance -- the company facing serious Ponzi scheme allegations -- are at the centre of a criminal investigation.
The company, which owes $30 million to mum-and-dad investors, this week was moved into liquidation at a fiery creditors' meeting.
Liquidator, SV Partners director Terry Van der Velde, said he would be funded by the nation's corporate watchdog, the Australian Securities and Investments Commission, to perform a detailed investigation into alleged criminal wrong-doing.
Mr Van der Velde and SV Partners' managing director Paul Sweeney were appointed voluntary administrators of the Guanaba company in March by a secured creditor who was concerned over the fate of almost $30 million in funds.
It is unlikely the 130 investors will see any return.
After the creditors' meeting, held on the Gold Coast on Tuesday, a fight erupted over whether the directors were to blame for the missing funds.
The Bulletin understands threats have been made against the directors.
One creditor was angered to see a director's partner, also a shareholder in the company, driving a black Mustang, while they had lost all their money.
Directors Ron Williams, of Guanaba, and Gary Maile started the company in August 2005.
Mr Van der Velde said there was 'clear evidence' the company was operating as a Ponzi scheme.
A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned.
"For example in October last year $2 million received from a creditor was used to pay interest and capital redemptions to earlier investors," said Mr Van der Velde.
He also said that the company was taking in money after its primary loan broker in Victoria -- who had substantial unsecured loans and who organised many loans -- was under investigation for fraud.
The broker is now in jail on remand and charged with several fraud offences including matters related to Selection One Finance, he said.
Mr Van der Velde said he would investigate claims that Selection One Finance's loans had been settled, but none of the money was returned to the company from those transactions.
"It now appears that the entire book of loans is non-performing and recoveries will be based on various claims due to losses caused from identity fraud and possible professional negligence," said Mr Van der Velde.
"Many of the loans made by Selection One Finance's Victorian broker were unsecured, with little if any due diligence undertaken."
Mr Van der Velde said secured company loans had been exposed to identity fraud, which would impact the recovery of funds.
He said the global financial crisis also had affected the company's retrieval.
Selection One Finance was the second mortgagee and unlikely to see a return from assets it had invested in.
After the meeting, Mr Van der Velde warned creditors of entering into such high-risk ventures.
"The risks were never clearly explained to people who were lured by the promise of high returns," he said.
"Creditors have now paid a very high price indeed.
"Many have lost most of their money, some have lost almost all."
ASIC representatives attended this week's meeting.
Mr Van der velde said the case shared many similarities to the defunct Wattle Group.
