"All of our personal assets including 74 personal student properties and our own homes is held in the partnership. This promissory Note ensures that if in the event that we ever defaulted on the agreement i.e. did not pay interest to you or did not pay the capital back you could in a court of law ensure that we sell adequate properties to realise the capital to repay you. This is why the investment is 100% guaranteed."
The investor-base would love to know the addresses of those 74 assets and what has happened to them ... but that will have to wait for the bankruptcy trustee to investigate.
For the first two months interest was paid on time, but thereafter the investor had to chase up C&B for the interest monies to be paid, which they were. In October 2010, this investor along with a number, and I suspect all, C&B PN holders who had invested in 2010, were sent an e-mail of the following form:
I hope you are well. I have attached a statement showing you have earned <amount> so far in interest with us accurate as of <date>. We are still offering the same interest rate if you are interested in adding to this. We will be sending you these statements quarterly for your records.
Our news here is that we have just signed off a £20m contract and have another £7m in the pipeline so we are all very busy sourcing enough stock. The good thing is there is a lot of discounted stock at present and due to unemployment there are a lot of people looking for work in construction also so our model seems to be well insulated from the market conditions which is good.
Why October? Well we know that the FSA prohibitted the partners from advertising for further PN monies in Q3 2010, and given that the mortgage market was very tight/dead, the only thing they could do was try and milk existing PN holders for more cash. So it is likely that in October 2010 C&B were running very low on monies to keep the charade going.
At the end of October, the investor notified Liam Collins of his intentons to invest in property in Nottingham where both his daughters live, and that he would be cashing in his existing PNs at the end of the 1 year term i.e. 18/3/2011. The investor again reminded Liam Collins of his intention to cash-in his PNs in February 2011 by phone.
Come the maturation date, 18th March 2011, the PN was not honoured ... but there is an e-mail from Liam Collins about the recent open day in which he stated that there were "two very precise reasons for late payments in interest and nothing to be concerned about":
- let down on the sales of many of our assets at the back end through our outsourcing sales arm. Many of our buyers had to pull out of deals in the last 8 weeks due to mortgage and planning restrictions as well as for some a change in circumstances.
- Our in house IT system which even when cash flow has been good has let us down due to several coding problems which we are now fixing.
And he goes on ... :
Your capital is safe and both David and I have our own homes as collateral to protect your assets as well as 27 other assets and the trading inside our sister company (Castle & Gatehouse) also acts as security with future contracts worth in excess of £3m at present. So we have both cash profits from trading, real bricks and mortar as well as rental income from the portfolio to secure your investment. I know on the day there were a few of you who had concerns over the liquidity of the company and rightly so as many property companies have had severe problems in the recession. As explained we have an excellent product built to not only survive a recession but built to thrive in it.
We are still accepting investments, however, we realise for many of you at present you need to see interest payments consistent for a while yet before you entertain the idea of further investment and this I can understand entirely.
Apologies once again but, as I say, nothing to be concerned about as we are all excited about the future of both C&B and C&G.
And this is then followed with the e-mail on 23rd March 2011 from "the board" for ex-CBS investors to sign 5-year PNs (See post Ex-CBS investors asked to sign 5 year PNs 22/3/2011) ... of course this e-mail was only sent to ex-CBS investors, not to PN holders who invested in 2010/2011.
On 24th March 2011 the investor is offered to buy 240 Great Clowes Street (see separate blog entry on this property) by Liam Collins, one of a number of such properties subsequently offered to him over the forthcoming months. This was a house that was going to be renovated as part of a JV by Dereham Investments Limited. Quite why Liam Collins, and later Joe Sinagoga/Robert Wakefield, ever sent JV properties to the investor is a puzzle, because the partnership did not have two pennies to rub together at this stage, and any investor with an ounce of common sense would only have proceeded with such a purchase if their existing toxic PNs were offset against the purchase price.
In April 2011, the investor received a phone call from Liam Collins in which he enquired whether the investor would be interested in investing additional PN monies ... the investor was told that the business was in good shape and doing well. Given this, and the fact that interest had been paid on his previous two PNs without too much prodding, the investor decided to renew the matured PNs for another year, and to invest a further X GBP. These monies constituted the family's life savings. The investor had no knowledge of the current situation with ex-CBS investors and the liability that they posed. The interest payments on the investor's PNs continued up to and including June 2011, and then stopped.
When the investor was asked to sign the 5-year PN in November 2011, and refused to do so, the retort from Liam Collins was:
[Liam] You will need to sign the 5 year PN which has been sent to you. If you do not we will be forced to bankrupt ourselves. If you sign it we can get on with business so long as 100% of investors sign this. You do not have much of a choice here so do us and yourself a favour and sign and scan this back please or appoint a solicitor and take legal action.
So here in an investor, almost certainly the largest PN investor in 2010/2011, who has lost his family's entire life savings and is really struggling to make ends meet, and being treated in the above manner. Of the X GBP that was invested in April 2011, the family has only received (X / 15) GBP of it back in the form of interest payments on the 3 PNs before all such payments stopped. How, with any sense of moral fiber or social responsibility, can you, Liam Collins, solicit monies from an investor as late as April 2011 claiming that the business is doing well, and then cease all interest payments to this investor 2 months later? And where, Liam Collins, did the other (14X / 15) GBP go? Clearly, Liam Collins, you defrauded the investor.
The investor sent me the pertinent pieces of correspondence between himself and C&B. The two renewed PNs, as well as the 3rd PN taken out in April 2011, had been witnessed by Mish Liyanage whose company MCC Accountants had provided book-keeping support for C&G and C&B up until the end of December 2010. What business did Mish Liyanage have witnessing PNs issued in 2011? So, with the investor's approval, I forwarded the 3rd PN to Mish Liyanage and asked him to confirm whether or not this was his signature, and whether he had indeed witnessed this PN. He had not - his signature had been forged. So it appears that a new criminal offence, one of forgery, can now be added to the growing list of criminal charges that will be laid at the doors of the partners once the bankruptcy is forced.