Monday, 3 November 2014

Big end of town unwittingly endorsed Lazar scheme

John Melluish said Ian Lazar misrepresented
him by using his profile without authorisation.
CONTROVERSIAL mortgage trader Ian Lazar may be in custody over a fraud he allegedly perpetrated in 2003 but documents obtained by Sydney Insolvency News show that a decade ago, the profiles of lawyers, liquidators and property experts from top tier firms were used to endorse Lazar's Business Australia Group (BAG) whilst it was under investigation by ASIC.

A BA Group prospectus published in 2003 advises prospective investors that Lazar and BAG enjoy the support of insolvency, property and legal luminaries who are experts in their respective fields.

Among those listed are Ferrier Hodgson partner John Melluish, former Ernst & Young property chief and now Japara CEO Andrew Sudholz and former Blake Dawson Waldron partner and tax supremo Phillip Wiseman

Of these, two say Lazar used their profiles and their company names without their knowledge or authorisation. It is not known how many investors committed funds to the scheme based on the presence of corporate heavy hitters appearing to endorse the BA Group.  

One version of the document identifies Melluish as "Investigative Forensic Accountant for BACF" (Business Australia Capital Finance). His position as a partner at Ferrier Hodgson is also highlighted, as is his former role as "National Education chairman of the Insolvency Practitioners Association of Australia (IPAA) and co-author of the CPA Insolvency Module".

But when contacted by SiN Melluish distanced himself. 

"The representations made on the website are not correct," Melluish said. "I became aware of those representations at the time and asked Ian to remove them," he said. 

"The only role I had was the provision of a short report as detailed below and another piece of work assisting the Nauru Phosphates Royalty Trust at Ian’s introduction," Melluish said.

"A piece of forensic work was done for either BACF or BACM (Business Australia Capital Mortgage), companies now in liquidation. I believe that the job would have occurred over a period of 2-3 months, maybe 10 or more years ago," Melluish said.

But Lazar's unauthorised use of Melluish's profile and the Ferrier Hodgson brand didn't end the relationship. The registered liquidator still took Lazar's calls.

"For a period of time between 2003 and 2009 he was ringing me every six months and he'd ask me if I had a deal or tell me what was going on and I understood from other insolvency practitioners that he was doing the rounds and having discussions with everyone. He was always promising insolvency work but never really delivering," Melluish said.

Lawyer Phillip Wiseman - who appears in the document under the heading "Blake Dawson Waldron - Corporate Lawyer to BACF" - was less forgiving.  

"I told him to remove it immediately," he told SiN. Wiseman also said that in the wake of Lazar's unauthorised use of his image and the Blake Dawson Waldron name he severed the connection. But not before providing one last piece of advice. "I told him (Lazar) he probably needed a license because it looked like he was running a managed investment scheme".

Japara ceo Andrew Sudholz
 was a director of BADG
Andrew Sudholz did not respond to a series of questions addressed to him and emailed to Japara, the ASX-listed aged care provider that he runs as chief executive officer. Japara receptionists hung up twice without asking the reason for SiN's enquiries.

The BA Group brochure lists Sudholz as "Director - Business Australia Development Group" (BADG) and goes on to detail Sudholz's position as managing partner, real estate advisory services, Ernst & Young.

Also involved with BACF was former Labor MP and Keating Government assistant treasurer George Gear and George Markos, who acted as Trustee for Business Australia Capital Finance (BACF). 

In 2005 ASIC banned Markos from providing financial services for a period of 18 months for engaging in false and misleading conduct relating to statements he made to investors in a failed medical centre development in Tooowoomba, Queensland. 

Makros is also described as a "financial advisor" to the BA Group in the introductory offer document, which kicks off with a laudatory description of the organisation's founder. 

"Mr Ian Lazar, founder of Business Australia, commenced lending over 12 years ago when he identified a niche in the finance market to cater for asset rich, cash deficient clients who require mezzanine finance within an efficient time frame.

"Business Australia is supported by Blake Dawson Waldron; Lawyers, Ernst & Young; Property Development, Ferrier Hodgson; Chartered Accountants and Walter Turnbull; Tax Auditors.

"The Business Australia Groups have enormous national and international client base, with a wealth of experience and skills due to the combined attributes of its founder, directors, members, staff and alliances."

Despite this boast, by 2005 ASIC had moved to wind up BACF (by then renamed Bondedge) and Business Australia Capital Mortgage (BACM).

Affidavits from ASIC investigators filed in support of the wind up application suggest that while the big end of town was unwittingly endorsing Lazar's operation, the regulator had opened a can of particularly putrid worms. 

"I am concerned that neither Lazar and Markos have sufficient knowledge or understanding of the financial transactions....." one ASIC investigator said.

An affidavit obtained by SiN includes details of how in November, 2003 $277,500 was taken from BACM's bank account to buy an Aston Martin from Suncorp Metway. By December 29, the car had been sold to Judith Amed, an employee of BACF/BACM using funds supplied to BACM by auto-financier CBFC.

ASIC's attempt to wind up the BA Group led to the appointment, by consent, of Andrew Wiley of Armstrong Wily as liquidator to various BA group entities.
At that time ASIC's then executive director of enforcement Jan Redfern said: "The orders today ensure that investors’ rights and company assets are protected. The liquidation of all four companies which we alleged operated the unregistered investment schemes can now be conducted by the same liquidator. 

"We believe that this provides benefits to creditors by ensuring that all available funds can be considered centrally to the benefit of all creditors". With the benefit of hindsight has ASIC ever articulated a more ill-founded declaration?

More than five years later disputes and legal challenges relating to Bondedge and the other BA group entities still festered, pitting prominent Sydney insolvency industry identities against each other.

Among them were Wily, Hall Chadwick's Richard Albarran, former Hall Chadwick partner Geoff McDonald, and notorious insolvency industry freelancer Jim Byrnes

Meanwhile, Lazar will now have to make another bail application if he's to enjoy Christmas at home with his pregnant fiancé. The matter is set to return to court on January 15, 2015.

Lazar was arrested outside his home in North Sydney at 8.00am on Thursday by detectives from the McMaster Task Force into white collar crime.

Warrants were simultaneously executed to search Lazar's home and offices, also located in North Sydney. He was charged with obtain financial advantage by deception.

Police allege that Lazar defrauded an elderly woman out of her home at Nambucca Heads on the NSW mid-north coast. The central local court heard he was part of a "larger criminal organisation" and that it will be alleged he has been involved in ongoing criminal activity for 10 years.

Lazar's barrister Richard Mitry said his client was the victim of a campaign fuelled by disgruntled former investors who couldn't afford to repay him.

He also rejected the allegation that Lazar was part of a criminal group, pointing out that many of those to whom he is allegedly linked are in legal dispute with his client.

According to the NSW Police media release, Lazar saw the alleged victim - now deceased - on a current affairs television program about individuals suffering financial hardship back in 2003.

He contacted the program and obtained the lady's contact details. With an unidentified associate he then convinced her that he would clear her debts as an act of generosity.

In 2006 the woman tried to sell her home so she could move closer to her daughter in the NSW southern Highlands. Police allege it was in arranging to sell the property that she discovered that the mortgage had been transferred to a company she had never heard of. Three years later, despite further negotiations with Lazar and his associates, she was evicted. She died in 2010.

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