Six solicitors on trial after UK's 'largest ever mortgage scam'

Former Dunlop Haywards head of valuations Ian McGarry, a chartered surveyor, and Birmingham property developer Saghir Afzal have pleaded guilty to their part in a £50m commercial mortgage fraud.

The court heard it was likely “one of the largest mortgage frauds ever perpetrated in the UK”.

McGarry and Afzal admitted charges of conspiracy to obtain a money transfer by deception and dishonestly obtaining a money transfer.

The pleas were entered in previous hearings but can only be published now after reporting restrictions have been lifted, with the trial under way of six other people.

McGarry has been released on bail but Afzal was remanded in custody.

Six solicitors have also been charged in relation to the alleged fraud and pleaded not guilty when they appeared at Southwark Crown Court.

They are: Hardeep Sodhi, 34, Laurence Fennigan, 49, Fatema Patwa, 48, Simon Lawrence, 39, Mark Knight, 46, and Kamran Malik, 31, who acted for various companies.

The court heard that two brothers, Saghir and Nisar Afzal, borrowed £49.3m against property that was worth less than £6m, in what was “most likely one of the largest mortgage frauds ever perpetrated in the UK”.

The prosecution told the court that Afzal and his brother Nisar had orchestrated a series of property transactions with the “sole aim of inflating the value of the properties and deceiving the banks as to the value”.

They had recruited a “dishonest valuer”, named in court as Ian McGarry, to provide “grossly inflated” valuation reports that included false leases.

The fraud concerned six properties bought between November 2004 and January 2006 for a total of £5.68m. Between February 2005 and March 2006, banks and building societies were persuaded to lend a total of £49.28m on their supposed security.

Andrew Baillie, prosecuting, said the solicitors had sold the properties to each other, ramping up the prices before applying for the mortgages.

Mr Baillie said: “This is not an 80% mortgage or a 90% mortgage but, taking all of these loans together, it was the equivalent of an 866% mortgage.”

He said that by the time the lenders realised that the properties were worth a fraction of what they had been told, it was too late: “The money had been distributed, a very substantial part of it sent abroad and the banks were left to whistle for their money.”

The Serious Fraud Office began investigating the case in March 2006 after a complaint from the Cheshire Building Society.

Dunlop Haywards, a subsidiary of Erinacious Group, went into liquidation in May 2008.

In 2009, the high court ruled that Dunlop Haywards owed £21m in relation to a Cheshire Building Society mortgage fraud.

Cheshire had also claimed against legal firm Cobbetts, which paid the building society £5.6m in an out of court settlement.
 
The case is expected to last 12 weeks. At the end of it, McGarry and Afzal will be sentenced.