£2m property fraudsters jailed
4:29pm 17th August 2012
(Updated 4:40pm 17th August 2012)
Two York men have today (Friday 17th August 2012) been sentenced to a total of seven years and ten month’s imprisonment for defrauding over 100 clients out of more than £2m.
Richard William Hodgson, 66 of Upper Poppleton, York was jailed for four years, two months and Christopher Douglas, 47 from York, was jailed three years and eight months.
PICTURED: (Top, Richard Willian Hodgson / Bottom, Christopher Douglas)
Following a 12-week trial which concluded in December 2011, a jury at Leeds Crown Court found Hodgson guilty of participating in a fraudulent business. Christopher Douglas pleaded guilty to the same charge at an earlier hearing at Bradford Crown Court in July 2011.
The pair operated a property club called Challenor Property Developments (CPD) based in Nether Poppleton in York. The company was established in 2005 but eventually collapsed in June 2008.
Challenor Property Developments worked by negotiating the bulk purchase of new build properties and negotiated discounts which were then passed on to their clients.
Problems began for CPD when they began selling franchises based on this business model, promising a low-risk, high return investment and exclusive access to a particular post code area, but this was not the case.
In the summer of 2008, alerted by numerous calls from more than 200 of Challenor’s concerned clients, North Yorkshire Police began what was to become one of the largest fraud investigations the force has ever undertaken.
The three-year investigation saw officers take statements from 130 witnesses, seize 33,000 paper documents and recover 1.5 terabytes of digital data – which is the equivalent of 1,500 copies of the Encyclopaedia Britannia.
The fraud team also worked closely with the HM Revenue & Customs Criminal Taxes Unit. This unit work alongside police and other law enforcement agencies to help detect tax fraud at all levels. Their interrogation of the company’s complex VAT records provided essential information to help secure the prosecution.
CPD used a high pressure sales technique to sell the franchise to clients, making unrealistic claims of potential earnings and false promises that if it was not a success, they would get their money back.
They promised training in how to run the franchise, which required excellent negotiation and interpersonal skills. As further reassurance, potential clients were promised support from the company, and in some cases, leads. But for most clients, this training and support never materialised and after paying between £5,000 and £50,000 each, as well as additional support fees, the clients felt abandoned.
Complaints began to flood in to the company from late 2007 and by the spring of 2008, it was clear that the company was descending into deep financial trouble. Despite this, they continued to sign up new franchisees, take their money and siphon off huge amounts of cash for themselves.
When it became obvious that the company was in serious trouble, Hodgson left at the end of March 2008, Douglas remained until the firm's collapse.
A small minority of franchisees had some cash returned to them by CPD in an attempt to avoid police involvement.
The company also made out credit notes to their franchisees - which they had no intention of paying - in an attempt to reduce the apparent liability of the company on paper and conceal the extent of the fraud.
Seven suspects were arrested during the course of the enquiry, however only four were charged with fraudulent trading. Two of those charged, Carl Gilfoyle, 42 of Florida street, London and Peter Carbert, 56 from Woodvale Road, Darlington were acquitted at the end of the prosecution case. During the twelve week trail, at the direction of the Judge after he found that they had insufficient control over the company to be convicted of fraudulent trading.
Detective Inspector Ian Wills who heads North Yorkshire Police’s Major Fraud and Financial Investigation Unit, said:
“The sheer scale and complexity of the investigation into Challenor Property Developments posed a significant challenge to North Yorkshire Police. However, I am very proud to say that the Major Fraud Team more than met this challenge, securing justice for the many victims who each lost thousands of pounds.
The investigation spanned a much larger timeframe than the franchising alone and there were in excess of 100,000 pages of investigative material including statements and exhibits which were not used during the 12-week trial."
DI Wills added:
“A large fraud investigation of this nature is a constantly evolving process and it is common for both prosecution and defence counsel to require further investigative work throughout the trial itself.
“The comprehensive nature of the inquiry and today’s sentencing should reassure businesses and communities in North Yorkshire and the City of York of North Yorkshire Police’s commitment and capability in bringing offences of this nature to justice.
“I pass on my praise and thanks to the officers who led the case, DC Melanie Spanton, DC Nicky Hancock and Detective Sergeant Garry Ridler for their outstanding work.”
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