A BUSINESSMAN accused of being involved in a Yorkshire-based franchising fraud denied yesterday failing to refund money when requested by unhappy franchisees.
Richard Hodgson told the jury at Leeds Crown Court he had no control over the franchise funds paid to Challenor Property Developments in York “so couldn’t repay the money.”
He said when the idea of franchising was first put to him by Christopher Douglas, the boss of Challenor, for others to find property for them to sell to would-be landlords “I was thrilled, I thought franchises was a brilliant idea.
“He told me we would do it by postal code.”
He told his counsel Richard Fisher he thought the idea was so good “because the main problem with Challenor was we could sell any amount of properties but we couldn’t get enough. We had enough clients but not enough properties.
“If we could cover the whole country, and to do that we needed to do it very quickly before the opposition got in on it, then we have a massive advantage.”
The jury has heard the business subsequently collapsed leaving franchisees and investors out of pocket, many losing thousands of pounds.
Hodgson, 65, of Sycamore View, Nether Poppleton, York, denies a charge of participating in a fraudulent business carried on by a sole trader between August 1, 2007 and June 25, 2008.
Two other defendants, Peter Carbert, 56, of Woodvale Road, Darlington and Carl Gilfoyle, 42, of Florida Street, London E2, were found not guilty yesterday by the jury on the same charge on the direction of Judge Christopher Batty.
He told the six man six woman jury he had heard legal submissions from their counsel as to whether or not it could be proved by the prosecution they knowingly carried on a business “that is being involved in the control of the running of the business not simply being employed by that business.”
That meant being involved in the decision making processes at Challenor and he had concluded the Crown could not prove either of the two were in such a role.
Douglas has pleaded guilty to the offence. The prosecution claim the firm, initially legitimate, became a “fraudulent money making vehicle” as people were later conned out of money.
The jury has heard when the franchise scheme was launched clients were offered training and a chance to source properties in a particular postcode area for onward sale to Challenor investors.
Hodgson told the jury he had been involved in previous business ventures with Douglas but in 2004 was living in Orlando, Florida, having retired with health problems.
Douglas had contacted him and visited and proposed starting Challenor for investors wanting to get into the buy-to-let market.
Hodgson said because he had previously been made bankrupt he did not think he should be a partner but they agreed his wife Muriel could and she put £10,000 into the business. She did not take any active role because she had been disabled for 20 years.
After he returned to the UK, he planned only to do a couple of hours a week but when they then began selling properties the business took off because the market was buoyant. Contacts were made with builders and when they could not get enough properties the franchising scheme was proposed.
He denied he recruited franchisees who were “manifestly ill suited” to be franchisees.
The trial continues.