Investors in financial dream ‘more than £2m out of pocket’

Christopher Douglas and Richard Hodgson continued taking “vast sums” of money out of Challenor Property Developments in York at an “unsustainable rate” in the months before the business collapsed, leaving many investors with nothing and some bankrupt, Paul Reid, prosecuting, told Leeds Crown Court.

In the nine months between August 2007 and May 2008, Douglas paid himself nearly £900,000 while, in the eight months to April 2008 when he left the firm, Hodgson received around £500,000 paid through his wife Muriel’s accounts, he said.

“The prosecution case is that people were conned out of significant sums of money believing they were buying into a legitimate business by being sold what was for them a dream making a great deal of money relatively quickly.”

He told the jury Hodgson had an important role “selling that financial dream” to clients and making them false promises they would get refunds if their investment did not work out.

Mr Reid told the court Peter Carbert, who was employed by the firm, assisted Hodgson in persuading people to invest their cash while another defendant, Carl Gilfoyle, later provided Douglas “a way to try and avoid responsibility for the huge debts it had at the end by pretending to be the new owner”.

Hodgson, 65, of Sycamore View, Nether Poppleton, York; Gilfoyle, 42, of Florida Street, London E2; and Carbert, 55, of Woodvale Road, Darlington; each deny participating in a fraudulent business carried on by a sole trader.

The jury has been told Douglas has admitted that charge. The trial is expected to last eight weeks.

Mr Reid said Challenor Property Developments was set up in 2005 and was run perfectly legitimately to start with, operating from Regency House, Poppleton, but became a “fraudulent money making vehicle for the defendants.”

Initially it was involved in the buy-to-let market with Challenor able to negotiate discounts on the sale of newly built houses through bulk purchases.

Those discounts were then passed on to investors and buyers which even included staff at the firm attracted by the deals on offer and the “gifted deposit” on a mortgage as a result.

Mr Reid said when the franchise scheme was launched clients were offered a chance to source properties themselves in a particular postcode area for onward sale to Challenor investors.

It was advertised to those in their property club and on their mailing list for a franchise fee payable for a postcode area, one advert offering “we are going to turn you into a money magnet” and another promising to make them millionaires.

People were “suckered into the franchising scheme and deprived of their money on the basis of this sort of advertising,” he said, some clearly ill-suited to the scheme.

When they went to training weekends or to the offices they saw the car park full of high-value cars, and were “seduced” by the appearance of wealth.

Potential franchisees often signed up after being promised a refund if things did not work out but they then discovered, when they got the paper work, that it only offered to try and sell on the franchise for them.

One investor, shown Hodgson’s collection of expensive watches, paid £39,000 for four postcode areas in Bradford, Leeds, Darlington and Halifax, and sourced several housing deals but they were not acted on.

When he and another investor in Wakefield who encountered similar problems complained, they were made “ambassadors” at the firm’s offices to help other franchisees with the promises of a salary, only to find they were bombarded with complaints by others like themselves.

Hodgson, who spoke to another investor of his home in Florida and his Bentley and showed her his black titanium American Express card, left the firm a month before the collapse, after a suspected “sham” row with Douglas.

The trial continues.