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Banks defrauded in £100 million bridging loan facility

17 Ionawr, 2013 | Eitemau newyddion

A defendant who fled the jurisdiction before trial has been sentenced to 7 ½ years’ imprisonment in his absence. Waheed Luqman, a director of a sub-prime loan company, deceived banks that provided a financing arrangement for the purchase and development of properties.  He was found guilty of fraud and false accounting by a jury at Manchester Crown Court yesterday, 16 January.

The sentences were 7 ½ years’ for conspiracy to defraud and 4 ½ years for each of the two counts of conspiracy to falsely account. All three sentences are concurrent.  He was also disqualified from acting as a company director for 15 years and has been ordered to pay costs to the SFO of £250,000.

An alleged accomplice, charged with money laundering offences, was acquitted.  

The conspirators

Waheed Luqman (39), was a director of Lexi Holdings plc, a property finance company based in Manchester and at some time with a London office.  Lexi Holdings went into administration in 2006 with debts of over £100 million.  Waheed Luqman conspired with other members of the Luqman family, principally his brother Shaid, to defraud creditors of the company, including Barclays Bank plc which was the main lender.  The period spans 2000 to 2006.

Waheed Luqman, who absconded in August 2011 after he was charged and is thought to be in Pakistan, was tried in absentia.  He is guilty of one common law charge of conspiracy to defraud creditors of Pearl Holdings (Europe) Ltd, later known as Lexi Holdings plc and two charges of conspiracy to falsely account contrary to s.1 of the Criminal Law 1997.

His brother, Shaid Luqman, the main perpetrator of the fraud, fled the jurisdiction in June 2011 before he could be charged.  It is thought that he too is in Pakistan.  Other family members named as conspirators but not charged because of medical reasons are the Luqman sisters Zaurian and Monazar who are also outside the jurisdiction.  

Lexi Holdings plc

The business, initially named Pearl Holdings (Europe) Limited, was established by Shaid Luqman in 2000 with funding from Barclays Bank.  It was renamed Lexi Holdings in 2004   It provided finance to individuals and companies wanting to invest in property.  Loans, commonly known as ‘bridging loans’ could be made at short notice and on a short term basis to secure a property, bridging a gap until the borrower could acquire long term finance.   The events took place over a period when property prices and financial markets were more buoyant than they currently are and when banks were more ready to lend.

Banks, mostly Barclays, provided Lexi Holdings with large amounts of capital over the period on the basis that the business was a highly regarded and successful enterprise making loans available to property developers who might not be able to obtain loans immediately from the banks.  Lexi entered into a Revolving Credit Facility Agreement with Barclays to draw down the required amounts for each transaction and though the bank carried out checks on the running of the agreement there was a great deal of trust involved.  Unfortunately the trust was misplaced.

Monies obtained by Lexi under the agreement were diverted and recycled through various bank accounts held in different names and trading entities which were hidden from the auditors and from Barclays and later a syndicate of banks of which Barclays was the senior partner.  They were also hidden from Lexi’s own internal accountants as the hidden accounts were controlled by a closed circle..  The Lexi accounts were doctored to create a false picture of the company’s profitability and creditworthiness.  Money was drained out of the company to family members in Pakistan and included large sums to the brothers’ father, Mohammed Luqman.  

Investigation and proceedings

There have been High Court civil proceedings brought for the recovery of money against the Luqman family and others which have led to judgments against them in relation to Lexi plc and an earlier enterprise of theirs called Modern Living which collapsed with substantial debts. Both Shaid and Waheed Luqman were obstructive so far as the investigations by the Lexi Administrators were concerned.   There have been contempt of court proceedings against both of them for having disobeyed court orders by either not delivering up or destroying documents and evidence required by the Courts resulting in them going to prison and being disqualified from acting as a company director for 15 years.   All of the actions by the Administrators and the subsequent criminal investigation by the SFO have exposed this long running and intricate fraud carried out by those running Lexi.

The SFO investigation opened in July 2009 and assistance was provided by the police forces of Cheshire, Greater Manchester and City of London.  Waheed Luqman and Mohammed Bhatti were charged in June 2011.  Their trial opened at Manchester Crown Court on 12 June 2012 without Luqman in attendance.  The jury returned their verdicts yesterday, 16 January.

Waheed Luqman was found guilty of one count of conspiracy to defraud and two counts of conspiracy to falsely account.  In addition to the sentencing already outlined, fresh warrants are to be issued for his arrest and immediate committal if he returns to the jurisdiction.  The SFO will be seeking Serious Crime Prevention Orders against him if he is located. A warrant remains outstanding for Shaid Luqman.

Mohammed Bhatti, 49, was alleged to have been an accomplice in the fraud.  He was not part of Lexi Holdings and not part of the conspiracy to defraud. He stood trial for money laundering offences involving the use of bank accounts he controlled. The jury found him not guilty.