HARLEQUIN PROPERTY: Former boss David Ames on trial for fraud five years after being charged
EXCLUSIVE: A FORMER double glazing salesman pulled in £398 million selling thousands of investments in planned Caribbean and South American luxury holiday apartments, most of which were never built, a court heard. David Ames, 70, sold investments in "off plan" properties worth a total of £1.4 billion at planned resorts across St Vincent, St Lucia, Barbados, the Dominican Republic and Brazil, that were promoted by celebrities, from 2010 to 2015, Southwark Crown Court heard. It was through a group of companies known as Harlequin Property that he controlled from an industrial estate in Basildon, Essex, Michael Bowes QC, prosecuting said. The Serious Fraud Office (SFO) prosecution opened on Friday more than five years after Ames was first charged with three counts of fraud by abuse of position in February 2017. Mr Bowes told the jury Ames was a shadow director of the UK arm of the group, which took investor deposits, but gave the instructions and was the face of the business, meeting with investors and celebrities.
He also was sole director and beneficial owner of a series of offshore resort development companies which came under the umbrella. Harlequin used slick brochures showing swimming pools and clear green seas to "induce" mainly British investors to plough savings and pensions into the scheme or even take out mortgages with the promise of interest paid by his company and 100 per cent finance schemes. While investors lost a total of £226 million after refunds and compensation were taken into account, Ames (with football pundit Andy Townsend above) and his family took £6.2 million in salaries and dividends. Around 9,000 units were sold but only around 200 were ever built at the partially-completed Buccament Bay resort in St Vincent, just two per cent of all units sold, and another hotel was refurbished, Mr Bowes said. Mr Bowes said: "The prosecution say the fraud was committed by David Ames inducing investors to enter into contracts for the purchase of those off plan properties when the true state of affairs in relation to those properties was to expose those investors to a loss or risk of loss to make a gain to him or his family. "He gave them nothing in return, they lost all their money. "The prosecution case is that this business model, even if theoretically possible, was wholly flawed in its operation and throughout the entire process David Ames failed to exercise any proper business controls which substantially increased the risk of loss to investors and the Harlequin business model exposed investors to the risk of loss and substantial actual loss." SFO investigators do not think Ames set out to create a fraud, but by early 2011 it was clear his business plan was not viable, said Mr Bowes. But, Ames continued to sell thousands more units and plough new investors' cash into developing Buccament Bay, knowing a deficit was growing, when it became clear it was not possible to build them all and after he had been warned by finance professionals the business plan was not viable and he could be trading insolvently, he added. Mr Bowes said he also began to sell units on land he did not own and had no planning permission for at Buccament Bay.
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Mr Bowes said: "In addition to the risk identified in the business model itself, as of the start of 2010, in terms of the construction itself, there was not even a written contract with the construction company Ice, no supervision by David Ames and there were identified issues of whether Harlequin owned all the land it intended to build on. "It did not and never owned such land and the extent of which planning permission had been granted in respect of the entire site was questioned and it did not have planning permission to build the Buccament Bay resort as sold." Investors paid or borrowed 30 per cent of the property purchase price to secure a unit and were told they would get annual rental incomes of around £20,000 a year from the properties and Harlequin would pay their interest until they were built if they needed mortgages to fund the investments. But, Ames, who was unable to secure external development funding, was using a "pyramid sales" system that meant he had to sell at least three off plan properties to provide enough money to build just one at a conservative estimate, said Mr Bowes. He said: "Just look at the number of units sold, all part of that sales pyramid, all that money coming in and units sold, but 200 is the sum total at one resort, it simply didn't happen." Mr Bowes said new investors' deposits were not used to develop their units, but were used to cover generous 10 per cent commissions to agents and independent financial advisors who promoted the investment and to develop the Buccament Bay resort which was running out of cash. Just 12 per cent of investor deposits were left for building after commissions and investor interest were paid, when, even at a conservative estimate 45 per cent of each property price was needed to build them, Mr Bowes said. He said: "I need 45 per cent, but I've got 15, so I need to sell more, but, oh I've go to build those, so I need to sell more and the sales pyramid continues. It's ever expanding, it's ever growing, the pyramid just keeps on. "The promises, the inducements - in the Buccament Bay price guide it says 'fully-furnished freehold properties with 100 per cent finance, subject to status and terms and conditions. All you pay is the £1,000 reservation fee and the developer pays interest on the loan. A 70 per cent development loan is available on completion, with 30 days use per year.' "It adds 'Harlequin Property a company you can trust'. "Really? The reality, of course, was very different. The business model, the resort never built, all that money pouring in and very little to show for it, all kept by the endless sales and the commitment would never be kept." The trial continues.