By Dan Oakes
HUNDREDS of Victorians are believed to have been caught in the collapse of a property investment scheme that has left $23 million unaccounted for.
Desperate investors have urged the Australian Securities and Investments Commission to take action against the former director of Dollarforce Financial Services and its sister company, Alamanda Property Investors, both of which have been put into administration.
Up to 300 investors, most of them Victorians, sank $42 million into the scheme; only $19 million was returned in the form of refunds. It is believed that the last interest payments and refunds were made in July.
The collapse is the latest property investment scheme to have gone bad and follows Fincorp and Westpoint.
Some investors' money was to be used as an interest-only loan, while other investors also bought investment properties through Dollarforce and Alamanda. At least one investor put $1 million into the scheme.
Although ASIC would not confirm it was investigating the collapse, BusinessDay believes it is examining the role of the companies' former director, Clestus Weerappah, in the apparent disappearance of the money. It is believed ASIC is leaning towards taking criminal action against Mr Weerappah.
However, lawyers Slater & Gordon, who plan a class action on behalf of 50 of the predominantly retail investors, have called on ASIC to act quickly in the civil courts.
"The Dollarforce Group raised money by making false and misleading claims and at times operating without appropriate licences," Slater & Gordon lawyer Rod Cunich said.
"We are calling on ASIC to urgently take steps so that investors at least have a chance to get some of their money back from these assets. Our clients are concerned that if steps are not taken soon, those assets will be gone."
BusinessDay has spoken to six investors who became progressively more suspicious about the scheme as they were forced to chase up interest payments, or did not get a direct response from Mr Weerappah when they asked for a refund of their initial investment. None have been able to contact Mr Weerappah for months.
BusinessDay went to the Hampton office of one of up to 15 companies established by Mr Weerappah including Altitude Property, Ivory Property Group, Lewmac Investments and My Building and was told he was "at the Brighton office". That address turned out not to be a Dollarforce office but serviced offices, where we were told the receptionist took messages for Mr Weerappah.
Mr Weerappah has not returned emails or phone calls.
An accountant, Ross Booth, was hired by Mr Weerappah in June to internally audit the accounts of the many companies in the Dollarforce group.
Mr Booth said last week that when he realised Alamanda had been trading insolvently for several years and that it had no assets to support the millions "invested" in the company, he informed ASIC immediately and began contacting investors.
In an affidavit seen by BusinessDay, Mr Booth says he discovered funds were raised predominantly from "unsophisticated investors" and used to perpetuate a Ponzi scheme as Mr Weerappah struggled to keep up payments to investors.
A Ponzi scheme, also known as a pyramid scheme, is when the money repaid to investors comes from subsequent investors, rather than from profit.
"There is no evidence in the records I have examined of any direct relationship between funds raised from investors and those funds being on-lent to developers rather the funds move among companies within the Dollarforce group, presumably on the basis of unsecured intercompany loans," Mr Booth said.
Mr Booth said he was told by Mr Weerappah: "I can't get any more money to pay (the investors) and they will start screaming when they don't get September's interest. I don't know what I'm going to say to them when that happens."
Mr Booth also said about $860,000 had been paid directly out of investors' funds to Mr Weerappah and his partner, Andrea Hawkins.
This week, angry investors asked how Mr Weerappah could get away with the apparent fraud for so long.
"You kind of blame yourself, but the banks and ASIC have something to answer for as well," one said. "We did understand what we were doing, but then the whole structure of the scheme changed and we still thought it was going along fine."