Brief Introduction to Scams
This document is designed to introduce you to the main scams that occurred. It contains no history or background.
Main Companies – Urban Investment Services Pty Ltd
- IBP Capital Pty Ltd, (later named Sunset Capital Pty Ltd)
Shareholders: Gabrial Neil Pennicott
Jan Li (Jane Lee, Jane Li, Jun Li, etc)
Directors: listed, or “de-factoâ€: Gabrial Neil Pennicott
Garry Lloyd Gosling
Jan Li
Seminar scam
After attending free Urban introductory seminars starting in late 2001, early 2002, prospective clients were invited to become private members of Urban’s “Exclusive Investor Club,†and then paid up to $895 to attend further “member only†seminars where Pennicott and various Urban “guest speakers†presented on such topics as setting up self-managed super funds, property development financing, use of deposit bonds, local and “offshore†company structures, how to “Become a Debt Free Property Investorâ€, etc.
Lots of promotional and product literature was given out encouraging clients to purchase off- the –plan properties, and “invest†in proposed property developments, etc. Urban said it was a “one stop shop†for all investment needs. Clients who signed up for any of Urban’s property “investment opportunities†paid a minimum $3,300 “Property Registration feeâ€. Much of the information provided to clients was actually public domain from the internet – e.g. Australian taxation information, or was of dubious legality e.g. obtaining “degrees†from offshore “Universitiesâ€. The seminars were really about getting clients to set up structures allowing Pennicott & Li to get their hands on clients’ equity or superannuation funds, which later disappeared.
Domain on Chapel Trust Fund scam
One of the main scams. As a means of funding a proposed 3- storey, 28-unit residential development at Cowes, Phillip Island, Victoria, clients were given a supposed “ASIC Policy†approved “Product Disclosure Statement†(PDS) and encouraged to form and become members of one of 20 proposed “Sophisticated Investor†syndicates.
The idea was for clients to pool their funds, (generally borrowed from their own equity) into one of the syndicates, each of which was to raise and then loan the sum of $500,000 to IBP Capital to fund construction of the units. A total of $10 million was to be raised, supposedly to be held in a solicitor’s “trust accountâ€, on which a 14% return would be paid to investors, monthly in arrears. This process was to be managed by directors Pennicott and Gosling.
Clients say they were assured, and the PDS states, that their funds were to be “Capital Secured†by a “Promissory Note,†issued by an “international securities providerâ€, and states a number of times that the 14% interest return to clients is “Guaranteedâ€.
Clients, however, say, that they received interest payments only for a few months before they stopped; customer service staff ran interference and Pennicott, Li, and to some extent Gosling, became scarce, un-contactable, or gave out excuses.
The so -called Promissory Notes were actually worthless and issued by Pennicott & Li’s company: IBP Capital, or by another of their companies: “Lloyds London International Securitiesâ€.
Clients who phoned international directory services to locate “Lloyds London’s†supposed international offices in Hong Kong, Singapore, Tokyo, Paris, etc, discovered they didn’t exist.
Other clients’ loaned money directly into a similar 10% return “interim fund†designed to give investors some return while the main syndicates were being formed and documents finalized. The same thing occurred. Clients received interest payments only for a few months, then they stopped; the money went missing, and Pennicott, Li and Gosling were more or less uncontactable or gave out excuses.
The funds never went near a solicitor’s trust account. The money was reportedly withdrawn in $50,000 cash lots, and then made its way overseas to bank accounts set up in off shore tax haven jurisdictions, to which Pennicott and Li have in some cases reportedly attached international ATM debit cards for their personal use.
The Domain on Chapel apartments were never built.
Share Offer Scam
When the interest payments to clients in the Domain on Chapel Property Syndicates stopped, clients were pressured by Pennicott and Li to transfer their interest in the supposed Domain on Chapel “trust fund†loans (both 10% and 14%), into shares in an unlisted West Australian company - Barclay Wells Ltd, at a rate of 70 cents a share. This was to be in lieu of receiving their invested loan funds back due to a “writ†raised in the Supreme Court by an upset client – Geoff Everett.
What clients weren’t told was that the unlisted shares were “non preference� shares, and realistically worth less than 5c a share, with no secondary market available, e.g., the Stock Exchange. According to one previous senior member of the company, the shares actually appeared to be Pennicott and Li’s personal property since Li & Pennicott held shares in Dingo Capital, the name of the company before was changed to Barclay Wells.
A number of clients say that Pennicott and Li said to them that they had been issued “Securities Dealer’s Licenses†by Barclay Wells and could now offer “investment banking†services as part of their services – for a fee of course.
It is reported that Pennicott & Li later ripped off the main Barclay Well’s Director’s daughter to the tune of $50,000 and he then engaged a Melbourne Solicitor to try to recover the funds.
2nd mortgage Finance Scam
Despite clients filling out comprehensive Urban “Personal Financial Audit†forms, demonstrating they did not have the necessary income, clients were nevertheless encouraged to purchase off-the -plan investment properties, for example, at Bundoora, Melbourne, on specific terms. These terms included that the properties would be “positively geared'', with no deposit required, rental return guaranteed, tenancy provision services, 14.50% future capital growth with 10% growth before settlement, 10% built in equity at settlement, free legal fees, etc., with a 90% first mortgage and 10% second mortgage to be arranged for them.
A few months later, Pennicott scrapped all of these terms, supposedly compensating clients by dropping the purchase price by approximately $60,000 and then arranged 75% first mortgages for them, which finance applications must have contained falsified documentation.
On settlement day, without client’s consent, Pennicott supposedly put in his own money to settle the properties in lieu of second mortgage funds, and e.g. 11 days after settlement, provided dubious second mortgage documentation to clients heavily loaded with additional fees and charges.
Clients say that certain contract signature pages appear to have been swapped later, and that their mortgage turned out not to be with IBP Capital Pty Ltd as detailed on their banks “direct debit†form and the original second mortgage documents supplied to them, but in actuality was set up with another of Pennicott and Li’s covert company’s based in the off shore tax haven British Virgin Islands - IBP Venture Capital Reserve Limited.
Despite getting in tenants, the clients supposed “positively geared†properties turned out to be “negatively geared†by nearly $300 a week, and they could not meet their repayments. In fact, the properties transferred from the original vendor, to Urban, and then on to the clients on settlement day, with Urban adding approximately an additional $100,000 to the original vendors sale price, even after the supposed $60,000 price reduction to the clients.
It is also questionable as to whether any second mortgage money was ever paid by IBP Venture Capital Reserve Limited to Urban. It appears to be just a paper transaction, but then, a lot of the paperwork is missing, and has never been supplied to clients despite repeated requests, while a lot went missing during the supposed “burglary†of Urban and IBP’s offices, which some ex -staff are convinced was arranged by Pennicott & Li. IBP Venture Capital Reserve Limited, hiding behind lawyers is currently still suing one young couple, for approx $125, 000, but the main lawyer is known to be taking instructions from Pennicott & Li.
The Bridging Finance Scam
Clients, even staff, with significant equity, were approached by Pennicott and Li and encouraged to loan their equity to IBP Capital which supposedly, would then loan it out at high interest to developers requiring short term “bridging†finance, when for instance there were delays in getting their finance approved, or drawn down, etc.
Clients were promised that their funds would be secured by “first mortgages†over the property developments concerned. In actuality, the funds appear to have been used to maintain personal cash-flow for Pennicott and Li, company cash flow for a number of related companies, or for whatever else Pennicott & Li wanted to use the money for.
One ex staff member who made independent inquiries about his loaned funds discovered for example, that the property which supposedly secured his loaned funds, over which there was to have been a “first mortgageâ€, had in fact “settled†weeks before the funds were supposedly loaned to its developer as “bridging†finance. The staff member then had significant difficulty and delays in getting their funds returned.
Wine investment Scam
At one seminar, clients were given thick bound promotional and educational material and encouraged to join the “Urban Wine Clubâ€, and purchase cases of supposedly exclusive specialist “Anne’s Mirador†red wine for $600 a case, as an investment “commodityâ€; The wine supposedly being in the same class as Grange Hermitage, etc. Clients later received a letter telling them sales had been achieved of $1,200 a case. One letter to client’s states: “In excess of 85 % of the attendees…participated in this opportunity of a 235% return on investment.â€
Clients were issued “Certificates of Ownershipâ€; encouraged to store their wine in “Authentic Hand Crafted Wooden Cases†in humidity controlled conditions to be arranged. Suspicious clients later discovered that the owner of the winery – Keith Jacobs, was in fact, a neighbor of Pennicott's, whose interest in wine was only as a hobby, and some of the extended Pennicott family, in good faith, had been involved in its manufacture, and labeling.
One client took a bottle of Anne’s Mirador to an independent wine auctioneer who provided a letter stating: “Due to the poor quality of the wine, and market resistance toward the product, the auction estimate, would only be between $4 – 9 per bottle. Sorry for the bad news.â€
_________________ Blue Sky Watcher
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