Scam spread may have snared socialite

WILLIAM MACE
Last updated 11:51 25/05/2013

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The arrest of a socialite at the centre of an alleged $9.2 million mortgage fraud may have come because of attempts to spread the scam.

Eli Devoy, now known as Ellie Stone, has entered no plea on 26 Crimes Act charges of obtaining by deception through a scheme designed to trick banks into granting mortgages on over-valued properties.

Six others – five men and a woman – were also charged with a total of 22 charges, entering no plea in the Auckland District Court yesterday, according to the Serious Fraud Office which brought the charges.

However the SFO accused 44 year-old Devoy of being the principal in the alleged offending.

She is alleged to have conducted a series of property sales and purchases between July 2007 and December 2010 which deceived various banks into approving mortgage applications based on false documents and information.

New Zealand Bankers Association chief executive Kirk Hope said he believed the alleged scam was exposed when attempts were made to sell an artificially inflated property to a legitimate buyer who suddenly realised they may have been paying too much.

"That's generally when these things will get exposed.

"It's great the SFO are taking action because when they are successful, that sends a clear message to fraudsters trying to do the same sorts of things."

Serious Fraud Office general manager of fraud and corruption Nick Paterson said mortgage fraud was "not uncommon" but that the regulator only focused on the largest and most complex cases.

Paterson said he was confident banks knew how to catch mortgage fraudsters, but the latest case heightened the need to look at their lending practices in order to prevent such fraud.

"The lesson coming out of it is I suspect the banks could and should do slightly more, although it's pretty tough, to be fair, to prevent somebody presenting you with a forged document," he said.

"People can create some pretty high quality-looking documents these days.

"Nonetheless I think the question should at least be asked: What could or should the banks be doing to avoid this kind of problem?"

Paterson said the SFO would not meddle in the banks' business but would be happy to engage with the industry over the matter.

Hope said such fraud was usually picked up by banks' checking processes and were relatively uncommon given banks were currently lending about $185 billion to Kiwi households.

He said the banks which lent to Devoy's alleged scam would not have lost $9.2 million because there was still value in the property assets held as security.

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Paterson suggested that the recent growth of Auckland house prices meant some of the properties may no longer be over-valued.

The others charged are Mehrdad Ghorbani, aka Mohammad Ghorbani Sarsangi [46], Mehran Ghorbani, aka Massoud Ghorbani or Ken Williams[35] , Nasrin Kardani [33], Mehrzad Ghorbani, aka Mehdi Ghorbani, Hassan Salarpour [35], and Javad Toraby [42].

The accused entered no pleas and will appear in court again on June 13.

- BusinessDay

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