Directors banned for carrying out land sales scam

Commercial landlords beware!

The directors of two companies, both of which traded as Option Four Group, have been banned as company directors for a total of 26 years.

Mehmet Husnu (also known as Matt Hudson) and Ali Seytanpir (also known as Alex Townsend) sold land as an investment, but the land was virtually worthless. Payments totaling £1,337,935 were made to Husnu, Seytanpir and a relative's company in Northern Cyprus. Their disqualifications follow an investigation by the Official Receiver at the Public Interest Unit, a specialist team of the Insolvency Service. Lawyers suggest that the decision demonstrates the resolve of the Insolvency Service and serves as a warning to investors to put in due diligence on land investment opportunities.

The companies, OFG Investments Ltd (OFG) and GIG Properties Ltd (GIG), marketed and sold plots of land belonging to another company on a former airfield in Devon on commission. The land was sold on the basis that it represented an investment opportunity, suitable for development and having a realistic prospect of planning permission, when it did not.

OFG and GIG only ceased trading when a freezing order was brought against them, together with the company that owned the land, in December 2011 by the then Financial Services Authority, following complaints from members of the public about calls they received from OFG's 'brokers'.

Investigation and disqualifications

The Official Receiver's investigation uncovered that between December 2010 to December 2011, the companies made sales of plots of land as an investment to members of the public who paid sums totalling £2,209,296.

Husnu has given an undertaking to the Secretary of State for Business, Energy and Industrial Strategy to be disqualified as a director for a period of 14 years. His disqualification commenced on 12 January 2017.

Seytanpir has given an undertaking to the Secretary of State for Business, Energy and Industrial Strategy to be disqualified as a director for a period of 12 years. His disqualification commences on 15 March 2017.

The resolve of the Insolvency Service

Rachel Adamson, partner at Stephensons, says the decision demonstrates the determination of the Insolvency Service 'to pursue land banking scams to ensure that those responsible are disqualified from being a director of a company'. She says the Insolvency Service is pursuing this aim with the purpose of protecting the public. It is therefore likely, Adamson adds, that 'this measure will be used hand-in-hand with criminal prosecutions for fraud'.

An investment point of view--'too good to be true'

For investors and their lawyers, Adamson explains that the ruling highlights the importance of 'proper due diligence on land investment opportunities'. She says that the ruling shows that it would have become apparent with proper research that the land was 'not the valuable asset it was held out to be'. Adamson adds: 'It is important that any potential investor looks at the potential return and if the return on investment seems too good to be true then it often isn't true.'

First published on Lexis Nexis - 15/03/2017