German Property Group: Tax Authorities Warn Of 2015 Fraud
For many investors who have lost money in the German Property Group (GPG) scam, it is still difficult to understand why the company’s founder, Charles Smetherst, and his associates are so large. The Hamover Public Prosecutor’s Office argued that Smetherst showed himself to be cooperative. According to the final report of the primary bankruptcy administrator, the events recorded by the auditors in September 2020 show the opposite.
Within two weeks of September 2020, employees of the company
at the time were said to have taken the files from the company headquarters to
Langenhagen and loaded them into their cars – not just once, but twice. One day
after the second incident, employees of an auditing company found sacks of torn
documents in a waste paper container on the company premises.
In addition, the primary bankruptcy administrator reports
how GPG employees were denied access to the company headquarters. It is said
that he had access to the company’s headquarters only with the participation of
the police.
Even in these circumstances, in the context of trouble-free
and partially non-existent bookkeeping, only a fraction of the connections come
to light after eight months. The initial bankruptcy report of a central company
in the corporate network provides information about the cash flow, as well as
the lack of interest on the part of the authorities in connection with the
crores of scams going on before their eyes.
Blurring, delays, disruption of education
The German real estate group, the German Property Group,
consists of about 200 companies, but one company is particularly relevant from
the creditors’ point of view: the majority of the money went to the project
company Dolphin Capital 80 (DC80), which issued promissory notes to private
investors. Interim Bankruptcy Administrator Gerrit Holesall and his team have
been conducting research since July 2020 and have now summarized their
findings. Business Insider was able to see the draft of its preliminary report.
It is not only data in the form of 6,100 files, 170,000
personal documents and thousands of unorganized e-mails, but above all the lack
of structure, uncontrolled bookkeeping within the company network and
incomprehensible cash flows that make comprehensive processing impossible. “In
particular, many of the postings were made without supporting documents and are
therefore based on unregistered business transactions,” Holmes writes. The
report, which deals with DC80’s structure and assets, always emphasizes that
even after eight months, the results are only temporary.
This is because even the founder of the company, Charles
Smetherst, does not provide meaningful documents or information from the
perspective of the bankrupt administrator. “Throughout the proceedings, he
sought to conceal, delay and obstruct the facts,” the report said. At the time
of publishing this article, Charles Smetherst has not commented on these
statements.
The tax office considered the investigation but did nothing
in the end
Not only the founder but also the authorities are said to
have shown interest in the Smetherst case. According to the report, the
responsible tax office has been conducting a tax audit since 2015, which was
uncertain from the perspective of the bankruptcy administrator. The report
states that the auditor pointed out from the outset that this was clearly a
pyramid scheme.
The tax authorities considered the inquiries, but in the
opinion of experts they “did not achieve the goal”. In subsequent years, GPG
was allowed to raise more money from dubious investors. When we asked the tax
office one reason why it did not need an investigation, we received a statement
of “no comment” referring to tax confidentiality.
The Hanover Public Prosecutor’s Office, which is
investigating Charles Smetherst and two other people from the GPG environment,
is not doing well in the report. Accordingly, the Public Prosecutor’s Office
said there was “no reason” to obtain evidence after the investigation had
begun. Securing evidence and property was not the focus of the Hanover Public
Prosecutor’s Office at the time, the report said. As we reported, no searches
took place until mid-March 2021.
It will be difficult for investors to get their money back
The investigation is not yet complete, but the funds handled
by DC80 alone are worth 3. 3.1 billion. As the bankruptcy administrator of the
entire real estate group reported in early April, this is a much larger amount
than previously thought. According to the report, DC80 served as the central
capital raising center for the GPG Group. Funds from about 4,000 British and
Irish private investors flowed into DC80 and then distributed within the real
estate group. Investors who invested some of their pension profits in GPG now
want to get their money back.
After all, it’s not so easy, because there is no overview of
which investor already has how much and to whom. “The question of which
investor is the debtor is not easy to understand in which company in the
group.”
Provisional Bankruptcy Administrator Gerrit Holes will apply
to Bremen District Court to open the bankruptcy proceedings and present a
161-page report. The court must decide whether he gets the mandate to be DC
Bank’s bankrupt administrator. Doubts about the jurisdiction of the Bremen
District Court over bankruptcy proceedings were finally legally clarified in
October 2020 when a local court upheld the jurisdiction of Bremen.
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