FSA wins legal battle against illegal land banking scheme
David Banner-Eve and Stuart Cohen sold plots of land across the UK through their companies, with the promise that investors would make a significant return within two to three years when the land obtained planning permission and was resold.
About 1,200 investments – with some paying between £5,000 and £25,000 for each plot – were told developers were already lined up for the sites. However, to date, no planning permission has been gained by Asset Land.
Mr Justice Andrew Smith found that in giving evidence at the trial, Banner-Eve had been deliberately dishonest and that he knew about the claims his sales brokers were making to investors. Cohen did not attend the trial and had not participated in the proceedings.
The FSA said it would seek orders from the High Court banning Banner-Eve and Cohen for life from selling interests in land banking schemes for business purposes in the UK.
It will also seek orders from the High Court for the payment of at least £15m by Banner-Eve, Cohen and the Asset Land companies to return to investors.
In June 2012 the FSA obtained injunctions against Banner-Eve, Cohen and each of the Asset Land companies freezing their assets and prevented them from selling more land to investors. The assets will remain frozen until the High Court decides the final amount to be paid to the regulator.
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The FSA has not yet identified any assets that would enable more than a small proportion of these payments to be made, and therefore it is unclear how much will ultimately be returned to investors. The FSA is continuing to make enquiries to trace the funds paid by investors.
Tracey McDermott, director of enforcement and financial crime at the FSA, said the victory was bittersweet.
“Proving in Court that the Asset Land operation was an unauthorised land bank sets an important precedent and puts us in a stronger position to tackle other land investment scams,” she said. “However, while this is an important case from a legal point of view, we are acutely aware that most, if not all, investors will only get a fraction of their money back.”
She added: “This is therefore something of a bittersweet victory. While we will continue to do everything in our power to tackle unauthorised businesses, and while other scam firms should take note and be concerned about the increasing success we are having in shutting these ruses down, consumers should also recognise the huge risks involved when investing with unauthorised businesses.”