THE CRIMINAL Assets Bureau (Cab) is investigating a number of cases where builders have paid fraudsters to purchase properties from them at inflated prices in a move to secure sales following the collapse in the property market.
Det Chief Supt John O’Mahony, the Cab’s chief bureau officer, told the Oireachtas Committee on Finance and the Public Service that it was investigating cases of “builder bailout fraud”.
Mr O’Mahony said the fraud involved property development companies “hiring” fraudsters to make false mortgage applications using forged documents and creating a false identity. The builder then nets the purchase price for “an inflated sum” and no repayments are made on the loan.
The lender is subsequently left with a loss and the property as it is registered under a false name.
The property is often in negative equity – where the loan is larger than the value of the property – because the property was overvalued by the builder.
“It is something that we have found recently in our investigations and it is driven by the downturn in the economy,” he said.
He declined to comment on whether the fraud was widespread across the industry and would only say that the Cab was carrying out “a number of investigations”.
The Cab said the fraud usually involved a number of individuals falsifying documents, including utility bills, bank statements, passports, driving licences and payslips, to fraudulently show a higher level of income as well as tax records.
Mr O’Mahony said builders had no problem selling properties “up to a short time ago” and that the Cab only discovered the “bailout fraud” in the last few months.
“They cannot do it without the fraudster and criminals that are willing to produce the documentation,” he told the committee.
The Cab said the fraud was similar to schemes found in the US.
The bureau cited the fraud in a presentation to the committee to show examples of mortgage fraud and how documents were being falsified to secure financial loans.
“In recent times the Cab has identified a number of individuals who are involved in the provision of very sophisticated documentation to support loan applications, in addition to producing entire false identities for people,” Mr O’Mahony said in his presentation.
He said that in a process known as “laundering by substitution” criminals were fraudulently drawing mortgages using false identities and repaying the loans with the proceeds of crime. Once the mortgage was repaid, a new loan was fraudulently applied for.
Since its creation in 1996, the Cab has taken 56 prosecution cases in the High Court; 20 cases involved properties being used to borrow mortgages using false documents.
The Cab’s legal officer Frank Cassidy and Greg Connell, managing director of the Irish Fraud Bureau, said a new register of loans would stop mortgage fraud through solicitors’ undertakings.
This fraud involves solicitors drawing a mortgage and promising to register the loan charge against the property later but borrowing against the property again.
