Final duo jailed in 'highly sophisticated' $41m Auckland hotel and bank fraud sentenced

A company director and property developer have been jailed for defrauding ANZ of more than $40 million to develop a downtown Auckland hotel.

Leonard John Ross, 51, and Michael James Wehipeihana, 46, were found guilty by a jury in July of obtaining by deception and using fraudulent documents.

They did so to gain a loan from ANZ for the now-defunct company Emily Projects in an effort to develop the Waldorf Celestion Apartment Hotel.

Their nearly nine-week trial began at the start of June in the High Court at Auckland.

The duo were convicted on three charges of obtaining by deception and two representative charges of using forged documents.

Today, Justice Rebecca Edwards sentenced Ross to four years and four months' imprisonment, while Wehipeihana was jailed for four years and three months.

Ross was the director of Emily Projects and held a 55 per cent majority stake in the company, while Wehipeihana was a property developer and held 35 per cent of the shares.

They were two of four men charged over the scheme which occurred at the height of the global financial crisis in 2008 and 2010.

The Serious Fraud Office (SFO) began investigating from at least March 2016.

The remaining two men in the group, financial consultant Vaughn Stephen Foster and lawyer Timothy Upton Slack have earlier pleaded guilty and been sentenced to 10 months' home detention for their part in the fraud.

Leonard Ross and Michael Wehipeihana's trial was heard before a High Court jury earlier this year. Photo / Nick Reed

Emily Projects developed the Celestion Apartments on Auckland's Anzac Ave and Emily Place.

The group made false oral and written statements and used forged documents to gain a loan from ANZ to develop the two-tower hotel project.

A loan facility of about $41m was illegally obtained, however, ANZ did not lose any funds as a result of the fraud.

But, in a victim impact statement, ANZ said significant time and effort was required to recover the debt.

Justice Edwards also said there was wider ramification for commercial trading generally and damage to New Zealand's international reputation.

She said the group's fraud was "highly sophisticated" and "an elaborate fiction" with a single objective to deceive the bank.

Financial consultant Vaughn Foster was sentenced to home detention earlier this year. Photo / Greg Bowker

SFO prosecutor John Dixon QC said it is "inconceivable that Mr Ross did not know what he was doing".

While Slack as the company's lawyer was an integral part in the scheme, Dixon said "Ross was the instigator".

"He acted with the intent to deceive... Mr Ross must've known that all of the sales were false," he said.

Justice Edwards agreed and called Ross the "architect of the deception".

At Slack's sentencing in September last year, Justice Kit Toogood said Slack made personal assurances to ANZ which he "knew were blatant lies" and used his position as a solicitor to gain the bankers' trust.

Slack's law firm or the firm he was working at during the time of his offending has been suppressed but in March he was struck off the roll of barristers and solicitors.

In a pre-sentencing report Ross said he was naive to place his trust in people he shouldn't have.

"He must take responsibility for his actions and not seek to shift the blame entirely to Mr Slack," Dixon said.

Lawyer Timothy Slack had earlier pleaded guilty and was sentenced to home detention. Photo / Supplied

Ross' family was upset about media coverage of his offending.

However, Dixon explained it not a result of the SFO broadcasting details of his case but rather the Herald approaching the SFO, which simply confirmed an investigation was being conducted.

Justice Edwards did prevent the Herald from photographing Ross in court today, but suppressed her reasons for doing so.

Rachael Reed QC, Ross' counsel, said he client had enormous support in "all aspects of his life".

The public gallery for the sentencing was overwhelmed with supporters of Ross and Wehipeihana. Some stood outside the courtroom looking in, while others filled the jury box.

Many of the pair's friends and family were named as purchasers of the hotel's apartments, the court heard.

Reed said her client "wished he had never committed the offending" and had made different choices.

"He will never be before this court again," she said.

In a letter to the court Ross characterised his offending as "cutting corners".

The group used fake documents to deceive the bank and gain a significant loan to develop Auckland's Waldorf Celestion Apartment Hotel. Photo / Brett Phibbs

Ross wishes to return to Australia and his family, who will remain there, while he serves his sentence, the court heard.

However, Reed said, he will be forced to remain in New Zealand during his parole period and will need to meet a good character test if he is allowed back into Australia.

"It appears he would not meet a good character test unless he is sentenced to a term of imprisonment under 12 months," she said.

Wehipeihana's lawyer, Marc Corlett QC, said his client wishes to serve the community in the social housing sector.

One of Wehipeihana's many supporters also made a passionate plea to Justice Edwards for mercy for the former legal executive.

"I respect the jury's decision and I respect New Zealand law ... but please, your honour, mercy," he said from the public gallery.

Justice Edwards said while was not the ringleader he was actively involved in the "construction of the deceit".

SFO director Julie Read said in a statement, after the jury's verdicts for Ross and Wehipeihana, the pair misled the bank to ensure Emily Projects obtained the loan.

"The SFO is committed to investigating and prosecuting this kind of offending to maintain the integrity of the mortgage market for the benefit of honest borrowers," she said.

Emily Projects went into liquidation in 2012.

SFO director Julie Read said her office is committed to investigating and prosecuting this kind of offending. Photo / Greg Bowker