Crackdown on millionaire clubs

Crackdown on millionaire clubs

The government this week launched a crackdown on "become a property millionaire" seminars and investment clubs, using compulsory winding-up orders to close down five companies.

Hundreds of investors lost between £30,000 to £50,000 a head after they were lured into buying membership of the schemes, persuaded by slick seminars and glossy brochures.

The schemes promised that investors could build a million-pound property portfolio in just 12 months.

But most lost their membership fees and ended up with no property. Property investment clubs have mushroomed in Britain over the past few years. Investors are encouraged to attend free seminars, where they are told how they can build up huge buy-to-let property portfolios for a relatively small initial investment.

Once ensnared, investors are typically charged thousands of pounds for further seminars, advice and fees.

A membership fee - as high as £50,000 in the case of one scheme shut down this week - gives investors access to new-build flats which the scheme promoters say have been secured at discounts of 20% or more off the usual selling price.

The scheme then arranges mortgages and finds tenants for the investors. The scale of the property clubs is enormous. It is estimated that as many as one in six of all new-flats in the UK built over the past year have been bought by such operations.

Earlier this year, concern about "become a property millionaire".....continued below

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promotions caused the Office of Fair Trading to undertake a special investigation, which will report by the end of the year.

This week's action by the Department of Productivity, Energy and Industry (the renamed DTI) resulted in the closure of five of the companies. The DPEI also named Mr Kieran Connolly as "the common thread linking the [five] companies".

But while the dream of a million pound property has evaporated for his investors, Jobs & Money can reveal that Mr Connolly continues to live in a million-pound home in rolling Leicestershire countryside.

We tracked down Mr Connolly to an address in the upmarket hamlet of John O'Gaunt, just outside Melton Mowbray.

But when we called at the house, Mr Connolly was not at the address. However, we were able to speak to Anthony Nunn.

Mr Nunn is the owner and managing director of SMI (Overseas). SMI (Overseas) was named in the court action this week by the DPEI, but is vigorously contesting the winding-up order.

In court, the DPEI sought, in total, the closure of eight companies. Five orders were granted, against Sterling Mansion, Mansion Investments, CM2 Services, Furniture Right and Seal Properties Ltd.

But the case against two other companies, Portfolios of Distinction and Turningpoint Seminars, was adjourned for 35 days, while SMI (Overseas) said it will contest the order. A date will now be set for a High Court case later in the summer.

Mr Nunn from SMI (Overseas) said: "SMI has nothing to do with the companies closed down. The other businesses were all to do with UK schemes. We don't even trade in the UK. It's an estate agent that offers international properties for people to invest in for private homes and retirement homes.

"We just ensure everything goes well. And yes, we get paid for that. £583m of contracts have been put at risk by the case. Yes, there's an awful lot of money involved."