Sunday, 27 December 2015

Part I—Promises: the Experience of One Investor

1]  The Beginning  Following the dramatic cuts in interest rates in 2009, investors hunted around for better returns. The websites and brochures of Collins & Bone (CoBo) and Castle & Gatehouse were very persuasive, the telephone sales even more so. They promised high returns for a modest investment, all backed by bricks-and-mortar. “Now is the time to buy old houses cheaply and turn a profit! But hurry—timing is crucial!” and “We are an experienced team with ten years’ successful business behind us—check our record!” (We did check and found that there was no adverse publicity at that time.)

2]  Collins & Bone   In 2010, the Partners (Liam Collins and David Bone Jr) promised that the small investments they received would be pooled in order to buy houses with cash so as to ensure quick returns and by-pass the mortgage market. The interest rates offered of 8-10%, which could have been seen as a warning of serious risk, seemed to be properly covered by the GUARANTEE —repeated throughout their literature, websites, emails and telephone calls—that any of their existing, profitable portfolio of houses (their debt-free assets) could be sold to generate cash if the need arose. For larger investments there was to be a ‘charge’ against a single property. Also, according to CoBo’s literature, prestigious organizations were their partners and advisors. Websites and brochures that they distributed also boasted that their senior management already had £20,000,000 (twenty million) ‘under management.’ Some Brochure pages can be seen here.

3]  Good Income  Investors received promissory notes, and for a while some interest; they didn’t think too much about their investment, except to recommend it to family and friends. Investors naturally assumed that the interest paid to them came from rents and the sale of houses as advertised.

4]  First Doubts  My first alarm was a missed call from Liam Collins.  It was several days before I could reach anyone in the office, during which time I got anxious. I then received a hurried call from Collins just before he boarded a plane to Romania. However his message was positive:

“We’ve just signed the £20,000,000 deal with Matterhorn! So we will be very busy now. And we’re still open to new investment.”  I was relieved.  But then I remembered that they claimed  to have completed that deal more than six months ago! Also, wasn’t this a Castle & Gatehouse deal? If so, who was going to look after CoBo’s portfolio? 

Shortly after this, their legal secretary, Tanya Barker, resigned. We later found out that their ‘group accountant’ also ceased to work for them around the same time (December 2010/January2011)

5]  The Difficulties  In February, 2011, an interest payment was missed. I received a letter of apology, where reference was made to ‘technical’ problems, and investors were invited to attend an ‘open day’ in March. On the day (which was cancelled, but  some people were said to turn up anyway), concerns were raised over liquidity and late payments. In a newsletter, the ‘cash flow problems’ were blamed on the Irish Property Crash, which supposedly resulted in the withdrawal of several big investors and a loss of sales profits for CoBo. However, investors were assured that  the company would get through the ‘bottleneck’, and that our money was “guaranteed” by their twenty-nine houses, including their personal homes. Some investors were persuaded to relinquish monthly income in return for yet higher annual interest rates. By June, interest payments were sporadic and unreliable. 

6]  The Excuses  By August 2011, stories began circulating that due to the big £20 million deal being on hold for the summer, CoBo were ‘dancing on the streets’(using the name ‘Faces of Disco’) to enable them to pay their investors. Other rumours suggested that they had to busk  to put food on the table. At the same time, Liam Collins was  taking time out to train with the Olympic  Bobsleigh Team, and videos show them doing their disco act with big signs claiming to be raising money for the Olympic BobsleighTeam

Part II—The Let Down

7]  They Say the Money is Gone! At the beginning of November 2011, investors received long, rambling emails explaining that CoBo were insolvent and that all the money had been spent. This was blamed on the collapse of the £20M deal which was under negotiation.  Further, CoBo stated that unless all promissory note holders agreed to sign new promissory notes, waiving repayment and interest on their money for another 5 years, Collins and Bone could go bankrupt.

8]  The Betrayal  When it was suggested that they could sell some of their ‘assets’, they replied that all their houses were in fact mortgaged and therefore had no intrinsic value if sold.  This showed that all the ‘guarantees’ we had been given were false. It emerged that most of their properties were in negative equity.

9]  What Happened to Our Money? The answers were vague: ‘business expenses,’ ‘legal advice,’ ‘running the company.’ When pressed, they refused to give a proper account of it and became angry and unpleasant.

10]  Shady Business  Receiving no answer from CoBo or their associates, we started to research their business activities and uncovered an incredibly complicated story, much of it self-contradictory, as well as downright misinformation and lies.  It became obvious that the promise that we could eventually get our money back was only a ploy to persuade investors to keep quiet while they solicited more unsecured and non-returnable loans from otherbona fide investors.

11]  The Blog  We began to document and publicize our findings in an effort to reach others who were tricked by Collins and Bone. After an initial threat that they would take action for libel, the Partners lapsed into frantic self-justification. Investors were bullied into supporting the Partners’ plea for more time to save the business and into writing messages of support for them. CoBo claimed that by not supporting them, investors would lose their money and those investors would be held responsible for all the subsequent losses. Meanwhile, as more and more people contacted us—some were very timid at first and some were even afraid that we might be part of a trap set by CoBo to reveal defectors—it became obvious that the extent of the Group’s malpractice and deception was much greater than we had thought. Another investor's blog can be seen here.

12]  Divide and Deceive  It became clear that as long as investors could be kept separate and in the dark about what was happening to their money, CoBo could easily manipulate individuals. They were upset by the revelations on our Blog because their activities were being brought into the open. When investors compared notes, they found a mass of contradictory stories and outright lies. Clearly, we could not trust a word they said and it became obvious that our original trust in them had been totally misplaced. 

13]  Bankruptcy  A number of investors clubbed together to pay the legal costs of bankrupting CoBo. It was a lengthy and difficult business. They argued and postponed at every point but by the end of May 2012, both were declared bankrupt. A Trustee was appointed and a Public Examiner began to look into their finances. Both will have a difficult task because CoBo are still not willing to cooperate.

Beyond doubt, the money we invested had not been used for the stated purpose, that is to buy houses. The guarantees they offered were completely false, because CoBo did not own (See #1 below) the twenty-nine houses they claimed to and they had no debt-free assets. The money entrusted to them was therefore FRAUDULENTLY obtained.

CoBo’s confidence trick worked only as long as they could lie and make up convenient stories tailored to each person.

Part III—Revelations

1] CoBo were not running a successful property business. In fact, most of their houses were in Law of Property Act (LPA) Receivership at least twice between 2008 and 2010. This means that they did not keep up mortgage payments even though tenants were paying them rent.

2]  CoBo had no debt-free assets with which to guarantee investments. 

AT NO TIME did they or their associates have “£20m under management,” as they claimed.

3]  CoBo have a record of failed companies with lengthening list of debts. In 2009, the CBS group of companies, of which they were directors, collapsed owing over £2 million to investors. CBS investors were issued promissory notes by Collins & Bone. Nearly all these debts are still outstanding at the time of this writing.  For a glimpse into the complexity of their activities, see the Companies Document page. Also see this report by a CBS investor.

4]  Properties that they renovated were often rented to students without proper legal safety features such as fire doors and alarms wired up. We understand that they often didn’t bother to file documents with the Land Registry when they gave people ‘charges or trust deeds’ on a property. Owners also had to badger them to pay rents due, and tenants’ deposits were not kept safe. Many students are still owed their deposits from their companies Diggs Lettings and Patrick Properties. See students' Facebook page .

5]  Many companies listed as ‘partners and advisors’ in CoBo’s brochures were not associated at all with their business activities, and they were angry that their names had been misused.

6]  Investors from late 2009 to early 2011 understood their money would be used to buy houses for cash, free of mortgages. More than a million pounds was raised on this basis, but no houses were bought at all during this period. 

7]  Only selected investors received interest. Others were told that no money was available. Meanwhile, the partners continued to pay themselves, whilst family and friends received salaries.

8]  Thousands of pounds of investors’ money was spent on an expensive wedding, fast cars, travel up and down the country and holidays abroad. 

9]  CoBo blamed the Irish property crash for some of their financial troubles. The truth is that several largescale investors from Ireland terminated their business dealings with CoBo and associates because they were totally dissatisfied with them as business partners and property managers. These Irish investors are still owed hundreds of thousands of pounds. 

10]  CoBo claimed that their business failed because of a cancelled contract for a £20 million joint venture. However, even if that venture had gone ahead, any profits would have been shared by Matterhorn Capital and Novocastria Developments; Collins & Bone was not a party to the contract. In any event, the profits would not have been enough to cover their £4m of debt—unless, of course, they were planning to swindle everyone concerned

11]  Liam Collins is no longer a member of or training with the British Olympic Bobsleigh Team, but he continues to busk on the streets as Faces of Discoclaiming that he is raising money to support his Olympic ambitions and the team. David Bone Jr often accompanies him. CoBo are collecting cash in this way and it is unlikely that they keep proper accounts. Meanwhile, they are not cooperating with the Public Examiner or making any efforts  to sort out the mess and misery they have caused.