German Property Group: Tax authorities warn of 2015 fraud

German Property Group: Tax authorities warn of 2015 fraud

Headquarters of the German Property Group (then Dolphin Trust) in Langenhagen.

Korber LG, CCBYY-SA3.0

  • A preliminary report by Business Insider on the situation in DC80, the most important company in the German property group, a real estate company.
  • In 2015, the Hanover Tax Office already decided that the company was a pyramid scheme. However, tax authorities considered the investigation “inappropriate.”
  • The documents were removed and torn, and the bankrupt administrator was banned from the house. However, according to the report, the investigating public prosecutor’s office has not found any reason to obtain evidence for a long time.

For many investors who have lost money in the German Property Group (GPG) scam, it is still difficult to understand why the company’s founder, Charles Smetherst, and his associates are so large. The Hamover Public Prosecutor’s Office argued that Smetherst showed himself to be cooperative. According to the final report of the primary bankruptcy administrator, the events recorded by the auditors in September 2020 show the opposite.

Within two weeks of September 2020, employees of the company at the time were said to have taken the files from the company headquarters to Langenhagen and loaded them into their cars – not just once, but twice. One day after the second incident, employees of an auditing company found sacks of torn documents in a waste paper container on the company premises.

In addition, the primary bankruptcy administrator reports how GPG employees were denied access to the company headquarters. It is said that he had access to the company’s headquarters only with the participation of the police.

Even in these circumstances, in the context of trouble-free and partially non-existent bookkeeping, only a fraction of the connections come to light after eight months. The initial bankruptcy report of a central company in the corporate network provides information about the cash flow, as well as the lack of interest on the part of the authorities in connection with the crores of scams going on before their eyes.

Blurring, delays, disruption of education

The German real estate group, the German Property Group, consists of about 200 companies, but one company is particularly relevant from the creditors’ point of view: the majority of the money went to the project company Dolphin Capital 80 (DC80), which issued promissory notes to private investors. Interim Bankruptcy Administrator Gerrit Holesall and his team have been conducting research since July 2020 and have now summarized their findings. Business Insider was able to see the draft of its preliminary report.

It is not only data in the form of 6,100 files, 170,000 personal documents and thousands of unorganized e-mails, but above all the lack of structure, uncontrolled bookkeeping within the company network and incomprehensible cash flows that make comprehensive processing impossible. “In particular, many of the postings were made without supporting documents and are therefore based on unregistered business transactions,” Holmes writes. The report, which deals with DC80’s structure and assets, always emphasizes that even after eight months, the results are only temporary.

This is because even the founder of the company, Charles Smetherst, does not provide meaningful documents or information from the perspective of the bankrupt administrator. “Throughout the proceedings, he sought to conceal, delay and obstruct the facts,” the report said. At the time of publishing this article, Charles Smetherst has not commented on these statements.

The tax office considered the investigation but did nothing in the end

Not only the founder but also the authorities are said to have shown interest in the Smetherst case. According to the report, the responsible tax office has been conducting a tax audit since 2015, which was uncertain from the perspective of the bankruptcy administrator. The report states that the auditor pointed out from the outset that this was clearly a pyramid scheme.

The tax authorities considered the inquiries, but in the opinion of experts they “did not achieve the goal”. In subsequent years, GPG was allowed to raise more money from dubious investors. When we asked the tax office one reason why it did not need an investigation, we received a statement of “no comment” referring to tax confidentiality.

The Hanover Public Prosecutor’s Office, which is investigating Charles Smetherst and two other people from the GPG environment, is not doing well in the report. Accordingly, the Public Prosecutor’s Office said there was “no reason” to obtain evidence after the investigation had begun. Securing evidence and property was not the focus of the Hanover Public Prosecutor’s Office at the time, the report said. As we reported, no searches took place until mid-March 2021.

It will be difficult for investors to get their money back

The investigation is not yet complete, but the funds handled by DC80 alone are worth 3. 3.1 billion. As the bankruptcy administrator of the entire real estate group reported in early April, this is a much larger amount than previously thought. According to the report, DC80 served as the central capital raising center for the GPG Group. Funds from about 4,000 British and Irish private investors flowed into DC80 and then distributed within the real estate group. Investors who invested some of their pension profits in GPG now want to get their money back.

After all, it’s not so easy, because there is no overview of which investor already has how much and to whom. “The question of which investor is the debtor is not easy to understand in which company in the group.”

Provisional Bankruptcy Administrator Gerrit Holes will apply to Bremen District Court to open the bankruptcy proceedings and present a 161-page report. The court must decide whether he gets the mandate to be DC Bank’s bankrupt administrator. Doubts about the jurisdiction of the Bremen District Court over bankruptcy proceedings were finally legally clarified in October 2020 when a local court upheld the jurisdiction of Bremen.

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