Shaun Kiely, 43, from Lancashire, was the director and shareholder of Sky Properties (Northern) Limited, a property development and real estate business, and of S-Mart Stores, a chain of small retail outlets in locations across the UK.
He deceived investors in 2005 by promoting the S-Mart stores, managed by staff he appointed, as profitable businesses whereas in fact, very little trading was being done. An investigation by the Serious Fraud Office (SFO) uncovered the fraud.
The defendant, found guilty at Preston Crown Court in May of obtaining money transfers by deception and of false accounting, was sentenced today (July 4) at Preston Crown Court. Confiscation proceedings of his assets have started.
Sentencing Kiely, Judge Gibson told him: "The jury accepted that there was a lie at the heart of the case. The sign of your calculation was that at first sign of failure, rather than improve trade by investing money, you walked away.”
Richard Alderman, director of the SFO, said: “Shaun Kiely abused the trust of the people who invested in his business. They expected a return for their money, but all they got was worry and distress. I am very pleased that justice has now been served.”
Before and during 2005, Sky Properties (SPN) bought more than 50 low value commercial retail properties across the country. SPN created 20-year commercial leases to S-Mart, also controlled by Kiely, for the properties, before selling on the freeholds at auction.
The properties were promoted as a chance to invest in a going concern, with the S-Mart lease promising rental income to investors for the next 20 years. But S-Mart was not a profitable business.
Those employed by S-Mart to run the shops stated that stock consisted of poor quality goods including damaged items and that on most days they would see no customers.
The assistants running the stores warned S-Mart management of the dire state of business, but the concerns were neglected.
This was because Kiely’s intention was not to run S-Mart as a retail company long term, but to make quick short-term profits by selling the freeholds on to buyers. These buyers would be unaware that the properties they were buying were leased by a company whose turnover was too low to cover its rent.
SPN sold properties through several auctioneers between June and October 2005. In the details provided by SPN to auctioneers, it was suggested that S-Mart was in a state of healthy profit.
The reality of the year-end accounts for S-Mart for 2003/2004 would have shown that the company was making heavy losses. But Kiely arranged for two invoices to be included in the S-Mart accounts which resulted in a total distortion of the true picture.
SFO investigators found that these two invoices had been created many months after their stated dates in order to overstate the turnover of S-Mart by millions of pounds.
The 2004 accounts were prepared by a firm of certified accountants which the SFO has since reported to their professional body, CIMA, for further investigation into potential professional misconduct.