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Former solicitor banned for 11 more years 12 February 2014

A former solicitor has received an additional 11 year disqualification, on top of an existing five year ban, for misrepresentation that led to over £29m losses to a mortgagee.

Malcom Stewart Graham, who ran SFM Legal Services Ltd, had been struck off as a solicitor and made bankrupt in 2009.

He received the first director disqualification in October 2013 after pleading guilty to seven counts of fraud at Newcastle upon Tyne Crown Court in relation to a Stamp Duty Land Tax (SDLT) scheme operated by his firm.

SFM had entered into a voluntary liquidation in August 2009 and disclosed liabilities of £266,368 to creditors, which had subsequently increased to £1,111,190, prompting the Secretary for Business, Innovation and Skills to bring separate disqualification proceedings.

The court found that Graham had caused or allowed SFM to misrepresent the nature of property transactions to a mortgagee, resulting in him entering into transactions which caused an estimated shortfall of £29,359,457.

When representing a debtor who purchased two hotels for a combined total of £11,150,000, SFM advised the mortgagees that the debtor was purchasing one of the 78 separate apartments located in the hotel buildings rather than a hotel, allowing them to receive funding totalling £16,799,124.

A separate allegation against Graham detailed a Stamp Duty Land Tax (SDLT) scheme operated by SFM which reduced tax on property purchases, for which the firm promised clients a refund on fees if the scheme proved unsuccessful in avoiding SDLT.

No provisions were made for repayments to clients, so when HMRC adjusted the SDLT scheme to be ineffective, SFM was left owning at least £571,495 to clients who had paid up-front fees.

District Judge Kramer found Graham unfit to be a company director, disqualifying him until 2025.

Vicky Bagnall, director of Investigations at the Insolvency Service, said: “Although Mr Graham was disqualified as a director by the court after a fraud trial, the Insolvency Service pursued a second disqualification in the public interest as the misconduct was so severe.
SFM deceived mortgage companies as well as clients, which ultimately funded Mr Graham’s lifestyle, and further protection for the public for a significant period was needed.”

 

 

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