Do you recall the Pandora Papers? A box opened on 3 October to reveal the names of those who owned at least 1,500 UK properties worth £4bn.

Peter Bill

Peter Bill

The 2.6-terabyte trove bared Britain as a world-beater when it came to the squirrelling of money anonymously into real estate. Odd how fast the fuss has died down.

So, is it still safe to continue stashing both licit and illicit money under shell companies on sandy islands in the sun? For now, yes. But world leaders at the June G7 beach summit in Cornwall pledged legislation by 2023, aiming to force the ultimate beneficial owners (UBOs) to expose themselves – nine years after law was first proposed.

While waiting, it would be nice to see RICS and the Law Society team up with the major banks to explore ways to clean up the onshore activity that continues to besmirch the sector. I’ll return to the courageous attempts by Dr Len Gibbs to lay bare a £500m scandal in the North West. For now, hold on to the fact that the tangled web he exposed lies entirely in publicly available documents.

Back to Pandora’s box. Property transfers labour under the necessary, if bureaucratic, know-your-client (KYC) rules. But there is of course the ‘choose not to KYC’ UBO loophole. Even so, those facilitating deals with a client hiding under a Seychelles SPV umbrella tend to know perfectly well who the UBO is. Turning Nelson’s blind eye is the unspoken compact.

single column pic from peter bill

Dr Len Gibbs: former housing association chief exposed a £500m scandal

This can lead to embarrassments. Would The Crown Estate have bought a £67m office block in Mayfair in 2018 from the ruler of Azerbaijan, Ilham Aliyev, if the kleptocrat’s name was on the press release?

The estate’s boss since 2019, Dan Labbad, has promised answers. Here are the questions: did they not know who was selling? If not, why not? Or did they know, but chose to take the reputational risk? If so, who the hell thought the risk of getting the Queen on the front pages was worth it?

Liverpool thesis

Back to Dr Gibbs and a presentation he gave last week to members of NARA, aka the Association of Property and Fixed Charge Receivers. The former housing association chief earned his doctorate from an unpublished PhD thesis in 2019 titled ‘The complex dynamics of private rental investment, using Liverpool as a case study’. Brave man.

Read the Liverpool Echo and Property Week to understand what led to at least 32 unbuilt, half-built or scrappily built blocks blotting the landscape, mostly developed using SPVs promising investors rental returns of 8% to 12% before falling into administration.

The Good Doctor’s research ranged well beyond Liverpool and was synthesised in one chart headed ‘The Scam Development Model’, a model spookily close to that explored in the script of series two of the BBC Two drama Guilt, which centres on a cast of dark characters circling a development in Leith.

Dr Gibbs’ slide displayed the seven-step process:

  • Step one: mix clean and dirty money to buy shares in the SPV.
  • Step two: add crowd-funded and/or ‘challenger bank’ equity or debt. Use proceeds to gain land rights to develop. Then obtain permission.
  • Step three: market the hell out of the unbuilt scheme, largely abroad, promising 8% to 12% rental returns on fractional investments.
  • Step four: offer deep discounts to persuade investors to use SPV-friendly solicitors.
  • Step five: collect 80% of the sales price in stage payments. Falsify stage progress certificates if necessary.
  • Step six: syphon money from SPV to cause it to fail.
  • Step seven: administrator steps in – and finds an empty safe. The scheme can then be ‘phoenixed’ – to start the whole process again.

PS: In Guilt, the fictional developer is called Phoenix.

Peter Bill is a journalist and the author of Planet Property and Broken Homes