Social housing tenant fared relatively well with unit in Chiasson Square but ‘governance practice’ failed to flag up her rights
Failing to flag up the risks to potentially risky investments worth hundreds of millions of pounds to public housing tenants resulted in a poor outcome for an SQC tenant’s investment, according to an independent report released on Tuesday.
Problems with the failed investment led to Annabel Crum becoming the latest MP to join a parliamentary inquiry looking into exactly how many tenants have fallen victim to unscrupulous commercial investments run by social housing providers.
Crum, who represents the Durham South West constituency, turned to SQC Asset Management in 2012 after moving to Canary Wharf. It was her housemate’s idea to invest as part of a larger effort. She borrowed money to invest and was later evicted, having lost around £42,000 of her £80,000 initial investment. Her debt to SQC Asset Management, for which she had no idea, was eventually halved.
However, Crum was stung by another investment during a visit to its offices in Soho, central London, in 2014. Her husband’s family, which had chosen SQC, handed over £390,000 for a unit in Chiasson Square. The UK developer, Unity Synergy, completed work on the nine-storey office block in September 2014.
The building has been marketed to foreign investors since, causing several issues for the building. Among the many concerns was insufficient parking, with a suggested hourly rate of $19. At least one investor, identified in the report as “mainly elderly”, has reported running out of money within hours of moving in.
This is only one of many issues raised in the report detailing dealings with other investors since the company went into administration. A report from the company’s legal adviser to the receiver described three successful overseas investors, two of whom have a number of customers on EQNPEX, EQCPP, EQCPE, Excel and EQPEC. The Legal Advisor said it had given an undertaking that if EQCPE or Excel failed, the two others would step in. However, the report makes no mention of Excel. It also does not suggest the three might be involved in the Chiasson Square project.
It goes on to describe Sigma as a vehicle through which investors passed money, with “less than a handful” of investors. As in Crum’s case, Sigma asked for money to be invested in front of them to cover corporate and administration costs and requested that the principals submit their individual signed share deeds.
The report refers to Sigma-linked funds as central to EQCPP’s wealth management business, which generated £240,000 for the company in 2016. It also refers to benefits agents who accept cash gifts from the clients and transfers them to portfolios within Sigma.
The last of the social housing investment services, EQCPE, is only now coming to the attention of the regulator, the Insolvency Service. It was appointed to ensure the protection of shareholders. However, this has yet to come to pass, with the Insolvency Service advising the City of London police that EQCPE is in no danger of insolvency.
A City of London police spokesperson told the Guardian that an interim report had been sent to the SOCA, which should then report back to City of London police. The spokesperson said: “If the report directly points to any criminal conduct then that is reported to us and we can then take steps to ensure there is a robust criminal investigation and potential prosecutions under the Health and Safety at Work Act 1974.”
A University of Warwick report last year found that a study of nearly £800m of IOOF property investments across the UK had resulted in 32 defaults, four Class A breaches and one Class B breach, which are considered the highest forms of misconduct.
A spokesperson for the society rejected any suggestion that its customers had been abused. “The company has proactively reached out to all its clients affected by what has happened in its accounts. All the accounts concerned have been frozen and action taken against any of those not yet in receipt of any forms of notification.
“IOOF has provided a range of assistance, including legal advice and refund arrangements, to the people affected by the insolvency of EQCPP.
“The company acknowledges the impact this has had on its investors and will continue to provide them with assistance.”