Former struck-off lawyer charged with property loan fraud

Charges serve as a warning to both banks and property owners, SFO says.

A formerly bankrupt, struck-off lawyer is facing charges brought by the Serious Fraud Office for allegedly defrauding his bank.

Edward Errol Johnston, 59, appeared in the Auckland District Court today on three charges of dishonestly taking or using a document.

Mr Johnston was discharged from bankruptcy last month and was in 2013 struck off by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal.

The SFO says Mr Johnston owned properties in the Auckland area, with mortgage loans that had fallen into arrears between December 2011, and January 2012.

It is alleged Mr Johnston submitted false sale and purchase agreements to his bank, which it accepted.

But the SFO says Mr Johnston either sold the properties for a higher price than he had stated or transferred them to another trust and refinanced with a loan from another bank.

He is alleged to have submitted false statements to the bank when obtaining the refinanced loan.

SFO director Julie Read says the charges serve as a warning to both banks and property owners.

“There is no benefit to this type of deceit as it will be uncovered and charges will be laid.

“Unfortunately, manipulating the system can also hinder access for honest buyers who are looking to finance the property.”

Mr Johnston did not enter a plea and will make another appearance next month.

In 2013, NBR reported Mr Johnston had been referred to the SFO following the collapse of his property investment company.

One entity he directed owed Westpac $1.54 million when it went into liquidation in June 2012.

Mr Johnston’s brother, Rick, was ordered to pay a sister company of failed Hanover Finance $137,000 last September for negligently breaching a loan agreement.

FAI Money, of which Hanover co-founders Eric Watson and Mark Hotchin are directors, had lent $300,000 to Edward Johnston for a Waitakere property in late 2009.

The court heard the loan had been obtained using false financial information.

Follow NBR on Facebook, Twitter, LinkedIn and Instagram for the latest news and free on-demand audio from NBR Radio.