A father and son's insurance racket has been stifled by ASIC, after the industry regulator found the pair's business had been operating without an Australian Financial Services Licence (AFSL).
Former Homesafe Equities founder Anthony John Scott has pleaded guilty to two charges in Melbourne's County Court.
The charges included one count of aiding, abetting, counselling or procuring the offence of carrying on a financial services business without holding an AFSL, and one count of aiding and abetting dishonest conduct in relation to financial products.
According to ASIC, Scott played a key role in the establishment and running of Homesafe, a company that issued builders warranty bonds in relation to 792 building projects throughout Victoria between June 2003 and March 2004.
The projects had a potential value in excess of $100 million.
The trouble started when Homesafe contended that it was the manager of what it called a 'captive pool' and that the insurance it provided by way of the bonds was fully reinsured.
ASIC alleged that, unknown to the builders who obtained the insurance certificates, there was no pool of money set aside in the 'captive pool' to pay any claims, and that contrary to what was claimed, full reinsurance was not in place in respect of any claims that might have been made.
The bonds issued by Homesafe were insurance products that required the company to hold an AFSL. Neither Scott nor Homesafe held such a licence, the regulator said.
Scott is scheduled to return to the County Court for sentencing on 19 November 2007.
The Commonwealth Director of Public Prosecutions is prosecuting the matter.
Last November, Scott's son and the former director of Homesafe, James Alexander Scott, was sentenced on one count of carrying on a financial services business without holding an AFSL and 15 counts of dishonest conduct in relation to financial products.
Scott Jr was fined $5,000 and placed on a community-based order requiring him to perform 250 hours of unpaid community work.
Homesafe was placed into liquidation on 13 August 2004 following an application by ASIC to the Supreme Court of Victoria that the company was unable to pay any claim made on the bonds it had issued.
