Formula fraud flat leave to appeal dismissed

A couple who found themselves embroiled in “an incredible series of events” involving an $18 million-plus PBS fraud have lost a bid to keep their home

The applicants, Zeinab Youssef and Hussein Mohamed Ali Haidar, owned and lived in a Sydney apartment which they purchased in 2014 in full, using money received by them from the Pharmacy Depot Hurstville Pty Ltd. The flat cost them $550,000 at the time.

The Commissioner of the Australian Federal Police had begun proceedings on the footing that Pharmacy Depot, as well as its directors and shareholders – one of whom, Yaakop (Jacob) Youssef, was Ms Youssef’s brother – had defrauded the PBS to the extent of around $18 million, thus committing offences against the Criminal Code.

The alleged fraud concerned a specialised formula for children and adults manufactured by Vitaflow Australia.

Between 30 November 2013 and 12 March 2015, Pharmacy Depot is alleged to have made a total of 4,743 PBS claims for 17 different products manufactured by Vitaflow.

This meant that $18,660,260 was paid to the Pharmacy Depot account nominated for PBS payments.

However, Pharmacy Depot only received two invoices for the purchase of such products – totalling $2,276.

In June 2015, the applicants obtained a loan of $600,000 from Westpac on the security of a mortgage of the property. The loan proceeds were placed in an offset account with Westpac in the names of the applicants.

After the fraud came to light, the Australian Federal Police sought orders to seize the flat, saying that the Pharmacy Depot directors and defendants, Mr Youssef and Hamza Amin Zoghbi, had provided funds for its purchase which were the proceeds of crime.

Ms Youssef and her husband Mr Haidar applied to the Supreme Court for an order excluding the property from this action, saying they would use their “best efforts” to draw down funds standing to their credit in the account and pay those funds to the liquidator of Pharmacy Depot.

They said that the funds from Pharmacy Depot were a loan from the company.

But the primary judge at the time found that the Westpac loan application had contained “materially misleading” information, and that there was no documentary evidence to support that Pharmacy Depot had loaned, rather than gifted, the couple the money. The application was dismissed.

The applicants then sought leave to appeal, saying the primary judge fell into error in this finding.

The court noted that the couple had bought the flat from a property developer which had constructed the block of units – a cousin of Mr Haidar – at around $200,000 below market cost.

It noted that there was a “powerful” subjective case raised by the applicants, given they had modest incomes and five children, and that they considered themselves to be “innocent participants” in “an incredible series of events”.

The couple said they were prepared to repay the $600,000 Westpac had lent them, and the court noted that there was no evidence as to whether they could be in a position to borrow the amount the flat was likely worth now, given a willing buyer had been prepared to pay $920,000 in 2016, though the flat was not sold at the time.

The court observed that if the couple were to regain access to the money in the Westpac offset account, they would need to pay these funds to the liquidator of Pharmacy Depot.

The appeal was dismissed.

“While it would be easy to decide this application on the basis of sympathy, the reality is that the applicants became the registered proprietors of the property on a completely wrong basis and they now seek to extricate the property from restraint by the use of bank funds which they also obtained on a wrong basis,” the court noted.

“The applicants have not discharged their onus of establishing on the balance of probabilities that an order for discretionary exclusion from restraint should be made.

“While the predicament in which the applicants find themselves warrants some sympathy, it is not for the Court to suggest ways in which they might extricate themselves.”

The couple were ordered to pay the Commissioner’s costs.

Previous A shortage of RUM
Next How to save a life

NOTICE: It can sometimes take awhile for comment submissions to go through, please be patient.

No Comment

Leave a reply