Reckoning day nears for Ponzi operator

His investor victims described him as charismatic and charming, an apparent multi-millionaire with all the trappings of wealth - polo, luxury ski holidays, and ownership of an eastern suburbs cosmetic surgery to boot.

Now the day of reckoning has come for the Financial Partners director, Simon Finnigan, following his guilty plea to Australian Securities and Investment Commission charges involving nearly $2 million fleeced in a Ponzi operation which bankrolled his luxury lifestyle.

Finnigan, 49, still sports a luxury address - Potts Point - only now he's living in a backpacker hostel, as the Herald discovered.

In all, $15 million was missing when creditors caught up with Finnigan in 2007. When the Herald's sister newspaper, The Sun-Herald, spoke to him at the time, Finnigan said: "It's been a terrible time. I'm in the business of venture capital and I've lost a lot of my own money as well as theirs. I'm no con man, I'm no charlatan. One business went bad. As a result, the rest tumbled."

His Ponzi scheme was revealed in court as Paul McGuire, for the Commonwealth Director of Public Prosecutions, outlined how Finnigan used investor funds deposited with his companies, Financial Partners Pty Ltd and Venture Capital Management Pty Ltd. Money went on Finnigan's personal and business expenses, and "typically for these types of Ponzi schemes ... [funds] were used to pay other investors when they had demands for interest payments or return of their capital," he said.

ASIC calculated that between February 2003 and November 2006, investors paid for 82 per cent of the $527,000 in travel, accommodation and business expenses Finnigan charged to his Visa account. When ASIC began its investigation in 2007, there were 25 investors and entities chasing their lost funds.

Finnigan "befriended and beguiled" investors, McGuire said.

Or as one witness, Dee Bone, who with her husband invested $200,000, told the court: "He was full of financial talk. If you listened to him you would think he was incredibly successful. He travelled the world, he was a serious investor.

"He threw lavish parties. I think one party was for $100,000."

That networking party was held at the Simply Beautiful Cosmetic Surgery and Laser Clinic in Edgecliff, which he owned along with Manuela Matt.

Matt at one stage shared her apartment with him, but also lost at least $200,000 of her investment, court documents show.

"He did say that he took very good care of his investors, that he treated them like family," Bone said. "He [said he was] true to his investors and he was like a Robin Hood to all of us ... he was going to go forth and prosper and we would all benefit."

Finnigan marketed Financial Partners as a vehicle for potential entrepreneurs to invest money, either by becoming licensees, or by investing directly. Investors were told their stake in property, shares, options and managed funds would generate returns of between 8 per cent and 15 per cent.

They were comforted by documents that their investments were "underwritten" there were even personal guarantees from Finnigan. At no time did any of the companies hold a financial services licence. Finnigan was, in McGuire's words, a "one man band assisted in the backroom by bookkeepers".

Finnigan's star venture was Biotech Solutions Pty Ltd, of which he was the sole director. Dubbed "magic water" by the magistrate Peter Miszalski during Finnigan's committal hearing, it was spruiked as a revolutionary product, which could be used in everything from stopping legionella in water cooling towers to purifying gold.

Finnigan told investors he was putting their money into Biotech shares. "It seems without exception they were all told once the technology had been finalised, the company intended to list publicly on the stock exchange ... at which time their investment would increase tenfold," McGuire said.

One investor, Philippe Perez, was told his $100,000 had bought 5000 shares at $20 each.

"ASIC have made some inquiries to determine that his registered shareholding shows it's worth $5 for 5000 shares - that is at 1? per share," McGuire said.

Some witnesses told the court they had refinanced mortgages on their homes, organised by Finnigan, who had become their mortgage broker. This ended in disaster for investors - repayments due from interest income were not made, and some lost their homes when banks foreclosed - but for Finnigan, brokerage was yet another income stream.

The lawyer Paul O'Prey, who with Finnigan set up the company structure for Financial Partners and was a director before he left in April 2003, said the trailing and initial commissions from loan and insurance transactions from Financial Partners were not huge. However, there was a strong income stream from these commissions in Queensland, where Finnigan had other business interests, O'Prey said.

Initially charged with 14 offences covering $2.3 million, Finnigan pleaded guilty to nine charges of dishonest conduct involving investor funds of more than $1.8 million. Each charge carries a maximum term of five years jail, a $220,000 fine, or both. Finnigan is due to face the NSW District Court on December 2 for sentencing.