High-risk 36% per annum return promises turn to dust as former Selection One directors sentenced to jail

Selection One Finance Pty Ltd’s former directors, Ronald David Williams, 46, and Gary David Maile, 64, have been sentenced to four years and three months imprisonment with a non-parole period of 16 months, after pleading guilty to breaches of director duties.

Their company, Selection One, advertised big win investment solutions, borrowing funds from investors for 12 months at an interest rate of 3% per month or 36% per annum.

However, both men pleaded guilty to failing to exercise their powers and discharge their duties as company directors in good faith in the best interests of the company. This failure was said to be intentionally dishonest.

These funds were then supposed to be used to fund short-term mortgages at high interest rates – to the tune of 6% per month, according to ASIC, which would have made these high returns feasible. However, a small number of these funds was on-lent to borrowers compared to the funds received. This meant that Selection One needed to raise more investor funds to pay its previous investors the promised return.

They did not disclose to new or existing investors the poor performance that the company was seeing, and neither of the directors took steps to change the high-risk business model. In fact, investors were encouraged further until the company was placed in voluntary administration on 3 March 2009.

Debts totalled $20,915,330 to 88 investors.

ASIC commissioner Greg Tanzer said that the jailing of Williams and Maile should send a clear message to company directors who act dishonestly.

“The investing public is entitled to expect that company directors are acting in their interests. ASIC will act to ensure that blatant breaches of directors' duties are pursued in the courts,” Tanzer said.

Some Selection One investors have reportedly lost their homes as a result of investing in the company.