A former Mayor of Hamilton and a corporate lawyer were among those involved in a conspiracy to defraud Government of $660,000 through a trust set up as a ?front? to allow a non-Bermudian to get a luxury home, a court heard yesterday.

But a lawyer for those named by Police said there was no proof of dishonesty and accused detectives of making sweeping allegations against innocent people.

And the judge hearing the case, Mr. Justice Ian Kawaley, said the trust had been set up in a legal way.

The Police allegations emerged yesterday as law firm Appleby, Spurling and Kempe (ASK), and six individuals sought to quash search warrants issued to detectives last year by Magistrate Edward King.

The search warrants for two offices of ASK, the $3 million home of top tennis player Norberto Herrero, and Sterling Management in Hamilton were issued to fraud detectives.

The Police were investigating the sale of a house ? La Paloma on Harbour Road, Paget ? by former Mayor of Hamilton William Boyle which Police say went to non-Bermudian Mr. Herrero and his wife Kathleen through a trust used as a ?front?.

Police information in support of the application for search warrants read at Supreme Court yesterday, said Mr. Herrero told a Government land valuation officer that he paid Mr. Boyle $100,000 to ?front? for him.

And the information given to Mr. King for the warrant stated the Herreros, Mr. Boyle, ASK lawyer Edward Scott Swainson, and Bruce and Margaret Hern of Sterling Management, who are trustees of Labrador Trust, were involved in a conspiracy to defraud the Government of $660,000 between April 1995 and April 2003.

The $660,000 is the sales tax that would have been paid if the house had been sold to a non-Bermudian.

Delroy Duncan represents the six individuals, while David Kessaram appears for ASK.

Mr. Duncan said the sole beneficiary of the trust was a Bermudian, Townley Peters, who is Mrs. Norrero?s daughter.

Mr. Duncan said the Magistrate who issued the search warrants on the properties did not use the proper parameters to establish if there was reasonable grounds to support the issuing of the warrants.

And he read from an affidavit which stated extra care should have been taken before issuing a search warrant against ASK because it was such a respectable law firm.

Reading out the Police information to the Magistrate, Mr. Duncan quoted it saying: ?It is believed that Norberto Herrero and Kathleen Herrero along with William Boyle, Scott Swainson, Bruce Hern and Margaret Hern conspired with one another to defraud the Bermuda Government of $660,000 in tax by the setting up of a trust in such a way that allowed Norberto Herrero and his wife Kathleen Herrero to have control of the property.

?It was alleged that Mr. Herrero used a Bermudian to front for him to buy a property when all along Mr. Herrero was financing the property.

?Further it was going to be acquired by Mr. Herrero as a non-Bermudian, but he did not agree with the valuation of the house so he did not go through with the purchase, but acquired the house later through a trust set up specifically for the purpose.

?In April 1995, William Boyle purchased the land for $912,000. Mr. Boyle is known to be good friends with Mr. Herrero.

?Between 1995 and 1998 the house was constructed on the property with the Herreros making all the decisions regarding the construction of the house.

?The house was completed in 1998 and in April of that year the Herreros moved in supposedly as tenants.

?In December 1998, Mr. Herrero applied for a licence to acquire the property from William Boyle stating the property was valued at $2,040,000.

?The application was refused by the Government because the property had been undervalued by some $1 million.

?The licence application was subsequently withdrawn because the Government licence tax on the purchase of a property valued at $3 million at 22 percent would be $660,000.

?As the Government land valuation officer had valued the property at $3 million there was no further application by the Herreros to purchase the property.

?In January 2002 the Labrador Trust was set up. In February 2002, Scott Swainson of ASK applied to the Ministry of Finance for its consent to allow Liberty Assets Limited to loan the Labrador Trust a sum of money to purchase La Paloma. Norberto Herrero is CEO of Liberty Assets Ltd.

?On 22 April, 44 Harbour Road was conveyed to Mr. and Mrs. Hern as trustees of the Labrador Trust for the sum of $2.8 million.

?As the trust is set up with Bermudian beneficiaries no government tax was payable. It is my information that Mr. and Mrs. Herrero have resided at La Paloma from the time the house was built and still reside there.

?Its my information that Roberto and Kathleen Herrero have had control of the property since it was conveyed from Kevin Petty in 1995.

?Norberto Herrero has made it known to the land valuation officer that he paid William Boyle $100,000 for fronting for him.

?The Herreros were instrumental in the building and furnishing of La Paloma and that the Labrador Trust is simply a vehicle for the Hererros to own the property.?

Mr. Duncan said: ?The allegation (in the information) should have set out what act of dishonesty was done in the creation of the trust that defrauded the Government.

?It is alleged the trust is the vehicle used to defraud the Government. At the very least, the information should have said something about the dishonesty in the creation of the trust so the magistrate could see what alleged to be the defrauding act.

?There was no such reference and we say that was a huge defective hole. They should have said the trust was created by fraudulent means.?

Mr. Justice Kawaley said: ?It would be impossible for them to plead anything that would support dishonesty because the trust was set up in a legally valid way.?

Mr. Duncan added: ?You cannot make sweeping allegations against innocent people ex-parte (in the absence of the other side) then say there might be something.

?That is not a permissable way to invade someone?s privacy.?

No one has been charged with any offences in relation to the investigation.

Director of Public Prosecutions Kulandra Ratneser is representing the Police with Solicitor General Wilhelm Bourne appearing for Mr. King.

The case continues today.