The company claimed to have marketing rights to use the names and logos of the MCC and Lords Cricket Ground on a range of whiskies and gins.
He said he worked without pay for a year setting up the company but had no input into its overall financial management and believed it had a bright future.
The company, which was called Specialist Packaging Solutions (SPS) or CMS Drinks, folded in 2012 and a group of seven investors from north, mid and east Devon lost all their money.
Lee, aged 49, of Merton in Devon, denies five counts of fraud and three of contravening regulations which control financial services.
Lee Chapman is the brother of the company’s founder and managing director Mark Chapman, who changed his plea and admitted fraud at the end of the second week of his trial at Exeter Crown Court.
Mark, aged 51, of Twyford in Berkshire, admitted dishonestly misusing company funds.
The prosecution say he bought a Range Rover Sport, a Porsche Boxster, and a Mini Cooper for himself or his family out of money invested in the venture.
His brother Lee is still on trial and told the jury his role in the company was restricted to organising the outsourcing of production of Lords branded spirits and suncream.
The prosecution say he deceived pensioners Gwendoline Snell, Gertrude Hill, and Victoria Ford into investing a total of £112,281 into SPS by telling them it was a business investment.
They say he also broke regulations preventing unregistered people from offering financial advice.
Financial adviser Marc Payne, aged 43, of Higher Hearson in Swimbridge, North Devon, has also denied one count of fraud and four of carrying on a regulated financial activity without authorisation.
The allegations against all three men relate to a period between January 2007 and August 2012.
The alleged victims and the amounts invested are Graham Knight, from Reading, £291,000; Gwendoline Snell, aged 85, of Westward Ho, £17,721.80; Gertrude Hill, aged 92, £54,500; her daughter Victoria Ford, aged 70, both from Torrington, £40,000; Richard Biss, aged 91, of Stoodleigh, Tiverton, £29.919.83; Valerie Addicott, aged 83, of Exeter, £50,000; Elizabeth Gage, aged 84, of Woodbury, £50,000; and William Maynard, aged 83, of Witheridge, £50,000.
Lee Chapman told the jury he did not play any part in the negotiations with the MCC and did not know they had cancelled the contract because they were not paid any royalties.
He said he knew Mrs Snell, Mrs Hill and Mrs Ford from his former job as a financial adviser for the Prudential but he left the job in February 2006 and kept in touch with them as friends. He said he joined his brother’s firm SPS as a director as soon as he left the Prudential and worked from home in North Devon, rarely visiting its offices in Reading.
Lee explained he was not acting as a financial adviser when the three investors put their money into the business and had an honest belief at the time that it was destined to be a successful enterprise.
“When I started working with my brother I was looking for a change. I wanted something completely different. It seemed like a very good opportunity to me,” he stated. “Of course I thought the business would succeed. I would not have done it at all if I did not. I thought the company was doing extremely well and doing quite a lot of different products.”
He said he had not been acting as a financial adviser when he visited Gertrude Hill and her daughter and they put money into the company voluntarily. “They knew what I was doing with the company and I said we needed some extra money or whatever and I was saying if that was okay.
“I thought it was a good investment and I had put my money into it,” said Lee. “I thought it was a good investment for anyone. I explained it was a business and asked if they were happy to put money in.
“I said there was no guarantee but I thought it was going to do really well.”
Mark said he was not authorised to sign cheques and went for months without any salary because he thought it more important to grow the business. He said it led to financial hardship and the eventual repossession of his former home in Torrington.
He explained his signature on VAT documents and forms sent to the company accountants by saying he would be asked as a director to sign things if he happened to be in the office when his brother was away.
Mr Payne also denied defrauding four elderly customers and told a jury he was also the victim of the alleged investment scam, saying he invested £50,000 of his own money into a drinks firm because he was assured it had a marketing contract to use the names of the MCC and Lords Cricket Ground.
He advised four clients to put money into the venture because the firm called SPS produced financial projections which claimed it had major contracts with supermarkets and a forecast turnover of £6m.
Mr Payne is a former investment adviser with the Portman Building Society and was a partner in a firm called St James Place Wealth Management when he made the investments in 2008 and 2009.
He denies breaking financial services regulations because he provided the four investors with letters which made it clear the money they put into SPS was a private arrangement which had nothing to do with the firm and was outside the ambit on the regulatory system.
Mr Payne told the jury he knew Lee Chapman because they had worked together at the Portman in the past and he had been impressed by what he was told about SPS.
He said both he and clients who invested were impressed by the cricket connection and he was taken in by a document which came from the company and outlined a bright future.
He said he invested £50,000 of his own money in return for a 10 per cent share but believed the company was growing so fast that when he urged his clients to do so they only received a 5 per cent share for the same outlay.
He said he provided customers Richard Biss, Valerie Addicott, William Maynard and Elizabeth Gage with letters which identified the SPS investment as high risk and not covered by the Financial Services Authority’s compensation scheme.
He said he also made it plain the deal had nothing to do with his position at St James Place and that he was acting in a purely private capacity. “When I spoke to them I thought it was all going to plan. I made it plain this was something I was doing off by own back and was not covered by the FSA.
“I wanted to make it crystal clear to them that what they were investing in was nothing to do with St James’ Place and it was not a product approved by them. It was something I had looked at personally and invested in personally and nothing to do with my position as a partner.
“I was given the impression by SPS everything was going well and at one point they said they were not even sure if they needed more investment. The cricket connection was what attracted them, the same as myself.
“It was a big thing going for SPS. That was the big drawer. It was a big deal. I did not know they had lost the Lords contract. I only found out about that when the police became involved.
“I would absolutely not have advised any investment if I knew they had lost the contract.”
Mr Payne said he was taken in by literature sent to him by Mark Chapman which promised large profits and spoke of deals with companies including United Breweries, Netto, Tesco and Bookers.
The trial continues.
