Blue Chip was set up as a franchise by Mark Bryers.
Business format franchising is very useful in insulating owners from liability. One type of liability is when people, downstream, sue the corporation because of its alleged fraudulent dealings. Bryers set up +160 companies.
Not many kiwi real estate investors are smiling as much as Bryers, a disbarred lawyer left, appears to be these days while biding his time in sunny Australia.
Criminal charges have been laid against Blue Chip co-founder Mark Bryers for his part in the property company’s $80 million collapse.
More than 100 charges have been laid against Bryers for alleged breaches of the Companies Act.
They follow a six-month inquiry ordered by the Registrar of Companies.
Bryers is living in Sydney, Australia running a similar type of real estate company. The Serious Fraud Office and Commerce Commission are also investigating.
To Recap:
More than 2,000 investors are out of pocket after 22 Blue Chip-related companies owing more than $80 million were put into liquidation last year.
Many investors are retired and face losing their homes.
About the only person working to try to recover any investor money is…
Paul Dale, an Auckland lawyer acting for many of the investors, said he was not surprised charges had been laid.
He welcomed the prosecution, but called on the Government to bail out those who stood to lose everything because of the Blue Chip collapse.
In a related story called Mark Bryers still gets rent cash, Rebecca Milne quotes a 67 year-old who as saying it’s too late for her and her 72 year-old husband:
“We’ve been to the doctor more in the last 12 months than we’ve ever been in our lives. We’re just so stressed about it all.
“We’ve already sold our home. We’re in a one-bedroom council flat. That’s all we’ve got.”
The New Zealand government has yet to explain how such a large-scale fraud could occur, let alone take steps to prevent it in the future.
…Bridgecorp staff were told to lie to investors who complained about late interest payments by blaming a bank error or computer glitch.
It says the finance company was so short of money that in April 2007, three months before it collapsed, it had only $45,000 available to meet $2 million in payments due to investors.
Also:
The Securities Commission alleges the Nathans Finance directors signed untrue statements saying the company had no bad debts, had adequate liquidity, that its lending was diversified, and that it made loans in accordance with robust policies.
It says they misled investors over Nathans’ lending to its parent company, vending machine operator VTL which is also now in receivership.
Names and Potential Outcomes
Bridgecorp: Former executive director Rod Petricevic and director Rob Roest already face five criminal charges, and now also face civil proceedings. Chairman Bruce Davidson and non-executive directors Gary Urwin and Peter Steigrad are now charged alongside Petricevic and Roest. Bridgecorp owes $459 million to 14,300 investors; they could get back as little as 13c in the dollar. Bridgecorp Investments owes $29 million which is unlikely to be recovered.
Nathans Finance: Directors John Hotchin, Donald Young and Kenneth Moses face criminal and civil proceedings. A fourth Nathans director believed to be living in Australia is also charged. Nathans Finance owes $174 million to 7000 investors; less than 10 per cent is expected to be recovered.
Penalties: Up to five years in jail or fines of up to $300,000 if convicted of criminal charges. $500,000 each in compensation payments.
Mrs. Gwendoline Harrison, a New Zealand pensioner was served with legal papers at her bedside this week. It involves the collection of a $300,000 mortgage that the franchise company, Blue Chip, sold her.
Bridgecorp directors Rod Petricevic (left) and Rob Roest are in the photo above, care of Richard Robinson.
It seems Mr. Bryers’ legal alternatives seem to be narrowing.
The New Zealand Herald reported this weekend:
Blue Chip co-founder Mark Bryers did not enter pleas when he appeared in the Auckland District Court yesterday on seven charges laid by the Companies Office.
He was bailed to an exclusive apartment in Sydney and is due to reappear in court in February.
Let’s hope that the bewildered mom-and-pop Blue Chip investors can take a moment and have something of a Merry Christmas. Wanna bet this bird remains unstuffed in 2009?
About 100 franchisees are seeking financial assistance to help them bring Green Acres to court – which is estimated to cost about $140,000 – after Commerce Minister Lianne Dalziel said at a meeting on Sunday that it had “declined all the demands for compensation” and claimed Keith Lapham was an independent business owner, and not one of its employees.
There was no immediate indication that aid would be forthcoming although the Minister meeting with the former franchisees is a good sign.
Ms Dalziel said the Serious Fraud Office, which is investigating the case, would be completing its investigations soon, and a decision on whether to press charges was about two weeks away.
These actions also involve a request to the lender to void their loan obligations:
Lawyers for the defrauded franchisees issued a letter of demand to Green Acres asking for the return of the money paid to Mr Lapham, and for loans for the purchases of the bogus businesses made through the company’s financing arm, FBL Finance, to be nullified.
Mr. Tyrone Pilacan, an immigrant from the Philippines, is quoted as saying he had recently lost his job and was struggling to meet the $800 monthly repayment to the bank.
An interesting story on the true value of a franchise.
From a strictly financial perspective, most franchises have a negative net present value (ie. they actually produce a decrease in capital rather than an increase).
Investors are for the most part, very very inaccurate in their appraisal of franchise offerings. They are successfully encouraged to deceive themselves.
Hell has been torture for Matt Blomfield – so he’s auctioning his $830,000 Auckland store for a $1 reserve.
Mr Blomfield, a Hell Pizza franchisee, is so fed up with the New Zealand owner TPF Group’s handling of the business that he’s willing to take a loss selling up his five stores.
“I just want to get the business sold, pay all the bills and move on with my life.”
The reporter Errol Kiong goes on to mention:
The Herald has also sighted emails from franchisees complaining of the lack of support from TPF, the high cost of ingredients – which they can only purchase from TPF’s own supply and distribution operation – and what they say is unsatisfactory marketing.
Ineffective marketing, lack of support and franchisors gouging franchisees on supplies are very, very common problems cited around the world.
One, it points to a specific truth about fraud: all levels of class, education, access to financial counselling and sophistication are vulnerable:
2,000 mostly seniors living on a fixed income and a millionaire British investment banker (Blue Chip) or
dozens of barely literate Indian and Chinese arrivals with Green Acres and Green Power franchises.
Quickly:
A British investment banker who came to New Zealand for a better lifestyle invested $1.7 million in 19 apartments through Blue Chip. Now Neil and Michelle Hickman are pinning their hopes on court action to recover some of their losses.
Mr Hickman gave up his career as a successful investment banker and moved his family to New Zealand two years ago, intending to live off his wealth.
Two, immigrants are considered prime protein by some franchise systems. New arrivals who invest large sums are often given special treatment [some expected; some not].
Several franchisors aggressively market their systems overseas to potential new immigrants using their government’s investor programs as a proven successful fraud technique: a badge of authority.
And three, for perhaps the most understated comment to date from a deeply betrayed person whose wife and three children are living in rented quarters while he goes back to work in Britain to make ends meet:
Team A: This is a picture of Jeff Meltzer of Meltzer Mason Heath, New Zealand.
A Mr. Aaron Heath says that after six months investigation, it is still too early to know what to write in their promised reports. Hmmm.
This is not a trivial little financial bubble involving a tiny franchise system tanking.
Blue Chip and its founder and Oz resident Mark Bryers have caused 2,000 Mom and Pop Kiwis to lose over $80 million as 20 related companies went buns up kneeling.
It appears the liquidator’s actions and sense of urgency have the full support of Commerce Minister Lianne Dalziel and the Clark government.
Two lawyers acting for more than 300 Blue Chip investors say they are aghast at the scale of the task and are angry about what they say is a distinct lack of Government aid for investors.
Specifically, how helpful have the liquidators been in assisting the the two lawyers (Paul Dale and Daniel Grove) in trying to defend the 2,000 citizens?
Grove says his firm has been greeted only with hostility from the liquidators so far. “We requested a document and were told we needed a court order.”
Illustratively, it is these two barristers that are:
Issuing proceedings against two Auckland lawyers – whom the barristers refused to identify – for professional negligence over advice to clients who became Blue Chip investors.
The two lawyers are doing this: notthe liquidators or the Government.
You Decide: Is it Team A or Team B that appears to be putting on a cheesy puppet play?
Before you rush to sign up, buy this movie. And then buy the book. A Civil Action is perhaps the most accurate portrayal of civil litigation. Ever.
You’ll have to do what you can do but it has many excellent lessons. Understanding the economics of a lawsuit drives the outcome much more than the facts.
Out of the pan and into the fire…
A good article from The New Zealand Herald about the building feeding frenzy to assign Blue Chip legal responsibility. It appears the range and numbers of professionals potentially liable is growing.
Maria Slade reports:
Grimshaw & Co is joining a growing bandwagon of lawyers and burnt investors seeking to make professionals liable over the advice they gave.
A range of professionals are in the lawyers’ sights, from financial advisers and solicitors, to valuers, auditors and corporate trustees.
Further,
North Shore lawyer Andrew Hooker has reviewed the cases of around 160 investors who have lost money in finance companies, and believes at least half of them have grounds for taking action against their financial advisers.
“The scale of advice would go from soundto slightly questionable, to absolutely disgraceful. And there are a significant amount of people in my view at the absolutely disgraceful end.”
Many were put into the same six finance companies – Bridgecorp, Capital + Merchant, OPI Pacific Finance, MFS Boston, St Laurence and Property Finance.
Pay careful attention to Robert Duvall and Sidney Pollack roles in the movie.
Another in a series of terrific articles by The New Zealand Herald on the Blue Chip mess.
This time, it seems the government was fiddling while Blue Chip investors’ money was burning.
Maria Slade reports today that two brief cases of original documents were handed over to property consultant Olly Newland [left] who has been helping the victims and the Serious Fraud Office.
It appears the Inland Revenue Department was pressuring the Blue Chip group of companies for income tax payable in 2005.
The documents – 40 or 50 files in their original folders – reveal that the Blue Chip property investment group was being pressured by Inland Revenue over hundreds of thousands of dollars in unpaid tax as far back as 2005.
The group did not fall over until early this year, when 22 of its companies were placed in liquidation owing around $84 million.
So a government agency was having a tough time with Blue Chip company 2 to 3 years before the whistle was blown? I wonder how many people got burned after the government knew or should have known there was a public risk?
Every public servant [civil servants, Oath of Allegiance, Parliamentary Oath & Executive Councillor] swears an Oath of Office to serve Her Majesty Queen Elizabeth the Second.
Presumably, QEII would frown on enabling a theft of $84 million from 2,000 of her loyal subjects [many of whom were old enough to remember her coronation].
Somebody knew something. They reported their suspicions properly. Somebody else did nothing because it would have been embarrassing politically to pull the plug, even though that was their duty to do so.
Some of the two thousand Kiwi were sold down the river to avoid a political scandal. The Blue Chip fiasco was not an accident: This was perfectly predictable and made worse by government inaction. The scammers had some very good friends in high places, I think.
For example, Simnel Ltd – a company associated with Blue Chip founder Mark Bryers – was under pressure to pay a tax bill of $226,806.
As Newland said:
“It was all happening long before the whistle was blown.”
Note: It is my experience that federal public servants are meticulous in documenting that they had informed their political masters about a likely tax loss. They know their duty and they knew there was a vulnerability [public hazard]in failing to regulate non-bank lenders.
There exists a paper trail from the Blue Chip tax problem into the political elite. Unless I miss my guess, all roads lead to the office of the Prime Minister of New Zealand.
Now here are a couple of novel ideas from New Zealand.
Maria Slade at the ever-vigilant New Zealand Herald reports today that the 2,000 investors who have lost over $84-million in the Blue Chip franchise collapse are being encouraged to apply for legal aid to finance their attempts at getting thier money back.
Commerce Minister Lianne Dalziel says she is:
interested in helping Blue Chip investors find ways and means to access legal advice, particularly in this case where lack of funding is a barrier to legal recourse.
This is a first: I have never seen a publicly funded legal aid program used to fund a franchise legal action.
Not that surprising that the New Zealand government doesn’t want to touch the Blue Chip mess with a 10 foot pole. It’d raise too many questions about lax commercial regulation, I’d imagine.
Something about creating a very friendly feeding ground for massive consumer fraud, targeting Kiwi senior citizens.
International financial market laughingstock? Or some other alarmist conclusions.
The second is that the the lawyers and valuation firms are being scrutinized for their professional competence.
Law firm Ellis Law, together with barristers Paul Dale and Daniel Grove, are acting on behalf of several hundred of them. Activity includes taking legal action against solicitors over allegedly negligent advice they gave on the investments.
Valuers who provided allegedly inflated valuations on properties sold through the Blue Chip scheme are also in the lawyers’ sights.
But we’re missing a key ingredient to the Blue Chip fraud sausage: The lenders. Where are they in this fiasco? The last time I checked, there should be some type of regulation or lapdog self-regulation to cover these lenders.
Could it be the government is handing over the heads of the small fries [no-name lawyers and valuators] to avoid looking responsible for not regulating lenders sufficiently?
The Kiwi government knew or would have been reasonably been expected to know that lax or no lending regulations causes loss.
When the chickens come home to roost, the government blames everyone except themselves.
This fraud would have been impossible without a source of funds. I suspect the government was asleep at the switch as $ millions fed this humongous scam.
Remember: Sue the SOBs with insurance, when you don’t have the cojones to sue the government and Her Majesty’s ministers.
Blue Chip was set up as a franchise by Mark Bryers.
Posted by Les Stewart 
Executives from 2 failed New Zealand finance companies are being charged with criminal offenses.
It seems Mr. Bryers’ legal alternatives seem to be narrowing.
The latest New Zealand Herald article on Blue Chip by Maria Slade [
