Legal Aid used to fund franchise lawsuits

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.

  1. Remember: Sue the SOBs with insurance, when you don’t have the cojones to sue the government and Her Majesty’s ministers.
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