Westpac bank advances $10m, not $10,000. Oddly, NZ now short 2 BP franchisees

May 21, 2009

BPNZYou have to have some sympathy for the banker.

But not much when you know their full involvement in financing franchises in New Zealand in the last couple of years.

The New Zealand Herald reports today on a service station franchisee couple taking it on the lamb, Runaway millionaires named – may have fled to Asia:

Interpol is leading a worldwide hunt for the Rotorua couple who have fled with millions of dollars worth of Westpac’s money.

The couple, who ran Rotorua’s BP Barnetts service station on Old Taupo Road, are Leo Gao and Australian girlfriend Cara Young.

They are understood to have applied to Westpac Bank for a $10,000 overdraft and mistakenly had $10 million paid into their account.

All legality and morality aside, you have to stop and think “What Would I Do” in this situation? Pretty easy to be sanctimonious when you’ve never been tempted to am-scray.

As usual the most interesting bits are from experienced police officers:

Detective Senior Sergeant David Harvey held a media conference in Rotorua this afternoon, but would not confirm any speculation. When asked where police believed the money had gone, he simply replied “overseas”, before refusing to answer any further questions.

$6-million: That’s simply amateur hour when compared to professional thievery such as Blue Chip. The Austrialia-based bank stands to lose big-time if the investors’ lawyer can convince New Zealand courts that the contracts are either unenforceable or void.

Westpac is frequently mentioned as the money behind the Blue Chip fiasco. the latest article is Westpac embroiled in New Zealand property fall-out.

Auckland barrister Paul Dale is launching a High Court challenge on behalf of more than 250 investors. Dale says his clients’ contracts are illegal for a number of reasons including that they breached the country’s Securities Act and Fair Trading Act.

If Dale is successful and the contracts are thrown out the developers will be left with a glut of apartments unsold and unrented, with price tags well below what they originally sold for. Standing behind the developers is Westpac. The Australian bank has been a major player in the New Zealand property market and has financed a number of developers that did business with Blue Chip.

Thank God for Paul Dale because from what I have seen the New Zealand government has done nothing to help the victims of Mark Bryers’ +80 million franchise fraud.


No franchise law: New Zealand as a Tier 2 economy

February 2, 2009

greenacreslogo1Humans have evolved a large brain to help in our survival.

It does a very good job but sometimes  it get tricked up in seemingly simple differences.

One of these is the difference between the words rent and own.

  • You rent a franchise.
  • You own a non-franchised business.

Understand? You own no thing/nothing when you rent a logo. Don’t look for equity: It does not exist in franchising.

Modern franchise law defines two terms:

  1. A franchisee is the end consumer or licensee.
  2. A franchisor is the owner and any of his “associates” (sub-contractor, selling agent, etc.)

Franchise law defines what a franchisor is very widely and a franchisee very narrowly for a very good reason: franchisors will try to wiggle out of their responsibilities by pointing to someone else in the selling chain when it hits the fan.

They are as bi-polar as U.S. bankers: laissez-faire in good times, socialists in bad.

A recent New Zealand Herald article shows this:

Auckland, Feb 2 NZPA – An Auckland man charged with fraudulently obtaining $3.5 million from people he granted Green Acres sub-franchises to, has re-appeared in court.

Keith Lapham faced three fraud charges alleging he obtained money by deception from 172 people while he was a master franchisee for Green Acres from March to December 2007.

Lapham was remanded on bail to a pre-depositions hearing in April when he appeared in Auckland District Court today.

His lawyer Peter Davey said an extra two months was needed to examine more than 30,000 documents disclosed by the Serious Fraud Office.

Lapham was an independent contractor and the Green Acres company was not the subject of any investigation.

There are only two terms: franchisees and franchisors & their associates in any jurisdiction with a half-assed franchise-specific law. Can’t really fault the Herald:

New Zealand is a Tier 2 economy in refusing to pass a specific-franchise law.

This government inaction is called enabling consumer fraud.

Questions

  1. Is it any wonder that Mark Bryers, a lawyer, structured the Blue Chip fraud as a franchise?
  2. With lots of people like Mark Bryers, being attracted to franchising, what’s the probability that it’ll happen again?
  3. Is it reasonable for Kiwis to expect more backbone from their government than having Minister Dalziel making her announcements on franchise regulation from the franchisor-only trade shows?

In contrast to almost all of the G20 countries that have a franchise law, it must seem that it’s like shooting fish in a barrel in running a franchise scheme in New Zealand.


kiwi Lenders in jail? There is a Santa Claus.

December 23, 2008

petricevicExecutives from 2 failed New Zealand  finance companies are being charged with criminal offenses.

Maria Slade and The New Zealand Herald report in Criminal charges for 9 finance firm chiefs that the Securities Commission and the Registrar of Companies allege:

…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.

This is a follow up to my May posting called 90 yr old faces losing house over Blue Chip:

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.


Mark Bryers: Blue Chip bird in an AUS Gilded Cage

December 8, 2008

gildedcageIt 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?

See Investors told to pay or lose homes and why all business journalists should be more curious.


Where’s Mark Bryers? With Waldo in AUS, of course.

September 4, 2008

The children’s game, “Where’s Waldo?” was a big hit with my kids a few years back. Here is a link to Waldo Wiki for some fun.

Otherwise, it appears from New Zealand’s One NEWS that the Blue Chip founder is somewhere in Australia (Blue Chip hope sparked by frozen funds).

Hundreds of Blue Chip investors across New Zealand have been given fresh hope that they might be able to recover millions of dollars worth of deposits for apartments they never wanted to buy.

The High Court has frozen funds in solicitors trust accounts until a full hearing takes place later this year…

We’ll wait and see if any cash actually surfaces from freezing the lawyer’s escrow accounts for the 2,000 seniors (mostly) who have lost over $84-million.

It does seem that Mr. Mark Bryers is keeping a pretty low profile these days. It appears that lawyers are having a hard time tracking him down in Australia to serve him with bankruptcy papers.

And what does one of the 2,000 investors [$1-million lost as a condition of re-locating to Britain] have to say about Bryers’s moving to Australia?.

“And now he’s off to Australia to do the same to people over there, I just – unbelievable,” says Blue Chip investor Michelle Hickman.

Altered loan documents, fraud and an agency relationship you say? Mrs. Hickman’s intrepid barrister Paul Dale:

“Certainly on the affidavit evidence we have filed to date, there has been fraud. We have produced examples of altered loan documents,” says Paul Dale the investors’ Barrister…

Dale says he has got powerful evidence of a profit sharing agreement between Greenstone and Blue Chip which would have seen money flow to Mark Bryers when apartment projects like this were completed.

Like I said before [Oz Alert: Shrewd businessmen immigrating], if you bump into Mr. Bryers or Bob Bangerter, let me know.


Sue Big Franchising: franchisor, lawyers, lenders, sales agents, developers

September 2, 2008

Neil Hickman, with wife Michelle and their children Lewis (6) Lauren (11) and Holly (10), moved here from the UK for a better life but have lost their life savings after investment company failures. Photo / Martin Sykes

Good job: Naturally, raise enough doubt to have the contracts set aside as unenforceable because they were based in fraud.

More body parts are washing up on New Zealand’s shoreline in the continuing Blue Chip scandal.

See my post on the family on the left, Kiwi scams touch all classes of immigrants and the New Zealand Herald’s original article, Immigrant banker put $1.7m in Blue Chip).

The Herald says this week:

The investors claim the agreements are unenforceable.

They say Greenstone and the Blue Chip group had an agency relationship, including a profit-share arrangement. They are also taking action against three Blue Chip-recommended lawyers over the advice they gave – Jonathan Mathias, Zeljan Unkovich, and Hamilton firm Foster, Milroy & Turketo.

Okay but Jenni McManus and BusinessDay.co.nz really gets into the details in Blue Chip investors sue their lawyers:

Eight out-of-pocket investors in bankrupt property company Blue Chip are suing their Blue Chip-recommended lawyers for breach of duty for their handling of millions of dollars worth of apartment purchases due to settle within weeks.

They say lawyers Jonathan Mathias, Zeljan Unkovich and the law firm Foster Milroy & Turketo who habitually did Blue Chip work, were recommended to investors for legal advice when buying apartments in the Barclay development in downtown Auckland about two years ago.

The investors claim they were dissuaded from using their own lawyers by Blue Chip, who they say told them its property schemes were complex and their own lawyers might not understand how they worked.

But Mathias, Unkovich and Foster Milroy & Turketo regularly did Blue Chip-related work and knew how the schemes operated, the investors say they were told. Some say Blue Chip threatened not to pay their legal fees unless they used lawyers Blue Chip recommended. Specifically, the plaintiffs allege the lawyers failed to advise them of the implications of the transactions they were signing or to give them any advice about the documentation.

So its the lawyers and franchisor only? No: Here are the lenders, sales agents…

The claim is part of the first significant lawsuit against Blue Chip. Other defendants have been named as Greenstone Barclay Trustees, GE Custodians (a lender), Tasman Mortgages and Executive Mortgages (mortgage brokers) and Blue Chip associate Bribanc (now know as Vault Realty).

Fraud claims have been brought against Tasman and Executive, where it’s alleged one or both fraudulently altered the loan documentation for one investor whose income was misstated, and mortgages were obtained from GE Custodians on the basis of fraudulent conduct.

…but last if not least, the property appraisers.

Described by Dale [Paul Dale, the Hickman’s lawyer] as naive and unsophisticated investors, the Hickmans also relied on a valuation from Blue Chip associate Bribanc Real Estate that they did not even see. Dale is arguing that, as with several plaintiffs’ properties, their apartment was over-valued.

They are seeking an injunction and although I am not a lawyer they appear to have to satisfy a pretty low legal standard:

…all the plaintiffs need prove is that they can mount a credible argument against the developers and Blue Chip.

Whatever happens, there were no aligned interests or a conspiracy to commit fraud. Only a nut-job would ever think such a thing.


Kiwi scams touch all classes of immigrants

August 23, 2008

The latest New Zealand Herald article on Blue Chip by Maria Slade [Immigrant banker put $1.7m in Blue Chip] is interesting for at least three reasons.

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:

“Talk about a bad year,” Mr Hickman said.


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