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.

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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.


So you want to Sue someone, do you?

July 25, 2008

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 sound to 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.


Blue Chip in government hot water since 2005

July 23, 2008

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.


Legal Aid used to fund franchise lawsuits

July 23, 2008

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.

Sue the enablers: lawyers, appraisers

July 9, 2008

Good news for the thousands of Kiwi real estate investors who have lost +$80 million from a tanked franchise system.

I like it. I like it a lot.

Sue the practicing attorneys with the greatest legal duty and insurance rather than the smarter, former one who is in Oz now.

  • Want to pretend fulfilling your fiduciary duty to a client?

Okay.

  • Let’s e-publish a list of the defending solictors and their law firms.

Auckland law firm Ellis Law is trying to take legal action against the lawyers and appraisers who helped convince senior citizens to sign up for some very high risk, fuzzy logic investments.

Ellis Law principal Brian Ellis said there were a number of concerns surrounding the solicitors’ actions, including:

  • The size of the deposits investors were required to make.
  • The immediate release of investors’ deposits.
  • The lack of explanation in the documentation about who actually owned the property and who was developing it.

But some things stay the Same: And what is the government doing when asked by Ellis and Paul Dale to help centralize and co-ordinate claims?

Other than acknowledging the lawyers’ request the Government has not yet responded.

There is still lots of work to do.

Ellis said many affected Blue Chip investors could not afford the $2000 retainer the lawyers were charging. “We think there’s a large number who have done nothing.”

He knew of people in their 70s and 80s who had no idea what to do, and who were struggling to even write a straightforward narrative of their situation.

Anyone that waits for any western government to help out when the inevitable and predictable fraud sausage blows up, is a damn fool.


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