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.

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Oz Alert: Shrewd businessmen immigrating

May 22, 2008

If you happen to bump into Bob Bangerter (left) or his fellow Blue Chip founder Mark Bryers (below) say hello for me.

I take Bob at his word: He is not, as some media outlets portray him, a rich old fiddler.

As far as the former lawyer Bob Bryers is concerned, a conviction for drunk driving (see Blue Chip’ Bryers blows the bag) and a divorce (see Blue Chip investors’ hopes fade) don’t seem to be slowing him down a bit.

It appears that Bryers is back in the real estate/franchising saddle but this time working full-time in Sydney, AU after becoming less popular in New Zealand (2,000 unhappy investors, $80-million losses).

Sydney property investment company Barkley Walsh says it is a subsidiary of ASX-listed Northern Crest Investments. Northern Crest was previously called Blue Chip Financial Solutions and is the parent company of many of the Blue Chip-related companies in liquidation in this country. Trading in its shares has been suspended since February.

To understand how franchising can be used to market over-priced assets AND dodge tiresome old real estate regulations, I recommend a very instructive article on http://www.stuff.co.nz called The Blue Chip Scandal: the valuations process.

Perfectly legal, I assure you.

Meanwhile back at the scene of the non-crime, the NZ Commerce Minister (a lawyer) continues to demean her office by publicly begging bottom-feeding finance companies to not collect on their perfectly legal Blue Chip mortgages.

This time on national radio.

BTW:

  1. Businesspeople will do what they can get away with to make a buck. That’s their job. If they don’t, they deserve to be fired.
  2. Everything is legal unless there is a specific statute to say it is illegal.
  3. The politicians’ job is to make sure legislation and enforcement are there so thousands are not impoverished by “aggressive capitalists”.

Don’t blame a leopard for having spots (see #1), fall for any excuse du jour why laws were castrated (see #2) or be confused as to the duty of this cabinet to its electorate (see #3).

This isn’t complicated, folks: A franchisor corporation is created. They recruit unsuspecting franchisees who are the only ones legally responsible for selling into a real estate bubble. The franchise system takes in the money and rapidly moves it to a related company. The franchise system (mask) is then killed off to sever legal liability to the principals and the cash.

SOP (standard operating procedure) in franchising, all around the world.


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