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.

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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.


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