Why is Mark Bryers, former franchisor & attorney smiling?

Because he knows white-collar laws are a farce.

Under Kiwi law, there is insufficient evidence for the Serious Fraud Office, SFO to press criminal charges although 3,000 New Zealanders have lost $80 million of their life savings via the Blue Chip franchise system.

1. Blue Chip escapes SFO noose
2. Shock as SFO decides not to lay Blue Chip charges
3. SFO says insufficient evidence for a criminal prosecution of Blue Chip

Bryers was sentenced in May for over 1oo commercial offenses for which he pleaded guilty. The sentence?: 75 hours of community work and a $37,500 fine. (Blue Chip boss sentenced – but avoids jail)

Not too surprising when governments treat a law enforcement agency as a political sacrificial lamb.

Ray Borradale from Australia notes on yesterday’s FranchiseFool post:

… I do like New Zealand’s approach to franchising.

Nothing complicated – don’t even tell anyone its buyer beware and then keep the location of the mass grave a secret. Economic efficiency and the grace to not worry people before its time to send them to that other place. Bewdiful …

Unmarked economic mass graves.

Plague victims on Venice island

What Mark Bryers did was substantially the same as every franchise system does frequently/sometimes/selectively does. Bryers ambition was larger and his time frame was shorter. That’s the only difference.

I quote Ray because Bryers is now Australia’s responsibility.

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Franchisor faces 100 criminal charges

Blue Chip was set up as a franchise by Mark Bryers.

Business format franchising is very useful in insulating owners from liability. One type of liability is when people, downstream, sue the corporation because of its alleged fraudulent dealings. Bryers set up +160 companies.

• Not many kiwi real estate investors are smiling as much as  Bryers, a disbarred lawyer left, appears to be these days while biding his time in sunny Australia.

The New Zealand Herald and Jared Savage report on the latest attempts to bring Bryers to justice (Blue Chip founder faces 100 charges).

Criminal charges have been laid against Blue Chip co-founder Mark Bryers for his part in the property company’s $80 million collapse.

More than 100 charges have been laid against Bryers for alleged breaches of the Companies Act.

They follow a six-month inquiry ordered by the Registrar of Companies.

Bryers is living in Sydney, Australia running a similar type of real estate company. The Serious Fraud Office and Commerce Commission are also investigating.

To Recap:

More than 2,000 investors are out of pocket after 22 Blue Chip-related companies owing more than $80 million were put into liquidation last year.

Many investors are retired and face losing their homes.

About the only person working to try to recover any investor money is…

Paul Dale, an Auckland lawyer acting for many of the investors, said he was not surprised charges had been laid.

He welcomed the prosecution, but called on the Government to bail out those who stood to lose everything because of the Blue Chip collapse.

In a related story called Mark Bryers still gets rent cash, Rebecca Milne quotes a  67 year-old who as saying it’s too late for her and her 72 year-old husband:

“We’ve been to the doctor more in the last 12 months than we’ve ever been in our lives. We’re just so stressed about it all.

“We’ve already sold our home. We’re in a one-bedroom council flat. That’s all we’ve got.”

The New Zealand government has yet to explain how such a large-scale fraud could occur, let alone take steps to prevent it in the future.

kiwi Lenders in jail? There is a Santa Claus.

Executives 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.

100 NZ Green Acres franchisees want Government help

In another New Zealand Herald article by Lincoln Tan (Victims of scam want Government help) the aggrieved former franchisees:

About 100 franchisees are seeking financial assistance to help them bring Green Acres to court – which is estimated to cost about $140,000 – after Commerce Minister Lianne Dalziel said at a meeting on Sunday that it had “declined all the demands for compensation” and claimed Keith Lapham was an independent business owner, and not one of its employees.

There was no immediate indication that aid would be forthcoming although the Minister meeting with the former franchisees is a good sign.

Ms Dalziel said the Serious Fraud Office, which is investigating the case, would be completing its investigations soon, and a decision on whether to press charges was about two weeks away.

These actions also involve a request to the lender to void their loan obligations:

Lawyers for the defrauded franchisees issued a letter of demand to Green Acres asking for the return of the money paid to Mr Lapham, and for loans for the purchases of the bogus businesses made through the company’s financing arm, FBL Finance, to be nullified.

Mr. Tyrone Pilacan, an immigrant from the Philippines, is quoted as saying he had recently lost his job and was struggling to meet the $800 monthly repayment to the bank.

Blue Chip in government hot water since 2005

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.

Bankers squeeze while the coppers ponder

In a recent New Zealand story, it seems the people who own both the Green Acres system and the bank that loaned into a +200 victim ($5-million) scam want the losers to make a decision:

…sign a “rescue package” or warned that the company would commence proceedings to get back the $25,000 its financial arm, FBL Finance, had paid on his behalf to former area manager Keith Lapham.

Another bank seems to also say one thing and do another:

…Finance Now Ltd, also issued a final notice to about 30 Green Acres franchisees as it too sought repayments for about $150,000.

In franchising, it is not uncommon for banks and franchisors to work very closely; Even including unauthorized withdraws from business accounts.

“The company had taken one instalment out from my account for $700 to pay the loan and I immediately had to cancel that bank account so they cannot continue to take out any more.”

He has written to Green Acres asking for the amount to be refunded, but said he had not had a response.

Meanwhile, since Dec 2008, the police have been doing exactly what about the missing cash?

Yesterday, Serious Fraud Office chief executive Grant Liddell told the Herald that investigations into the Green Acres case were ongoing and that a decision had yet to be reached of whether any charges would be laid [my emphasis].