Clear Asset Value of $10 million, You Say?
I Think "Flak Flies" Means a Lot of People Got REALLY Mad...
If you want a guarantee, buy a toaster.
- Clint Eastwood
Flak Flies over Flat Rock Trust Collapse
by Chris Hutching
Wellington investment manager Donald Simcock this week defended himself against accusations from investors in the Flat Rock Trust to which receivers were called a couple of weeks ago by Countrywide Bank. Two US emigres, Jeff and Ruth Hatch, targeted Mr Simcock and business partner Stephen Reidy for steering them into the Flat Rock Trust in 1993. Messrs Reidy and Simcock founded a company called NZEB (formerly New Zealand Enterprise Board Limited).
NZEB owned the manager of Flat Rock Trust, New Zealand Trade and investment Corporation. Messrs Simcock and Reidy were also directors of the management company and promoted Flat Rock Trust. This week Mr Simcock said there was no conflict of interest in any dealings with Flat Rock investors. He and the management company had also lost considerable money and had been assisting the trust at their expense over the past 18 months when it struck financial trouble. However, disgruntled investor Ruth Hatch claims she believed the trust was a quasi-government investment and she and her husband were keen to appear to be following the necessary advice they received in order to obtain residency in the early 1990s.
The March 1993 Flat Rock prospectus No 2 states: "NZEB evolved from the activities of the Wellington Regional Enterprise Board which was founded in 1987 by central govemment, local govemment in the Wellington region, and the private sector through the Chamber of Commerce." According to Mrs Hatch, she and her husband were referred by the Wellington Chamber of Commerce to the NZEB which was described to them as an immigration specialist (Mr Reidy is a past president of the chamber). At that time they dealt with Mr Reidy and were offered the investment in Flat Rock as well as subsequent immigrant assistence. NZEB presented a special case to the minister at the time.
The Hatches placed $500,000 with Fiat Rock Trust but Mrs Hatch said she had no idea of the management fees involved. "No one ever told me about these fees," she said. 'There's no way we could make money on this trust. They charged more in fees than the trees grew."
When contacted by NBR, Mr Reidy was reluctant to discuss the matter and said he had ceased his involvement long ago, although acknowledged he had worked in an adjacent office and had been chairman of the Hatches' company until last December. But Mr Simcock confirmed that NZEB had brought in more than $66 million in foreign investment for a range of trusts and said it was always made clear to investors that there was no such thing as a government guarantee of any sort.
New Zealand Development Trust also managed Local Area Financing Trust, Flat Rock Forest Trust and Phoenix Communications Trust (now a listed company in UK and operating in the US called West 175 Inc). It runs a prawn farm at Wairakei now being converted into a theme park and has previously invested in commercial property.
Mr Simcock said the Hatches were keen to invest in forestry and he considered they were sophisticated business people who knew exactly what they were getting into. "It wasn't a situation where they were naive," he said. Mr Simcock was sympathetic to the plight of the Hatches but said there had been considerable misinformation about fees and commissions taken by the manager of Flat Rock. The management fee had been dropped 0.5% after 1993 and over the past 18 months there had been no remuneration at all. "It would be quite wrong to suggest there have been significant investment losses to migrants generally. This is the first time we have encountered difficulty and it has resulted from a cyclical downturn in forestry. "The standard of migrant care compared to other countries is very high and we keep in close contact with the ministry on all the regulations."
Source: The National Business Review 27 February 1998
There are three issues here on which I would like to comment: Was it implied to unitholders that they were dealing with a quasi-governmental agency? How much was brought into these trust funds and how many investors were involved? Was it implied to immigrant investors that there were guarantees of any sort?
So, do you think Simcock is 100% correct when he states above that "it was always made clear to investors that there was no such thing as a government guarantee of any sort"?
We were told by the Wellington Regional Chamber of Commerce that NZEB were immigration consultants. We engaged NZEB for their assistance with immigrating. We consulted with both Simcock and Reidy about immigration matters. We were told by Messrs Reidy and Simcock that the Manager [NZTIL] was a wholly-owned subsidiary of NZEB, and that the two of them, through their company, NZEB, were both immigration and investment consultants (your basic one-stop shop for business investment migrants). I was unaware that they were charging an investment fee as well as an immigration fee.
No conflicts! No guarantees! No money or trees left! But no problem!
For news articles on the Flat Rock Forests Trust, forestry, the Serious Fraud Office, one immigrant family's experiences, immigration
specialists, fraud, juries, logging, and more, pressing the "Up" key below will take you to the Table of Contents for this News
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