To state the facts frankly is not to despair the future nor indict the past.
The prudent heir takes careful inventory of his legacies and gives a faithful accounting to those whom he owes an obligation of trust.

- John F Kennedy
 

by Daniel Riordan

Aggrieved investors of the failed Flat Rock Forests Trust - the target of a Serious Fraud Office investigation - are considering a class action suit against the trust managers.  But the trust's trustee says there's nothing left to claim.

Wellington unitholder Ruth Hatch, who has been organising investors, told the Sunday Star-Times a law firm specialising in such work was considering taking the case.  Class action suits, where aggrieved parties band together and share the costs (and possible benefits) of legal action are common in the United States but rare here.  (But see American-style Lawyers' Fees Up for Discussion.)

Hatch said there had been a tremendous response to the letter she wrote in late September to 450 unitholders of the 1100 who lost all their money when Flat Rock collapsed and was placed in receivership.

The trust's assets were sold for $7.4 million to British buyers - enough to pay secured creditor Countrywide Bank and the receivers' costs of $600,000, but not other creditors or investors.  At its last completed set of accounts, 31 March 1997, the trust had assets of $14.9m and liabilities of $6.9m.

Flat Rock, established in 1992 and managed by private company NZ Trade & Investment (which was also wound up), managed 1300ha of plantation forests.  But it ran into trouble when Asian economic turmoil sent forestry assets falling, blowing out the trust's debt/equity ratios to 46% against its trust deed's 35% limit.  Critics also' note it failed to follow its prospectus guidelines.  Flat Rock offered to buy mature forests, harvest them and payout regular dividends, said Chris Lee, a Kapiti Coast sharebroker with 2600, mostly retired, clients.

Instead, it borrowed, bought immature forests and was unable to service that borrowing.  The number of unitholders who lost money is unclear but includes about 20 immigrants (among them Americans Hatch and her husband Jeffrey) believed to have invested up to $500,000 each.

Hatch said unitholders had last met in 1997 and recent requests to Flat Rock's trustee, Perpetual Trust, for a subsequent meeting as allowed under the trust deed had been discouraged.

Perpetual Trust general manager Corporate Trust Rod Templeton said the trust was in termination and there was little the trustee could do to help.

Source: Sunday Star-Times 17 October 1999

No, this isn't a photo of any forest that was
once ours.  But it's a nice picture, nevertheless...

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 section.  Or you may wish to visit the Forestry Trust Table of Contents to read how a unit trust went bust.  Or the Topics Table of Contents which offers a different approach to lots of topics - among them poisonous insects, eating dogs, what's addictive, training vs teaching, tornados, unusual flying machines, humour, wearable computers, IQ tests, health, Y chromosomes, share options, New Jersey's positive side, oddities, ageing, burial alternatives, capital punishment, affairs, poverty, McCarthyism, the most beautiful city in the world, neverending work and more...