It is base to filch a purse, daring to embezzle a million, but it is great beyond measure to steal a crown.  The sin lessens as the guilt increases.

- Friedrich von Schiller
 

Only Fraud Office Can Get Forest Investors' Money Back

by Chris Hutching

Out-of-pocket investors in the collapsed Flat Rock Forests Trust have been told their only hope for getting their money back is if the Serious Fraud Office takes action.  The trustee of the collapsed Flat Rock Forests Trust has sent a letter to unitholders outlining losses and telling them its involvement is at an end pending wind-up of the trust or action by the SFO.

Perpetual Trust has provided documents to the SFO about certain transactions of the trust and its manager.

The trustee has confirmed previous reports in The National Business Review revealing the forestry assets were sold for $7.4 million which compares with the book value at March 1997 of $12.3 million.  All of the money - minus $596,279 in costs from receiver Jane Muir - has been repaid to Countrywide Bank.

Other investors are out of pocket and consider their only chance of any redress now lies with the SFO investigation.  The exact number of unitholders who have lost money is unclear but includes about 20 immigrants who invested $500,000 each.

One of them is US immigrant Ruth Hatch who said the most frustrating aspect of the sutuation was the apparent lack of interest from statutory authorities and professionals involved on the periphery who seemed more concerned with eliminating records.  The most recent example was the intention to remove from the Companies Register a subsidiary company called Clearwood Holdings, which Mrs Hatch believed might contain important records.  Mrs Hatch said the records of the Companies office generally appeared shambolic.

The investigations of the SFO include questioning of the executives involved in the management company, Stephen Reidy and Don Simcock.  Mrs Hatch claims she and her husband Jeff were referred to Mr Reidy and Mr Simcock by the Wellington Chamber of Commerce in the early 1990s when they were described to her as "immigration specialists."

The essence of the complaint from the immigrant investors is that they were led to believe the investment was government-backed and that it was part of a requirement of immigration rules at the time.  Perpetual Trust general manager Rod Templeton said his company was also a loser, having inherited the problem in 1996 (after the Pyne Gould acquisition of Perpetual).

If there were any lessons to be learned it was for investors to scrutinise the structure of any investment for such things as the ability of the manager to take action without reference to unitholders or the trustee.

Any future action now depended on the conclusions of the SFO, Mr Templeton said.

Source: The National Business review 14 May 1999

Again, I have several comments.  First, Rod Templeton said his company was "...a loser"?  (How perceptive of him!  Amazingly candid fellow.)  Second, since the accounts were never audited, that means the "book value" at March 1997 isn't reliable.

Next, unitholders have not seen a bill from the receivers so as to understand just what their hefty fee covered.  How much was profit to the receivers?  (See Muirly doing My Job and Flat Rock Collapse Flattens Creditors.)

The "lesson to be learned" should be printed on the back of the Business Investment immigration application?  Somehow, I've learned slightly different lessons from my experiences and thus came to slightly different conclusions.  My conclusion starts with "increase transaction transparency and records security."

And the SFO isn't our ONLY hope.  A good, affordable lawyer (is there such a thing?) would be a start.

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...