Bridgecorp NZ & Australian investors CRASH

Out-of-pocket Bridgecorp investors are turning the blow-torch on their financial advisers as two lawyers at opposite ends of the country take the first steps towards suing those they believe responsible for the company's collapse. NZ Sunday Star Times |Sunday, 21 October 2007

Grant Cameron, a Christchurch barrister, and Andrew Hooker from Auckland law firm Turner Hopkins say dozens of investors have approached them in a bid to recover some of the $550 million lost when Bridgecorp went bust on July 2. Group lawsuits may be investors' best alternative, they say. Alongside financial advisers who put their clients' funds into Bridgecorp in many cases with no specific authority, or assessment or discussion about risk other potential targets include the directors, the trustee and the auditors. Possible causes of action include Fair Trading Act claims for misleading conduct and misrepresentation, Securities Act claims, and claims under the Secret Commissions Act. His firm is offering free preliminary assessments for investors "especially the oldies" to determine whether they might have a case.

Hooker has run newspaper advertisements to attract disgruntled investors. At this stage he is "just throwing the net out" but says there has been "huge" interest.He has had "some pretty nasty" communications from financial advisers since his advertising campaign began. "But I'm not on a witch-hunt. I'm just a lawyer who's doing my job." Suzanne Edmonds, who is working with investors behind the scenes, has called those interested in legal action to a meeting in Auckland on October 25. Cameron and Kapiti sharebroker Chris Lee will address the group.

Meanwhile, investors' horror stories continue to be uncovered. Their biggest complaints:

• Advisers who told clients their Bridgecorp investments were guaranteed, underwritten or insured by Lloyds of London (they weren't);
• Advisers who invested client funds in Bridgecorp without seeking specific legal authority to do so, and those who failed to warn clients that Bridgecorp was a high-risk investment.
• Many investors say their money was placed in Bridgecorp after they had specifically told their advisers they were interested only in low-risk investments.

  Says one investor, with $85,000 in Bridgecorp and $25,000 in also-collapsed Five Star Consumer Finance: "Having read some disturbing news about Bridgecorp in late June, I spoke to our financial adviser on Friday, June 29, who assured me there was absolutely nothing to worry about. They were simply having a short-term liquidity problem and were not about to collapse. We woke to the news on Monday, July 2, that Bridgecorp was in receivership."When the investor spoke to the adviser again a few days later, the adviser said they'd had some reservations since December 2006 that Bridgecorp was not functioning well but they "couldn't tell everyone or they'd want to try to get their money out".Says another: "In 2007 (my advisers) told me not to pull my money out of Bridgecorp because this might put the company at risk."So where does the adviser's fiduciary duty lie with the finance company whose investment products he is flogging (and from whom he is receiving an often hefty commission) or with his clients, the investors who have entrusted a big chunk of their life savings to his care?"This is where the courts may come in."Our adviser said the Bridgecorp rumours were baseless and the loans were underwritten by Lloyds of London and safe as a church," says one investor. "This adviser now tells us his professional indemnity insurer has warned him not to discuss individual (Bridgecorp) holdings."

  The sums involved aren't small. The Sunday Star-Times has been told of one North Auckland investor who has lost about $3.5 million. Individual losses of between $100,000 and $200,000 are common, often spread across Bridgecorp, Western Bay Finance, Provincial and Nathans Finance.

  All have gone bust.

• Victims include an 81-year-old rest home resident who relied on the interest on her $80,000 life savings to pay rest home bills. Another couple, aged 93 and 95, were relying on Bridgecorp and Five Star investments to pay their retirement village fees.

  Says another, aged 67, who lost $160,000 across several bust finance companies: "We will never recover from this. We are too old and too tired to fight. We are absolutely devastated, feeling that we have been robbed of our life savings by dishonest and unscrupulous investment companies."

  Many investors complain their financial advisers are still spinning them hard-sell, despite Bridgecorp's collapse and advice from the receiver that holders of unsecured debentures and capital notes will get nothing.

  "(My financial adviser) told me not to believe what the receiver, the media and the experts were saying and that we will get most of our money back," said one. "I feel that I have been misled by my financial planner.

  "I want them to be held responsible for their negligence."

  Of the investors who have written to the Star-Times, many complaints have been received about Vestar (formerly Northplan), Paul McEwan & Associates (a company owned and run by the former test cricketer) and Muriel Dunn Financial Services.

  The Star-Times asked each company whether it had told investors their Bridgecorp money was guaranteed, underwritten or backed by Lloyds, what it had said about risk, what independent research it had done before putting clients into Bridgecorp and what level of commissions Bridgecorp was paying.

  Through his PR man Coran Lill, Vestar CEO Simon Purvis refused to answer these questions unless the Star-Times supplied the names of the complainants (we didn't). Nor would he disclose the level of commissions Bridgecorp was paying his advisers. Vestar did disclose these to clients, he said, and fully explained the risks.

  The main complaint by aggrieved clients of Muriel Dunn is the lack of discussion or advice about risk.

  Karen McDonald, Dunn's daughter and general manager, told the Star-Times that after a meeting in July 2006 with Bridgecorp's management her team decided to continue to support the company but to monitor client portfolios as their debentures matured to ensure they were not overexposed.

  In December last year McDonald decided to no longer reinvest client funds in Bridgecorp. "We are puzzled as to how this crisis occurred, given the accounts presented for the company in March, dated December 2006, showed good liquidity cover," she says. "This apparent anomaly may well be one of the issues the receivers have raised with the Securities Commission." Paul McEwan would not disclose the level of commissions Bridgecorp paid to his company. He does not believe his firm misled clients about the risks with Bridgecorp and says in mid-2006 he decided to reduce its Bridgecorp exposure.None of the three advisory firms explained exactly what they told clients about the Lloyds insurance or whether their advisers pointed out its highly conditional and limited nature. But at least one Lloyds underwriter living in New Zealand has written to London complaining about what he considers to be misleading claims in Bridgecorp's advertisements.

BUYING A CONDO IN THAILAND & PROPERTY:

OUR ADVISE IS DO A STUDY ON THE COMPLEX BEFORE YOU BUY AS AT 2007 AND DO NOT BUY PROPERTY (House and Land) UNLESS YOU HAVE A THAI COMPANY AND BUSINESS IN GOOD PROFIT MODE. MANY THAILAND PROPERTY COMPLEXES ARE FEELING THE PINCH FROM 1/. Increased mortgage rates 2/. Over spending by the consumers buying in anticipation 3/. Increased oil and material prices 4/. Under budegting & relying on sales volumes to cover outlay expenses

A foreigner can ONLY own a condo in his/her name. You cannot own a house and land in your name unless you invest 40m baht  = 1 Rai of land. Bank's do not lend to foreigners; only Thais or Companies. We can not assist you with any mortgages so please ask your Bank.

Just a note about buying Condos. ---Find out what the monthly maintenance costs are from the managers and if a management program is in place; ALSO THE SINKING FUND. Never give a deposit for a condo before you do your preliminary checks. Get it in writing signed by 2 witnesses as this holds up in Court. Avoid unfinished projects as they may run out of money or be under capitalized and be careful of projects that have started then stopped then resumed again . If the steel construction has gone rusty then chances are the additional concrete added will not be to safety specs and the condo is unsafe. If very few condos have been sold in a building with good amenities like landscaped grounds, security Guards and a receptionist and office have the title searched but most of all someone has to pay for all this, plus the electricity for lighting and lifts. Try and check if the downpipes are sealed in concrete as if so stress and tension will crack your lines-- now a common fault in concrete constructed complexes. Has the complex got a dry fire riser on each floor and what about extinguishers & smoke stop doors on each floor. If not and you have now bought your condo it may pay to invest in a parachute or drop ladder?? All piping from floor to floor should be self alone with easy access to maintain and not built into the concrete..

The total cost (often inflated) has to be divided up among the condo owners, which can be a lot if only a few units have been sold. Ask for an exact statement of maintenance costs and how they are paid. If the project has different size condos in the same building, large units will pay more towards maintenance costs than small units. If you are a legal resident you can obtain a mortgage but you need to check with your bank and credit arting. The best idea though is pay cash as you can negotiate. In Bangkok look at around 48,000 -100,000 baht per sq m. A foreigner can only buy max 40% of a condo unit so if that 40% has been taken up and you are the 42% person you may find you are buying a lemon so to speak. If the developer owns a majority of units you may not like his manager but if the owners have majority votes than they can remove him. Check title before you buy --maintenance clauses --- and payment funds as well as 49/51% ownership on titles in the condo. Check rubbish, security, office staff, cleanliness, maintenance before you buy etc.

The Condominium Act has recently been amended. Now 49% of units in all condominiums and  100% of units in condominiums in a total development area under 5 rai located in Bangkok, all municipal districts and such other areas as shall hereafter be announced by the Minister of the Interior (which is expected to include rural Phuket) can be foreign owned, provided that the funds for the purchase have been remitted from aboard (which is the already the norm).

THAIS BUYING CONDOS

The main risk is borrowing from the bank and can one service the mortage of the condo they wish to buy. Low deposits and 30 years to pay is a long time to pay back a loan especially when many and forget the sales talk of high rental returns and fantastic capital gains -- this is total rubbish. I have seen Thais scramble to buy a condo complex in Chiangmai near Carrefoure and the sales pitch was this area will be the CBD of Chiangmai and foriegners will flock to the area. Oversubcribed within 6 months 2 floors had Thai owners who had second thoughts and started to deaault on repayments. To date 2 years later nothing has changed let alone no CBD has been created??? Remember Thais have credit cards; a car on finance and other monies to pay before you look at the basic cost of living. Telephone marketing by bank staff on commission today allowing Thais access to money for cars, bikes, businesses etc is on a high to get even more Thais into debt. Yes bedt as thats what Taksin Shinawatra has done to the majority poor people in Thailand. Think about it. Marcos (Phillippines) Suharto ( Indonesia) used the strategies is you give plenty opf money to the poor you indebt them fast. They then become pawns for the ruling party. Shinawatra did exactly the same and look what is now happening in Thailand. Remember gasoline has tripled in 10 years and the cost of utilities increased by the same amount.

Here is a simple rule immaterial of the interest rates: When you borrow 1m baht heres what you will pay back: you double the borrowed sum which is now 2m baht and halve it again ie 50% of the loan which now = 2.5m baht you will pay back over the loan term. This is a safe rule of thumb as you must look at interest rate rises, changes in your income, lifestyle, additions to the home, utility and cost of living rises, inflation, holidays, car repairs, school fees, etc. Its now a lot of money to pay back and now can you service this loan in 5 yars time??? Think about it. It so easy to borrow and once you get your loan you are on a high but 30 years is a long time to wait --- in fact a lifetime of paying back money into a hole ---- can or will you be able to do it; what happens if you have an accident or injury or your life changes or your circumstances mean you cannot keep up --- "Once your mortgage goes up, for the first couple of months you might manage, but then you start getting behind," or you want to buy a new car or find out you have used your credit card too many times. This is when you start to stress as you have budgeted from the start using your income to pay back when suddenly these changes in your life occur to manage repayments. Do not listen to sales pitches from Realty staff as they are only interested in their commission, not your ability to repay your loan. Only buy if you need to buy and have the spare cash for that rainy day --it may just pay off. Do not buy because you feel its a good deal and you think in 20 years time you will have a bargain as it will not match your repayments; let alone the 3:1% ratio of income against loan repayment. Today its no where near this ratio so watch out. Better to only have what you need but who are we to say whose right.

WHY INVEST YOUR MONEY IN A FINANCE COMPANY

TO A PERSON YOU DON'T KNOW THEN LOSE IT ALL

As more finance companies are going against the wall why are you investing and entrusting your life savings to a finance company. Finance companies undermine monetary policy with a cost advantage gained by attracting deposits from "illusionary" investors who do not realise they are lending money at rates too low for the risk they are taking. If this sector were subject to the same continuous disclosure obligations as listed companies the flow of discounted money into the property market would reduce, and cool that market.

Our advise don't invest in Finance Companies at the moment --buy some gold instead or wait as a bubble is starting to grow & keep the money in the Bank. Buy the gold but put into your own bank safety deposit box not the sellers. Safeguard your fund yourself and do not entrust in a finance company who SAYS they have a portfolio too good to be true-- you will lose.

WHY USE OUR SERVICES: 

• We work for you (Both Thai & foreign consultants )
• No hidden charges-everything is up front.
• Guaranteed conveyancy help &  Company, work permit & land  setup for foreigners
• We will sell your Commercial property, houses, businesses, bars and Guest Houses
• Because you have the benefit of foreign help with our Thai lawyers and expat consultants
• We offer: Full house onsite appraisals. Cost is 3000 baht for a house under 2 years old & 6000 baht for older houses ( plus travel if out of town ). This 5-6 page report is a must if you want to know what your house is really like which includes pics of repair work needed and we even do a air con survey (extra).
• Need help in Investments in NZ: See SPICER & ASSOCIATES in Levin NZ. Mrs Natalie Martin: for all investment information. She helps Asia Trading Post as well and advised against Bridgecorp to investors. Just write to us.

BANGKOK REAL ESTATE Please go to : www.bangkokrealty.biz