KEY POINTS:
The Securities Commission and the Serious Fraud Office should probe the statements made by telemarketers and other professionals allegedly acting on behalf of the Blue Chip structured residential property investment group of companies and franchises.
What's going down should clearly have sprung red alerts among New Zealand's corporate
enforcement agencies but there's little sign yet of an energetic response from the relevant authorities.
The stories of the many worried Kiwi investors, typically baby-boomers or older people wanting to build retirement nest eggs, who have been disadvantaged by the Blue Chip mess, are heart-breaking.
The move of many Blue Chip-related companies into liquidation last week raises the question whether a "buyer's beware" sign should have been attached long ago.
But the authorities should also be probing any misrepresentation.
In mid-January, I got a cold call from a Patrick Foster wanting to interest me in investing some of my cash in a rock solid Blue Chip-related property deal. The call came as publicity about the difficulties existing Blue Chip investors had experienced getting expected rental returns from their investments were gaining currency in news media stories.
Stories that had been reported in the New Zealand Herald and elsewhere indicated that long-time property investor Olly Newland was getting involved on behalf of some disadvantaged investors.
Blue Chip Financial Solutions Ltd had already released a financial result showing a 56 per cent profit drop for the nine months to last September. The rumour mill was running fast.
I questioned Patrick as to Blue Chip's financial health and quoted back to him the stories that I had been reading. He tried to fob me off by saying Macquarie Bank was a major investor in Blue Chip, implying that it stood behind the company. Blue Chip was also listed on the Australian Stock Exchange - you get the drift. The telemarketer didn't want to supply his name or number.
It was better to arrange a presentation. But he ultimately did so, giving me an Auckland number.
The problem is that Macquarie Bank had already publicly distanced itself from Blue Chip Financial Solutions Ltd last October.
Back then, the Independent Financial Review reported that Macquarie's corporate affairs manager (Australia) Irene O'Brien said it was definitely not the case Macquarie Bank would guarantee any investments exercise made with Blue Chip Financial Solutions Ltd.
Macquarie had originally held nearly 4 per cent of Blue Chip Financial Solutions Ltd but that amount had diminished after the delisting of the stock in New Zealand and relisting in Australia.
Macquarie had gone so far as to ask Blue Chip to turn over transcripts of the spiels used by its New Zealand telemarketers.
The company made assurances they would speak to the telemarketers, as the Independent reported at that time.
But four months later the telemarketers were still using Macquarie's name.
It could be that the liquidator, when he gets around to sorting through the Blue Chip morass, will seek answers to these questions.
But there are other areas of concern. At issue is Blue Chip's decision to quarantine its Kiwi-domiciled business into a new master franchise (Diem Ltd) run by the New Zealand management, instead of leaving it directly under the management of the (now) Australian parent company, Blue Chip Financial Solutions Ltd.
The authorities should ask just what was the real purpose behind this particular manoeuvre.
New Zealand and Australia have been moving towards a single economic market, which is supposed to make it easier for a company either side of the Tasman to be able to play in one Australasian investment play pen without going through the rigmarole of drawing up separate prospectuses and so on. It's a philosophical issue. But investor protection is not being approached in a similar transtasman fashion.
The third issue, which also calls into question disclosure, is why Blue Chip was able organise virtually all the advisory parties to the transactions (valuers, property managers, insurers, loss attributing qualifying companies) instead of a requirement for investors by law having to use independent advisers.
Auckland lawyer Paul Dale, who acts for one bunch of disaffected investors, is concerned that neither Diem Ltd nor Blue Chip Financial Solutions Ltd has yet to be put into statutory management or liquidation.
Dale has a point. Securities Commission head Jane Diplock should by now have asked the Registrar of Companies to take a look at Diem's books.
Getting a look at Blue Chip Financial Solutions Ltd's books might be difficult unless both the Australian and New Zealand authorities combine forces. Trading in Blue Chip Financial Solutions Ltd was suspended on the ASX last week.
Blue Chip's founder Mark Bryers is reported as trying to get a resolution in place.
Statutory management is a last-resort weapon for at-risk companies. Most go into receivership or are put into liquidation if solvency issues have occurred. But in this case there may be some justification in trying for an orderly work.