End to IBC saga likely in New Year

By Bob Dey

Liquidators of the New Zealand end of a company incorporated in Australia hope to resolve early next year how the surplus from asset realisation can be disposed of.

Meanwhile the company's director, Eric Isadore Jaffe, faces a public court examination after refusing to attend the liquidators' offices in Auckland. The Australian Securities and Investments Commission is also considering action against the company and its auditor.

The unusual case involves a company established in Sydney in the 1930s, Industrial Banking Corporation, and controlled by Mr Jaffe, of Auckland.

Mr Jaffe, who turned 78 last weekend, maintained in 1980 during a public examination after his bankruptcy that concepts developed for this company would enable creditors to be repaid quickly. Mr Jaffe said then he had been living off the sale of shares in the company.

He again sold shares in the company four years ago, backed by a balance sheet showing it had intangible intellectual property assets totalling $A170 million.

In 1995, he raised $2.6 million by selling redeemable preference shares in Industrial Banking Corporation to elderly investors contacted through Probus clubs. That money was due to have been repaid on September 1, 1997.

However, the Reserve Bank ordered IBC not to use the word "bank" in its title when operating in New Zealand and the Securities Commission banned advertising for the shares because no prospectus had been issued.

Creditors established that IBC's physical assets amounted to the net interest in four heavily mortgaged townhouses in a block of five on Ring Tce, overlooking Auckland's Westhaven marina. They were held by a Wellington company controlled by Mr Jaffe, IBC International, as nominee for his Sydney company.

When the ASB Bank, as mortgagee, took the townhouses to auction last year, Mr Jaffe turned out to be the highest bidder on all four. His offer of $2.1 million on behalf of the Jaffe Trust Co Ltd was accepted by the bank, which was seeking to recover just over $1.7 million.

Land transfer documents show the townhouses were then sold to Tai Cheng Liao, of Rotorua, for $3.1 million on the signature of Mr Jaffe's wife, Fay, as a trust company director. The Jaffes remain residents of their apartment.

The first of these two sales left about $380,000 to be distributed to other creditors. But PricewaterhouseCoopers accountant Colin McCloy said his wish to repay investors had been prevented by three competing claims on the money.

A High Court hearing to resolve that issue is expected early next year, though a firm date has not yet been set. Meanwhile Mr Jaffe is to face a public examination called under the Companies Act and set down for the end of November.

Australia's Securities and Investments Commission is also looking at what action might be taken over IBC's affairs, including action over the valuation of intellectual property assets by the company's auditor, Arthur Forrest.