Investors haven't suffered, claims CMI boss

A contributory mortgage chief banned from offering any new deals for a year has hit back at the Securities Commission, saying investors lost no money because of his mortgage schemes.

John Martin, director of Auckland's Contributory Mortgage Investments (CMI), and consultant Peter van Nieuwkoop gave the commission a series of promises about three mortgages which failed to meet regulation standards.

But Martin said investors had not suffered and had instead been rewarded. "I'm disappointed in the commission's actions. These were all technical breaches," he said about the ban until next March.

"There were no problems."

Investors in an Auckland mortgage were offered interest rates of 12 to 16 per cent a year and all had been repaid in full. Investors who put $6 million into a Nelson mortgage would also be well rewarded, Martin said.

CMI raised $13.4 million for a trust run by Australian Colin Godfrey, head of First City Developments, which built many high-rise Auckland apartment blocks. The $13.4 million was to fund a development at 85-89 Greys Ave, to be converted from a carpark into student apartments. The Nelson deal has been pulled from CMI's website and no more details were available.

Commission chairwoman Jane Diplock said investors in the first and second Greys Avenue Development mortgages and the Trans Tasman Hotel Corp mortgage on the Nelson property were not fully informed.

"Investors may have been misled about the financial state of the borrower, the value of guarantees given and the use of investors' funds to repay contributions made by trusts associated with Mr Martin and Mr van Nieuwkoop," she said. "CMI [now] has an opportunity to raise its standards of care and governance."

The two made undertakings to:

* Get independent legal advice about their securities law obligations.

* Upgrade accounting systems.

* Appoint an independent director.

* Engage their auditors to perform an enhanced audit role and report to the commission.

* Ensure contributors were given all information that might be material to investing.

* Refrain from offering new contributory mortgages before March 31 next year.