Battle of writs

Auckland war veterans are fighting a new battle, but this time it is over money, as JAMES GARDINER reports.

Auckland's RSA is in turmoil. Allegations have been made of financial mismanagement and election-rigging, punches were thrown at an executive meeting and police were called. Court action against the association by some of its own members has cost it about $70,000 - roughly twice what it spends each year on veterans' welfare.

It has been a fractious few years for the several hundred members of the Auckland RSA and they haven't even had a bar of their own to retreat to. Unlike most of the country's associations , the central Auckland organisation has no clubrooms.

Faced with a diminishing membership in the late-1980s, the association decided to cash up its assets and become more of a charitable trust than a gathering place for old veterans. Its premises in Fort St were sold, with the proceeds put into two trusts worth about $2 million. The members became beneficiaries of the trusts.

The Auckland RSA Trust Fund pays for the running of the association, while the Auckland RSA Welfare Trust has about $300,000 set aside for the welfare of servicemen who have fought in war or carried out peacekeeping duties.

Serious infighting has broken out among the members over what should be done with the money. Battlelines have been drawn between ageing veterans of the Second World War, the Korean, Malaysian and Vietnam Wars and the newer recruits whose backgrounds are in military peacekeeping, cadet corps and non-military services such as the police.

The only thing they agree on is that money that should be going to the returned servicemen is being wasted and time is running out for the Second World War veterans, who still dominate the rapidly diminishing membership but are dying off.

There has been legal action about the election of executive officials and the actions of the committee, and a battle with the RSA's national office in Wellington over who should get public donations from the telephone appeal run in conjunction with the high-profile Band of Brothers series, screened on TV One. TVNZ threatened to walk away.

Since the dispute began, some members have looked into the background of the Auckland association's key executives. They have not liked what they have found.

One of the key people running the association and its trust funds is Peter Desmond Swain, a disbarred former lawyer with convictions for theft over misappropriating $25,000 of a client's money.

Association president Chris Yates said he had only recently become aware of Swain's 1988 convictions, and the association's trustees would now investigate further and decide whether to take any action.

Swain was made a trustee when a former Auckland RSA president and Second World War veteran Les Pipes was kicked off for questioning a move to make a long-term investment of funds in a private company, Five Star Finance, which has links to Yates and another member of the executive, Neil Williams, who was also appointed to the executive when another elected officer resigned last year.

Yates, whose military connections are as a long-serving leader of military cadets, has confirmed to the Weekend Herald that he has been the subject of investigation in the past.

He left the police force 20 years ago after being arrested, though the charge against him was dismissed at a depositions hearing.

Yates agreed that he had made some enemies, including all the members of his own family and he no longer had contact with them.

The Herald has copies of letters signed by his father, mother and sister warning that he should not be in a position of authority because he has been untruthful in the past.

Yates said that animosity dated from about eight years ago when he had his father, Robert Yates, arrested on serious charges, the nature of which cannot be reported for legal reasons. Bob Yates was found not guilty of all charges.

Chris Yates said his family had turned against him and he was estranged from his ex-wife and daughter.

The link between Yates and Five Star Finance is that the company owns the Freemans Hotel, also known as the Leopard Tavern, in Freemans Bay and his company, Chris Yates Ltd, leases it and holds the liquor licence. Yates lives on the premises.

Five Star Finance tried to convince the RSA executive that it should invest $150,000 - about half its welfare fund - for five years in what it called buildings at North Harbour Stadium. The buildings were in fact 50 portaloos leased to the stadium by another company, Rhino Group Limited, and these were offered as security.

The managing director of Five Star Finance, Nicholas George Kirk, is the majority owner and a director of the company, along with a string of others including Five Star Mortgages, Five Star Rentals and Four Star Investments.

In a letter to the association, Kirk said he understood the association's need for absolute security and said North Harbour Stadium was a "quasi local body" and therefore "AAA-rated so far as security is concerned".

He said the portaloos were worth $230,000 and offered as security, which would be repaid in 60 monthly instalments, giving an interest return of $50,200.20.

His claim surprised the chairman of the North Harbour Stadium Trust, Peter Fitzsimons, who said it was known the stadium could not service its debt or repay debt and was being helped by the North Shore City Council, which was its guarantor.

That fact did not support a claim that it shared the council's creditworthiness and the trust had no credit rating of its own.

The lease agreement with Rhino was nowhere near five years and probably for one or two years and "there is the possibility of us exiting that".

Kirk proposed that Marcus Arthur MacDonald, a partner in Phillips Fox, act as solicitor for the RSA. He said Williams "from our office" had been working on the deal and MacDonald had prepared the documentation.

Companies Office records show that MacDonald is director of Five Star Finance and has other business links to Kirk. They both own stakes in the Leopard Tavern Ltd, which owns Yates' pub.

Les Pipes, aged 77, an executive member at the time of the Five Star investment proposal and a former president who was involved in setting up the two charitable trusts that form the financial basis of the association, was outraged.

He complained that there were conflicts of interest and wrote to MacDonald asking how he would deal with these.

The association's lawyer, Geoff Hanlon, was also upset. He wrote to the trustees of the two trusts, saying he had been engaged four months earlier to advise on the feasibility of liquidating each of the trusts and to act for the trusts on other matters, but he quit after seeing a copy of the Five Star proposal and a letter from MacDonald stating that he was acting for the association.

"My advice has not been sought nor given in respect of the proposed transaction," Hanlon said. "I do not think it advisable for me to continue to act for the trust fund or welfare trust and, indeed, I am not willing to do so."

MacDonald wrote back to Pipes saying there was no problem with the same firm acting for more than one party in a transaction, providing everyone was aware of it, and that separate solicitors acted for each party, "so that in effect there is a Chinese wall".

He said although Five Star's offer had been accepted by the RSA it had withdrawn the offer when it became aware of opposition in the association and had allocated the investment to another investor client.

Asked whether he declared his own connections with Five Star at the time the offer was considered, Yates said he had. He believed the investment was sound, but because it had not gone ahead it no longer mattered.

Yates said Pipes' removal as a trustee was because other trustees were unhappy that he and two other former executive members, Bill Grupen and Jim Newman, were taking the association to court, not because of Pipes' objection to the Five Star idea. Pipes had chosen to resign from the association, he said.

The court actions are on a range of issues, partly about whether rules have been followed during the past two elections and partly about the association's failure to follow an AGM decision to develop a corporate plan.

Ironically, the disputes have meant there has been competition for executive positions for the first time in years. Previously, the association had barely enough candidates to fill the 14 executive positions.

Grupen, a Korean War veteran whose daughter Ruth is a barrister and has taken the legal action for the trio, said it was largely because of Yates' obstructiveness and determination to control everything that the court action had dragged on and remained unresolved and attempts to remedy the problems had failed.

Some executive members still support the trio, although the majority side with Yates and have authorised the legal defence. Hanlon, the son-in-law of another executive member and Yates supporter, Norman Pollard, is back working for the association, along with another barrister who heads the defence.

"We know we're right, so we've got to do it," Yates said.

The dispute has been raging for 18 months. Tension reached boiling point at the October executive meeting when a man employed to act as welfare officer, Steve Matheson - who is also on the executive - punched another member of the executive, Vietnam War veteran Graham Gibson.

Matheson refused to tell the Herald why he hit Gibson. He apologised as a condition of police diversion, which Gibson agreed to, so no criminal conviction was entered against him.

Gibson said he had been asking questions that "they didn't like".

He said he felt sorry for Matheson, who he believed had been "wound up" in a back room by Yates after the meeting, then came out and hit him as Yates looked on. "I told him to grow up and kept walking. I'm a real veteran, mate, not one of these peacekeepers."

The RSA's national office in Wellington has been called on repeatedly to intervene in Auckland, but has refused. Senior officers and chief executive Pat Herbert came to Papakura with their solicitor for a meeting last year when a range of allegations was made, but nothing has resulted.

Now Herbert won't speak publicly about what has happened. He told the Weekend Herald he did not want to get involved, and has not returned several calls since.

Auckland members say the national body fears that adverse publicity will damage public confidence in the annual poppy day appeals.

Pipes said the public had a right to question where their poppy donations were going. While most associations put the money toward the welfare of veterans, some spent it on bar facilities or honorariums for elected officers. "My belief is that the public believe all that money goes for the welfare of returned servicemen, and so it should."

He said there was no legal protection for poppy day money and, in reality, anyone could sell poppies and pocket the proceeds providing they did not misrepresent themselves as RSA members or where the money was going.

The Auckland RSA gets about $35,000 a year from poppy sales, the proceeds of which go into the welfare trust. The welfare trust employs a welfare officer whose job it is to allocate donations of about $35,000 a year to beneficiaries.

The poppies have been a source of controversy before. Yates angered some people two years ago when he imported cheaper Chinese-made poppies to increase profits.

Correspondence between him and TVNZ obtained by the Herald also reveals a dispute between the Auckland body and the national association over the Band of Brothers veterans' appeal.

Documents show the Auckland association tried to cut the national association out of the appeal, accusing it of trying to use the appeal to resurrect an unsuccessful trust run by the national body. The Auckland RSA said it would give the money directly to veterans throughout the country.

TV One brand communications manager Jude Davidson wrote back saying the internal dissension was unacceptable. If the dispute spilled into the public arena then TV One would abandon the appeal.

In the end the appeal raised just over $10,000 from 1000 donations, far less than it cost to arrange.