Blue Chip papers lay bare the money woes

John Luxton, Wyatt Creech, Mark Bryers and Jock Irvine at a Blue Chip AGM. Photo / Herald on Sunday

The troubled management of the collapsed Blue Chip empire has been laid bare in hundreds of pages of company documents - which also disclose massive expense claims by its "spiritual leader" Mark Bryers.

The documents reveal confusion in the boardroom of the company over how much money it had, what it owned and how much of it belonged to Bryers.

The papers formed a substantial part of the documentation used by the Serious Fraud Office in its investigation into Blue Chip and its associated companies.

They were obtained by the Herald on Sunday through an Official Information Act request to the Ministry of Economic Development - the only official agency to obtain a judgment against any of the company executives.

The ministry's National Enforcement Unit successfully prosecuted Bryers for bad record-keeping and failure to attend an investors' meeting.

He was fined $38,000 and sentenced to 75 hours' community work.

The Blue Chip finance companies collapsed in 2008, costing about 3000 investors more than $80 million.

The papers are a collection of board records and financial papers from 2006 and show repeated problems.

The board included former deputy prime minister Wyatt Creech and another former minister, John Luxton. Both put themselves up for re-election to the board in May 2006, although they resigned later in the year.

In that same month, Bryers was still managing director and told the board of the "superb core business"that the lack of available cash was an issue of "urgency", before highlighting six key danger areas. Bryers then suggested the board hire a consultant to handle three of those matters because they were so tightly enmeshed in his personal business.

The person he nominated as the consultant - departing financial officer Brian Rankin - used his May report to the board to describe Bryers as "severely compromised".

Blue Chip's fear of "serious reputational risk" - the lack of money - was relieved with the launch of its Australian business.

Customers there were told that their investment would be used to grow the Australian business, but the cash was pulled back to New Zealand, where it was used to pay bills and bonuses, and to meet expired property settlements for which there was no other money.

By June 2006, the board was trying to separate Bryers' business from Blue Chip's.

Luxton, who would later quit, citing concerns about Bryers, raised concerns about "allegations of insider trading" after the trade of one million Blue Chip shares involving Bryers. The debate over the trade continued to the next board meeting a month later at which Bryers was formally "censured" and told such trades must never happen again.

Bryers showed confusion over his business dealings and the company's work. He told directors he had wrongly believed he needed to pull his personal business out but had not done so.

The extent to which Bryers' and company business had become mixed up was further shown when he was asked whether he owed the company money or vice versa.

In the minutes, he expresses concern that the dealings will "haunt this company", and is then described as considering putting himself in "limbo". He said he had "enrolled in a course in Australia to learn more about corporate governance".

Bryers said he was "the only person who can sort this out" and he planned to spend the next six months as "spiritual leader/mentor". Then, he pointed out he was only the third-highest-paid person in the company and "he should be the highest-paid".

Financial documents with the July board papers reveal the degree to which Bryers was immersed in the company. Under the heading "Mark Bryers' personal expenses", are listed $256,231 in expenses for May 2006. It was the highest claim in the six months documented. The other monthly expenses bills range from $90,381 to $117,044.

It was no surprise to have his expenses listed among company papers - later board papers stated accounting for Bryers' personal affairs was done by the Blue Chip finance team. As Bryers sold shares, paid bills and conducted his own business, he would often turn to Blue Chip. When he wanted to sell his box at Eden Park in August 2006, he first offered it to the company.

Increasingly, Blue Chip did not have the answers. Papers show it struggled or failed to pay tax most months. It struggled to pay other bills while spending showed thousands of dollars spent at restaurants including Hammerheads on Auckland's waterfront and the inner-city bar The Bluestone Room.

It was too much for Luxton, who resigned in October (Creech had quit a few months earlier). He wrote of being upset that money raised in Australia was not spent there - instead it was spent on Bryers' personal companies. "I feel let down by Mr Bryers," he wrote.

The so-called "Blue Chip model", espoused by Bryers, also came in for criticism. Chief financial officer Keith Mellor described the "poor practice" of treating deposits paid in by customers as cash for company business. It had left the company in a "very vulnerable financial state".

The muddled affairs of Blue Chip led to it paying bills for companies owned by Bryers. A "business plan" quantifies the level of mingled business at $17.5m with Blue Chip paying Blue Sky bills. Blue Sky was a Bryers development company which he later sold for $1 to business partner Bob Bangerter.

A staggering amount of cash went through the company. Bryers was borrowing money for the company at 17 per cent interest and lending it interest-free. Confronted about it, Bryers said he would pay the interest - although the money was simply added to the bill.

By November, there was still no clarity on who owed - or owned - what. The minutes that month state that records of Blue Chip and Bryers dealings "are not being maintained".

It took another 14 months before Blue Chip officially collapsed. Bryers, owing $235m, was bankrupted. He is in Australia, working in property.