Financial advisory firm Vestar invested most of an elderly Taranaki woman's life savings into seven failed finance companies and funds, including ones it was connected with, documents filed in the High Court at New Plymouth allege.
In early 2007, just after Vestar founder Kelvin Syms sold the firm to publicly
listed Australian company MFS for $52.5 million, the 89-year-old rest home resident's portfolio was worth $500,000.
Less than a year later it was worth $150,000, the documents claim. The woman has since died.
Her family and six other Vestar investors are taking court action against Syms and his fellow former directors, alleging negligence and breaches of the Fair Trading, Consumer Guarantees and Companies Acts.
Also in the gun are the local Vestar adviser, plus two other members of Vestar's investment committee, including Commerce Commission member Donal Curtin. They have all filed defences to the action.
Curtin, a former BNZ chief economist, has made headlines for his role as chairman of the Vestar committee.
He has faced an inquiry instigated by the Commerce Commission, has stepped down as deputy chair and had his duties limited. Lobby group Exposing Unacceptable Financial Activities (EUFA) has criticised the commission for not going far enough.
However, Curtin didn't hold a stake in Vestar and was paid only his fee for chairing the investment committee, Hugh Rennie QC said in his report to the commission.
Unlike the wider Vestar organisation he did not receive any commission or brokerage for selling certain products, Rennie said.
In contrast, Syms has had much less of the limelight, despite profiting handsomely from the company.
Known for his love of luxury vehicles, he lives in a $5.3 million waterfront home in Westmere and has a $2.6 million Italian-style beach house in Mangawhai.
He also co-owns another Mangawhai property, two units in Mt Maunganui and several properties in Dargaville, and has shares in infant formula exporting company Avante International.
The Herald on Sunday understands he drives a red Ferrari and his third wife Gina drives a darker coloured model.
Gina Syms comments on her Facebook page that she is "living the life of Riley - very happy, no time or financial pressures to worry about".
The Taranaki family say their disabled mother had lived in a rest home for 10 years. She was a conservative investor who wanted to preserve her capital and supplement her income.
Her Vestar adviser put her funds into a list of products approved by the company's investment committee.
More than 80 per cent was invested in finance companies and funds that ultimately either went into receivership, liquidation or moratorium, including Bridgecorp, Boston Finance, Capital + Merchant Finance, and OPI Pacific Finance.
Boston and OPI Pacific were subsidiaries of MFS, which bought Vestar.
The family's statement of claim alleges at one point Vestar asked the woman's son, who had power of attorney, to grant it the authority to invest the funds without his consultation.
He says he declined. After that he claims he received no regular updates on the progress of his mother's portfolio and had to rely on advice given to him at various meetings with the adviser.
"At no point in time did [the adviser] or any member of the team ever warn the plaintiff as to the danger her portfolio was in or of the need to diversify it," the claim alleges.
Bridgecorp collapsed in July 2007, owing 14,000 investors $459 million. Capital and Merchant followed four months later owing 7000 investors $167 million.
The family claims Vestar failed to adequately diversify the portfolio away from its emphasis on finance company deposits, did not effectively monitor those companies and created an advantage for Vestar by recommending their mother invest in associated companies.
A quarter of her funds were invested in MFS subsidiaries, a conflict that was never disclosed, they claim.
Syms was also a director of Boston Finance at the time.
The family are seeking compensation for their mother's losses, plus 8.4 per cent interest and court costs. The other investors are seeking similar amounts.
Barry Keon lost $400,000 through Vestar and is the founder of the Victims of Vestar group.
He is one of several dozen investors bringing similar action against the company's directors and investment committee in a separate case in Auckland.
He worked as many as three jobs to get to the point of owning seven rental properties, he said. When he sold four of them he invested the proceeds on Vestar's advice.
More than half of that investment is gone.
Syms said the investors taking action were in the minority. "Out of 4000 investors the majority really do believe that we have done a pretty good job."
Investors received much more than the retail rate being paid by lenders as a result of investing through Vestar.
Comments about his lifestyle were "emotive", he said. "We had a very good business that was sold and the world changed.
"We were the talk of the financial planning industry when we sold and it's very simple - there's a thing called tall poppy syndrome."
