Elderly investors lost savings to fraudster's scam

By NAOMI LARKIN and ANGELA GREGORY

George Haddow knew something was amiss when he was told his investment could not be repaid because the company directors were away at Princess Diana's funeral.

What he did not know was that he was only one of many elderly Aucklanders who had lost their savings to Eric Isadore Jaffe's money-making scam.

The investors, mainly retired Aucklanders, lost $2.8 million, mostly in sums ranging from $10,000 to $250,000.

Jaffe, aged 79, was convicted in the Auckland District Court this week of seven charges of making a false statement by a director and one charge of forgery.

He was discharged on one count of making a false statement by a director.

The charges, brought by the Serious Fraud Office, related to the Industrial Banking Corporation, which was established in Sydney in the 1930s and bought by Jaffe in the 1970s.

IBC's share issue was supported by accounts claiming the company had $170 million in intellectual property rights. The shares were due to be redeemed in 1997 but were not repaid.

Prosecutor Rhys Harrison said investors were not told the assets were intangible, consisting of intellectual property rights rather than concrete assets.

Creditors established that IBC's physical assets amounted to the net interest in four heavily mortgaged townhouses overlooking Westhaven Marina.

The townhouses on Ring Terrace, St Marys Bay, were bought for just over $2 million by a Wellington company controlled by Jaffe, IBC International.

The ASB Bank took the townhouses to mortgagee auction in 1998 and sold them back to a Jaffe family company, Jaffe Trust, for $2.1 million. The mortgage default was $1.7 million.

Land transfer documents show that sale was followed a fortnight later by the sale of the four units for $3.1 million to Rotorua developer Tai Cheng Liao.

The Herald understands that even if reparation orders are made, Jaffe's assets could remain beyond reach if they are tied up in a family trust.

Like many other investors, Mr Haddow, 72, and his wife, put their $40,000 in the scheme after being introduced to it through Jaffe's agent, Chris Evatt.

They understood their shares would be worth $56,463 in 30 months, but realised they had lost the lot less than a year later.

Jaffe had not left them broke, but they were unable to upgrade their car, replace worn carpets or modernise their kitchen.

"He has stolen our general comfort," Mr Haddow said.

His former employer, the Auckland City Council, had invited a number of investment advisers, including Mr Evatt, to talk about what could be done with lump-sum redundancy payments.



Others came in contact with Mr Evatt through the Probus (Professional and Business Retired People) club, where he talked on investments.

"He was so plausible and it sounded like a good return," one woman said. "We were taken for suckers."

This week's verdict was the climax of a five-week trial and the end of a saga stretching back to 1980, when Jaffe was declared bankrupt.

At the time, he told creditors he had a concept "which totally protects the investor against losing his money."

Jaffe was facing claims from bankers, the Inland Revenue Department and individuals for more than $300,000.

Their saviour company, IBC, was "my expertise as far as my concepts are concerned," he said.

But in 1997, in a written judgment appointing two interim liquidators for IBC, Master Ann Gambrill in the High Court at Auckland referred to these concepts and intellectual property as relating to "crashed war planes, opportunities in Indonesia and proposed developments around the Pacific."

Evidence she heard included proposals for a development in Fiji, parking buildings, joint-venture agreements "and concepts of transporting pilgrims from Indonesia to Mecca."