The Green Acres Franchise Group has welcomed news a "master franchisee" allegedly behind a multi-million dollar scam has been charged with fraud.
The Serious Fraud Office (SFO) today laid three fraud charges against Keith Victor Lapham in Auckland District Court, alleging that while a master franchisee for Green Acres he obtained money by deception.
The SFO alleges Lapham obtained $3,591,900 from about 172 people to whom he granted sub-franchises from March to December 2007.
Green Acres chief executive Andrew Chisholm said the last 11 months had been extremely difficult for the company.
Mr Chisholm said at no time was the company or any of its directors the subject of an SFO inquiry.
Lapham was an independent contractor who had purchased, under a franchise agreement, the right to use the company's system and as part of the grant of the franchise rights, he was entitled to sell ironing sub-franchises, Mr Chisholm said.
The company had expressed sympathy for those who had been affected, and had offered them the opportunity to take up, at no fee, a franchise, he said.
"We have now given a number of ironing businesses to people who indicated that they wished to take up this offer."
The company had also put a further group of affected people into lawn-mowing, domestic cleaning or commercial cleaning franchise businesses, without an additional franchise fee, he said.
The charges against Lapham follow complaints from mainly Chinese and Indian immigrants who paid up to $25,000 each for ironing franchises.
In a statement today the SFO said it alleged Lapham obtained the money by telling the sub-franchisees that he would pay them a guaranteed income of $650 per week when he knew he would be unable to pay that money.
He used the payments he got from new sub-franchisees to pay guaranteed income to other sub-franchisees.
The SFO also alleged Lapham obtained $96,000 of the $3.5m by telling four franchisees there were many fewer sub-franchises in the Auckland area than in fact there actually were.
Those representations were important to the sub-franchisees in deciding to enter into agreement with Lapham.
The third charge alleges that Lapham obtained $244,800 by making false representations to Green Acres about how many sub-franchises he had granted.
That sum represented money that he was obliged to pay to Green Acres based on the number of new sub-franchisees that he had.
Lapham was remanded on bail until February 2.