The Securities Commission has confirmed it is investigating Credit Sails, a complex financial product whose value collapsed from $91.5 million in 2006 to zero amid the global financial crisis.

The probe adds to an existing investigation by the Commerce Commission into whether the product’s marketing breached the Fair Trading Act.

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The Commerce Commission has concluded action under the Fair Trading Act against the promoter of property schemes in which vulnerable consumers were misled into thinking they were buying properties. In fact, the consumers were never registered on the titles as the owners of those properties.

In the Auckland District Court, THE HOME FINANCE COMPANY LIMITED, MEGURO LIMITED and the director of both companies, Christopher Mark Ashenden, have been found guilty of breaching the Fair Trading Act, and ordered to pay $237,048 in fines and court costs and $42,764 in reparation.

In these schemes the investor companies purchased residential properties primarily in South Auckland using a property investment model promoted by Ashenden. These properties were then marketed using phrases such as “why rent when you can buy,” and “why rent when you can own, rent is dead money.”

People who signed up to the scheme, instead of owning the property outright, were granted the right to occupy the property under a 30-year instalment agreement with various property investment companies. These companies had bought the properties and remained recorded on the titles as their owners with their own mortgages registered against them. The people who occupied the houses then made weekly payments of principal, interest, rates, taxes and insurance to the owners. The house occupiers were also required to fund any repairs that the property required.

It was not made clear to these occupiers that their agreements did not give them legal ownership of their property until the end of the 30-year period.

When sentencing Ashenden and his companies, Judge L H Moore commented, “By encouraging vulnerable people in the mistaken belief that they were acquiring home ownership rather than a package of rights and obligations which, on any view, fell far short of that concept, folk were lured into commitments which were a recipe for disasters in which they lost everything they had put into the property they were seeking to acquire – indeed were given to understand they had acquired.”

Judge Moore also commented that Ashenden’s offending had contained strong elements of cynicism and the calculated exploitation of people. Large penalties were imposed on Ashenden despite the fact that he had been adjudicated bankrupt in New Zealand in October 2010.

Judge Moore considered that the bankruptcy was no more than a ploy and was certainly not an indication of his true worth. He stated, “The court has no hesitation in concluding that Mr Ashenden is one of those people whose affairs are deliberately kept complicated to the point where it is exceedingly time consuming and expensive to unravel them…”

“The case emphasises the importance of seeking independent advice before signing up to a property deal. Buying a property is a complex transaction and the right advice will ensure that you are fully aware of all the risks and benefits before any financial commitments are made,” said Commerce Commission Enforcement Manager Stuart Wallace.

“The Commission is pleased the Court has recognised that consumers caught up in the scheme suffered significant financial harm and distress and has ordered reparations as well as fines,” said Mr Wallace. “It is also encouraging to see that the Courts are prepared to look past complex commercial structures to ensure that the people and entities that are instrumental in these schemes do not escape penalty.”

Civil action is continuing against Home Finance Company, Mr Ashenden, and other investment companies involved in the Home Finance scheme in relation to other properties that were part of the scheme.

Background

Other similar schemes. In a similar case in June 2010 Steven Gustafsson, the now bankrupt promoter of another property scheme, the Haven Property scheme, pleaded guilty to making similar misrepresentations. Gustafsson agreed to make payments totalling $30,000 to affected occupiers of the Haven properties.

In connection with the Haven scheme, salesperson Daniel Simperingham, and his investor company KAURI POINT PROPERTIES LIMITED, also pleaded guilty to charges relating to their part in the scheme and were ordered to pay reparation totalling $25,000 to affected occupiers. Criminal and civil action is ongoing in respect of the Haven scheme.

In August 2009, three companies involved in another similar property management scheme pleaded guilty to breaching the Fair Trading Act:

* INVERCARGILL PROPERTY MANAGEMENT LIMITED was fined a total of $38,500 and ordered to pay $25,000 in reparation to occupiers of properties that the company had managed;
* NEWFOUNDLAND LIMITED was fined $13,500 and ordered to pay reparation of $10,955; and
* SOUTHERN HOUSING GROUP LIMITED was fined $10,500 and ordered to pay reparation of $5,000.

In November 2009, a related company, CMA Property Investments Limited was convicted of eight charges of breaching the Fair Trading Act in the Invercargill District Court. CMA Property Investments Limited was fined $40,000 and was ordered to pay $42,290 in reparation to occupiers of properties involved in the scheme. CMA was also ordered to pay $1,040 in court costs and $1,600 in solicitor’s costs. CMA PROPERTY INVESTMENTS LIMITED is a registered company, incorporated in March 2008. The director and principal shareholder is Christopher Mark Ashenden but Steven Gustafsson was once a director of that company.

Christopher Mark Ashenden is the director and sole shareholder of THE HOME FINANCE COMPANY LIMITED and MEGURO LIMITED. Ashenden had a number of New Zealand companies but applied for voluntary bankruptcy and was adjudicated bankrupt on 22 October 2010. He owes money both in New Zealand and in Australia. Ashenden now lives the USA where he promotes a product known as ‘Brainquicken’, a health supplement, on websites and in blogs.

Steven James Gustafsson is the director of HAVEN PROPERTY GROUP LIMITED with shares owned jointly by him and his wife Stephanie Elizabeth Gustafsson. Stephanie Gustafsson is the sole director and shareholder of Haven Property Investments Limited.

The Fair Trading Act. Court penalties for breaching the Fair Trading Act can include fines of up to $200,000 for a company and $60,000 for an individual per offence. Only the courts can decide if the Fair Trading Act has been contravened and set appropriate penalties.

Section 14 1 (b) False representations and other misleading conduct in relation to land says:

No person shall, in trade, in connection with the sale or grant or possible sale or grant of an interest in land or with the promotion by any means of the sale or grant of an interest in land,

(b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put, or the existence or availability of facilities associated with the land.

Source: Commerce Commission press release

Two directors of a Christchurch-based building company that has gone into liquidation pleaded guilty to multiple charges of breaching the Fair Trading Act in the Christchurch District Court today. They have been fined $15,000 each and have been ordered to pay a total of $97,000 in reparation and a further $30,000 for emotional harm reparation in total for six complainants.

Leslie James Day and Malcolm Bruce Jones were directors of Balmoral Homes Limited, a company that designed and built residential homes in the Christchurch area.

Published: Commerce Commission Media Releases
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New Zealand Companies Office records for BALMORAL HOMES LIMITED list Leslie James DAY and Malcolm Bruce JONES as directors.

An Auckland-based car finance company has pleaded guilty to breaching the Credit Contracts and Consumer Finance Act (CCCF Act) and the Fair Trading Act in relation to car loan contracts. Dolbak Finance Limited has been fined a total of $2000 in the Auckland District Court yesterday.

A Commerce Commission investigation found that Dolbak Finance Limited’s car financing contracts did not comply with the CCCF Act, as they did not accurately disclose the annual interest rate charged on the loans.

Published: Commerce Commission
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New Zealand Company office records show Anthony Christopher BAKER as the sole Director and Shareholder of Dolbak Finance Limited

… Stuart Wallace, enforcement manager of the commission, said five addresses in the Auckland region had been served with search warrants in an operation this week.

The searches relate to internet search directories National Business Online (nbo.co.nz), New Zealand Business Online (nzbol.co.nz) and NZ Look (nzlook.co.nz).

New Zealand Business Online’s sole director and shareholder is Shallandra Singh, also known as Shailendra or Shallendra.

Read the full article on line >>> NZ Herald – nzherald.co.nz

Kenneth James Ross, the organiser of the failed air and car show Wings and Wheels over Waikato, was sentenced to nine months home detention and 200 hours community service in the Hamilton District Court today.

Mr Ross was found guilty of five breaches of the Crimes Act and five breaches of the Fair Trading Act in Hamilton District Court in November 2009 after a three and a half week defended hearing. The charges were laid following a joint investigation undertaken by the Commerce Commission and the New Zealand Police and related to various false and/or misleading claims made by Mr Ross to Waikato Regional Airport Authority (Hamilton International Airport), corporate sponsors and consumers in the planning and promotion of the proposed airshow.

Published: Commerce Commission
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The Commerce Commission has had enough and has stepped in to sort out refunds to people holding tickets for the failed Wings and Wheels Over Waikato airshow.

In March, the commission obtained a court order freezing the assets of Hawker Holdings, Airshow.co.nz Media Limited, airshow.co.nz Limited and Kenneth James Ross, so that ticket money would be available for refunds.

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New Zealand Companies office records for HAWKER HOLDINGS (NZ) LIMITED:

• Director: Kenneth ROSS
• Company Status: Struck off (updated 18 November 2010)

New Zealand Companies Office records for AIRSHOW.CO.NZ – MEDIA LIMITED:

• Director: Kenneth ROSS
• Company Status: Struck off (updated 18 November 2010)

New Zealand Companies Office records for AIRSHOW.CO.NZ LIMITED:

• Director: Kenneth ROSS
• In Liquidation from 28 Aug 2008
• Liquidator: INSOLVENCY MANAGEMENT LIMITED

Low returns for carpet-cleaning and water-blasting business franchises led to Commerce Commission inquiries that resulted in two men facing fraud charges at a depositions hearing in Christchurch District Court.

Stewart John Brown, 43, was before the court yesterday on nine charges of fraud and four of forgery. Robert Llewellyn Parr, 55, of Horowhenua, faces a charge of obtaining by deception and one of fraud.

Read the full article online >>> NZ Herald – nzherald.co.nz

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