Money Managers Action Group

There is a recent news article in the Dominion Post titled “Over Generious Helping of Risk Leaves Bad Taste” written by Chalkie. alias Tim Hunter, the Fairfax Business Burreau Deputy Editor.

In it he makes reference to three people you will all be familiar with, our old friends Doug Somers-Edgar, Gerald Siddall, and Russell Tills.

Siddall & Tills are owners and controllers of NZ Funds Management, which is getting a bit of bad press lately.

These same two gentlemen along with Somers-Edgar, are also owners and and controllers of First Step, and these two organisations are closely tied together, which means any problems associated with NZ Funds Management will have a flow on effect with First Step, more than likely resulting in more writedowns and losses for the First Step Investors.

Unfortunately a large number of Money Managers investors would also have got sucked into investments with NZ Funds Management.

Throw in yet another link to Martyn Reesby, who owns Strategic Finance (also in the news for the worst reasons) and you have yet more losses for Money Managers & First Step Investors.

Have a read of Tim Hunters article, and you will get an idea of the tangled web of companies, bad investment decisions by the owners of NZ Funds Management, and losses for the ever suffering investors.

http://www.stuff.co.nz/business/opinion/6883861/Over-generous-helping-of-risk-leaves-bad-taste

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Chris Lee is urging investors to write to the Trustee “Calibre Asset Services” to seek help in recovering money lost in their investments with Money Managers First Step, and to ask what are the Trustee’s future role and plans in pursing compensation for all the investors he represents.

 See the article on Chris Lee’s web site “Taking Stock 22^nd March 2002

 http://www.chrislee.co.nz/index.php?page=newsletter-display&list=2&month=March&year=2012

 This is a result of the recent ruling by Justice Dobson in regard to the collapse of Lombard Finance, and the resultant court case where the Directors have been found guilty.

 He notes:

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What Justice Dobson has clearly said means that when any mortgage trust (like Canterbury Mortgage Trust or Money Managers First Step) or finance company (like Strategic Finance) offered a prospectus or investment statement to potential investors, the company had to disclose known risks and problems that a notional investor would want to consider before investing.

 If some loans were already sick, or if liquidity was falling, or if collections were well below budget, or if deposit renewal rates were collapsing, then these matters had to be discussed in simple, honest terms.

 Justice Dobson even wrote some paragraphs as an example of what Lombard’s directors should have said in their offer documents.

 Directors had no right to hide relevant problems, they had no right to take the view that saying too much might “scare the horses”. To do so, would be criminal, the Judge said.

 I interpret his ruling as saying that new investors were entitled to a truthful picture of the company, even if that disclosure might be damaging to existing investors, in that such disclosure might threaten the company’s future.

 In effect this should mean that every investor would invest new money on the basis of all information currently held by directors.

 What all this means is that anyone who read a prospectus or investment statement, and then invested money by filling in an application form, would be accepting all known risks.

 If known risks were not disclosed, then a crime had been committed.

 Every investor who lost money as a result of that crime would find it fairly easy to link the crime to a compensation claim.

 Class action against the directors and perhaps the chief executive would seem likely.

 Chris Lee also indicates he would be pleased to receive copies of trust companies replies so he can publicly acknowledge their full and honourable responses.

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 The Money Managers Action Group agrees with this recommendation and also urges investors to write to:

 Edward Russell

Chairman & Director

Calibre Asset Services

Trustee Company

Private Bag 92226

Auckland

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One of our members wrote to our Orange Finance Trustee Company. After two months they have finally responded.

Having done nothing positive for us over the past few years we would like to see them acting positively in our interests now. Unfortunately, from these responses it seems they will not be looking to canvas our views regarding extending the moratorium and nor are they pushing hard to get things resolved in our best interests.

Answers supplied by Stewart Lockhart, Corporate Business Manager, Covenant Trustee Company Limited

Question 1.  Matrix Funding are charging $27,000 per month, and have only recovered 37% of principal so far.  What staff do they have, and how is this $27,000 per month justified.  As shareholders we have a right to know, and should be given a breakdown of costs.

Answer:      The management fee was appropriate at the time the moratorium was entered into in August 2009. Indeed,  it compared very  favourably with other moratoria, and the receivership option.

Question 2.  Will Covenant as Trustee be automatically extending the moratorium for 12 months, or will you allow shareholders a vote on whether or not to extend it.  If you are extending it what level of fees do you think are justified?

Answer:   Regarding the management fee , in March this year Covenant  met with Orange and amongst other things we  discussed an  adjustment to the management  fee. The fee reduction discussions have not been concluded yet.   In March this year  Covenant also had initial discussions to extend  the moratorium for a further year as from 31 July 2011 .The Company expects to have paid 42 cents in the dollar principal by 31 July 2011. (see the moratorium report dated May 2011  for further details.) The decision to extend the  moratorium will be made in July this year, and at that point,  an announcement will be made to the debenture holders. You may  recall the terms of the moratorium which commenced in August 2009   -  that  the trust deed does not require  a further meeting  of debenture holders to give effect to an extension to 31 July 2012.

Question 3.  If the Moratorium is extended a further year until August 2012, and the full amounts have still not been recovered by then, what is the outcome for shareholders regarding monies still to be recovered, possibly still a further 4 years away?

Answer:  if the moratorium is extended to 31 July 2012, and at its conclusion  there should be  debenture holder moneys   outstanding  the options to consider will be  a further moratorium or to appoint a receiver.

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Recently unsolicited letters started arriving from Energy Securities LP offering $1.65 per share for your DNZ shares which are currently valued at $1.22.

DO NOT accept this offer.

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Latest Report – 31 March 2010

Reviewing the recent report is further gloomy reading for investors.

The moratorium was implemented in August 2009 and now in Feb 2011 we have the following facts:

37% of the principal has been repaid – but the rest of the money is a long way off, up to five years away.

Is it what you expected from your 2 year moratorium?

Remember that Somers-Edgar’s Matrix Funding is being paid $27,000 per month yet they are clearly failing to deliver. Does that surprise anyone?

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The Institute of Financial Advisors have decided to ignore the massive losses suffered by First Step investors by partnering with NZ Funds – appointing them their “Professional Development Advisors”.

What skills NZ Funds will pass on to the industry are unknown – but if others adopt the historic financial management techniques of NZ Funds owners we have serious concerns for investors in New Zealand.

Mr Siddall & Tills, the ultimate owners of NZ Funds, were beneficiaries of trusts that made many millions of dollars through First Step – a scheme which lost millions of dollars of investors money and was plagued with multiple levels of inter-related transactions with little independent oversight.

Incredibly the IFA now holds these two individual’s company up as a beacon for the industry – yet neither of them have ever fronted up to explain how such apparently safe investments turned so bad.

If you find that appointing NZ Funds as Professional Development Advisors is an affront to the losses and pain you have suffered please write to Peter Lee, Chief Executive, IFA, peter@ifa.org.nz.

Read more about these Siddall & Tills here http://www.stuff.co.nz/sunday-star-times/business/3016690/Old-school-tennis-champs-NZs-hidden-money-men

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Chris Lee, a sharebroker on the Kapiti Coast, has written this damning commentary of the First Step fund.

Archives / Taking Stock /  3rd February 2011.

 http://www.chrislee.co.nz/index.php?page=newsletter-display&list=2&month=February&year=2011

He clearly demonstrates that “First Step” was a house built on sand.

The lawyers cleverly constructed the foundations to protect the few who made millions but inevitably it failed due to its poor lending practices and lack of capital.

It is a sad indictment of New Zealand that three individuals can make ten’s of millions of dollars at the expense of investors – yet suffer no official sanction.

They would legally be entitled to launch the same scheme again today!

Those that fail to learn from history, are doomed to repeat it. - Winston Churchill

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Reading the papers this weekend should be cause for some optimism.

Firstly, the Serious Fraud Office has First Step on its radar read it here -

And then we read the Commerce Commission is making inquiries as well read it here.

Lets hope that they make progress on our behalf.

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