Shock as SFO decides not to lay Blue Chip charges

UPDATED 5.30PM The Serious Fraud Office’s decision not to prosecute Blue Chip is hugely disappointing for hundreds of victims of the failed investment scheme, says barrister Paul Dale.

Mr Dale represents more than 200 burned Blue Chip investors and has led several legal challenges on their behalf since the scheme collapsed in February 2008 owing more than $84 million.

“I must get asked once a day what’s happening to [Blue Chip founder] Mark Bryers and as far as I can see nothing has been done for investors,” Mr Dale told NBR this afternoon.

“The investors don’t begin to understand why nothing’s happened and I personally can’t explain to them.”

The SFO began investigating Blue Chip in May 2008. But today the agency said it will not bring any charges, citing insufficient evidence.

“We have concluded that [the] evidential threshold cannot be met,” SFO chief executive Adam Feeley said.

At least 3000 Kiwi investors lost money when Mr Bryers’ complex property scheme failed.

Mr Dale said the SFO decision was “hugely disappointing”.

“As far as I’m aware there has never been a thorough investigation of Blue Chip. The liquidators don’t seem to have done very much. The Securities Commission has done nothing, The Commerce Commission has done nothing and now the SFO aren’t going to prosecute,” Mr Dale said.

“The investors will wonder what an earth has happened.”

In May this year Mr Bryers was fined a total of $33,750 and ordered to do 75 hours community work after pleading guilty to charges laid by the Ministry of Economic Development for breaching the Companies Act and the Financial Reporting Act.

The sentence brought mixed reactions from investors, with some describing it as lightweight.

Mr Dale said the SFO investigation should have been swifter.

“I think it should have happened right at the outset while the trail was warm and there was info and people out there things should have been done quicker.

“At one point we alerted both the liquidators and the SFO to the fact that there was a room full of documents after liquidation in the possession of the directors. But they didn’t seem to produce any action.

“No wonder we have no investors in this country.”

4.45PM: The Serious Fraud Office will not bring any charges against the Blue Chip group as, despite having completed its investigation, there is insufficient evidence.

Investigations are continuing in relation to one of its South Island franchises.

“The Blue Chip investigation has attracted intense public and media interest. However, in order to lay criminal charges there must be a reasonable prospect, based on credible evidence which could be admitted in Court, that an impartial jury could be satisfied, beyond reasonable doubt, that the person prosecuted has committed a criminal offence," SFO director Adam Feeley said.

“We have concluded that this evidential threshold cannot be met.”

“Some may consider that Blue Chip operated in a moral vacuum with high pressure sales techniques and less-than-forthcoming disclosures regarding the nature of the property investments. The Court of Appeal in Bartle v GE Custodians & Tasman Mortgages described the Blue Chip business as a predatory and oppressive asset lending scheme which was inherently defective and fraught with risks.”

“However, the SFO can only form a judgment on matters that cross a threshold into serious criminal acts. In this regard, we are satisfied that insufficient evidence exists for a criminal prosecution.”

Mr Feeley said the SFO had investigated a large number of Blue Chip’s operations, including allegations of:

§ Misuse of purchasers’ deposit money;
§ On-selling of previously sold apartments;
§ Unauthorised amendment of loan applications;
§ Use of false representations and documentation to obtain advances or fees and avoid penalties;
§ False Representations to investors;
§ False accounting for renovations at Mr Mark Bryers’ home.

Mr Feeley said “this is not a decision lightly made. We have collected an enormous number of documents; conducted numerous interviews with investors; Blue Chip staff; and senior officers. However, after extensive discussions with the Crown Solicitors, Meredith Connell, we concluded there is insufficient evidence to implicate any particular individual with criminal conduct.”

Mr Feeley noted that the matter could be reviewed if further, compelling, evidence came to light, but that discussions with interested parties to date had not revealed anything new to the SFO investigations already conducted.

The SFO had also referred matters of professional conduct of lawyers involved in the Blue Chip developments to the NZ Law Society for inquiry.

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