Mark Bryers questioned over Blue Chip's related party lending and cash flow
Former Blue Chip boss Mark Bryers returns to the witness box today, having faced a day of questions on his management of the failed property investment company, as the High Court continues its examination of his application for discharge from bankruptcy.
Bryers was adjudicated bankrupt in October 2009 owing $230 million. Typically bankruptcies last for a three-year term and his lawyer David Chisholm said Bryers had already served an extra two and a half years because of delays in getting the hearing.
"For a first-time bankrupt, he's the first to have an extension of his bankruptcy for such a long time," Mr Chisholm said.
The Official Assignee is seeking conditions on his discharge from bankruptcy, including banning him from owning and operating a business in New Zealand for an indefinite period.
The Blue Chip group of companies failed in 2008 owing $84 million to more than 2000 investors.
Most of Bryers' assets were held in family trusts and he told the court he was required by the banks to provide a personal guarantee as a director of the various special purpose property companies despite the assets of those companies being trust-owned. "You can't get a loan in New Zealand without that," he said. It was those guarantees that he gave to commercial lenders that are said to have led directly to his bankruptcy.
Bryers and his family interests held a 61 percent stake in Blue Chip in 2005, but that had been whittled down to just 3 percent at the time of his bankruptcy. He told the court that once the company had co-listed on the Australian stock exchange in 2006 the listing rules required him to continue to reduce his holding. "Most of the wealth accumulated by my family trusts over time, despite what the media says, had very little or nothing to do with the public company."
Bryers pleaded guilty to 34 financial reporting charges in May 2010 and was fined $37,500 and ordered to completed 75 hours of community work. The charges didn't relate directly to the failure of the company but the judge described Bryers as utterly failing in his obligations as a company director.
Phillip Cornege, the lawyer acting for the Official Assignee, spent much of the day yesterday when Bryers was in the witness box questioning him over cashflow difficulties and related-party lending within the Blue Chip group, in an apparent attempt to demonstrate why he shouldn't be allowed to run a company here in future.
The failed property company was said to be on the brink of insolvency from mid-2006, largely due to huge related-party payments to Bryers that seriously impacted cashflow.
Cornege referred to a risk assessment by Blue Chip's chief risk officer, Simon Franklin, and a briefing prepared by senior staff without Bryers' knowledge – which were delivered to Blue Chip's board between August and September 2006. Director and former National MP John Luxton resigned the following month, and later revealed his concern at Bryer's management because of the millions of dollars worth of related-party expenditure.
As a result of the cash-drain, Blue Chip had to arrange expensive bridging finance.
Bryers put much of the blame for the cashflow difficulties on alleged incorrect accounting by the group's former financial officer and a change in accounting treatment for property development income.
Blue Chip switched its business model from doing developments associated with Bryers to providing an underwriting fee for third party developments. The fee wasn't paid by the developer's financiers until a certain number of units had been sold off the plans. Bryers said there was a serious underestimation of what impact that delay would have on Blue Chip's cashflow.
Since 2007 Bryers has been living in Australia and told the court yesterday he had no intention of returning to live here, describing this as his "last visit to New Zealand." He had lost a bid to avoid appearing in person at the High Court hearing, which is expected to wrap up today.
Until August last year Bryers, under the alias Mark Ryan to avoid the public opprobrium attached to his name, was working for an Australian company Talos Accounting Group. It is acquiring small Australian accountancy firms and pitching property investments to their clients, one of the hallmarks of the failed Blue Chip operation.
Long-time Bryers associates, Robert Hughes and Lawrence Eakin, gave evidence yesterday that Bryers was only a strategic consultant to Talos, rather than running it or being a beneficial owner, which would have breached the rules for his bankruptcy due to a reciprocal agreement with Australia. An organisational chart for the company listed Bryers as general manager but Mr Eakin told the court that was later corrected.