KEY POINTS:
A former Commerce Minister regrets being a director of ruined property business Blue Chip but says he didn't warn the public about the company's problems because he feared the corporate fallout.
John Luxton, Commerce Minister from 1996-97, was a director of Blue Chip for a year until he wrote a scathing resignation letter in October 2006 criticising many aspects of the business and founding shareholder, director and boss Mark Bryers.
But Luxton never raised the problems in public. Now, hundreds of New Zealanders stand to lose their life savings and family homes after investing with the company.
Luxton yesterday defended his decision to be publicly silent about problems with the company, saying his first duty was to Blue Chip.
"I thought if I went public on the issues it would do enormous brand damage to the organisation and prevent any opportunity of trading their way through," Luxton said.
"The last thing you do is destroy the brand of a company that a lot of people have invested in."
His resignation letter said he lacked confidence in the "advice, judgment and frankness" of Bryers and listed serious problems he said the company faced, including "cash bleed".
The letter was sent to the Herald anonymously but Luxton confirmed it was his letter and he said it was written partly as an attempt to change Blue Chip. The letter was only sent to the board so Luxton questioned who sent it to the Herald.
Former politician Wyatt Creech was also a Blue Chip director and resigned in June 2006, but could not be reached for comment yesterday.
Luxton's resignation letter raised the issue of a $17 million related-party non-Blue Chip expenditure.
"Of course I knew that related party expenditure was occurring, but this goes well past expectations and is taking much longer to resolve than expected," Luxton wrote when he resigned.
Blue Chip was trading at a profit at the time, but Luxton wrote that the board did not have the information it needed for adequate governance, despite numerous requests for information.
"I no longer have confidence in the advice, judgment and frankness of the managing director," Luxton wrote of Bryers. "I believe the serious problems facing the company can be surmounted but I am not willing to have my reputation dependent on a key person and fellow director whose reports and work I would require to have continually verified.
"I am realistic enough to know that he remains integral to the company as its major shareholder, founder and the developer of its key product so the proper thing for me to do is resign. I feel let down by Mr Bryers."
Luxton said yesterday one of the reasons he agreed to join the board initially was that it was chaired by Jock Irvine, an Auckland lawyer whom he held in high regard.
