Insurer probes Blue Chip loans for fraud

Mark Bryers on his way to court. Photo / Herald on Sunday

Blue Chip loans are being investigated by an American corporation to find out if investors' mortgage loan documents were doctored and therefore unenforceable.

A New Zealand private investigation company, working for American insurer Genworth Financial which has insured loans worth millions of dollars, is interviewing 500 finance company customers, mainly victims of the failed Blue Chip property investment empire.

If Genworth finds that fraud was committed, the company is expected to refuse to pay out - possibly allowing those still forced to pay Blue Chip mortgages to claim they are unenforceable.

The new investigation stems from Blue Chip's practice of sourcing money from American finance company GE Money to lend to investors.

The company is a division of GE Capital, one of four major businesses of United States General Electric corporation.

GE Money has submitted insurance claims to insurer Genworth Financial to recover its losses in cases where proceeds of property sales of Blue Chip investments fell short.

Genworth has hired an investigation firm to investigate whether Blue Chip mortgage loan documents were altered or obtained fraudulently to help investors get loans they should never have had.

Last night Serious Fraud Office director Grant Liddell, whose office is investigating Blue Chip, said an investigation into several GE Money franchises (home loan company Wizard) was also under way.

But the inquiry is a race against time and may come too late for some investors, with mortgagee sales claiming family homes, leaving them increasingly stressed and some of them suicidal.

GE Money learned of the investigation only after a call from the Herald on Sunday.

A spokesman said GE Money would consider legal action against Genworth depending on the outcome of the investigation. "It is our right to query an insurer who we believe has not honoured its commitments," he said.

However, the spokesman said insurers would "often do investigations to determine that circumstances are correct" before paying out claims.

The Herald on Sunday understands private investigation firm Risq NZ has been hired to carry out the inquiry. It in turn contracted Advance Investigation in Tauranga to interview about 500 people, mostly Blue Chip clients, on behalf of Genworth.

A Genworth spokeswoman refused to talk about the insurance claims and neither investigation company would comment.

Former Blue Chip boss Mark Bryers now runs a property investment company, Northern Crest Investments, in Sydney but on Friday he returned to Auckland and pleaded guilty to three charges involving Blue Chip.

The collapse of 22 Blue Chip-related companies has seen about 2000 investors owed about $80 million.

Bryers still faces 69 criminal charges. He has pleaded not guilty on those and has been remanded until October.

A legal source said a Genworth representative was present throughout a Blue Chip test case in the High Court in Auckland in April.

Whangarei pensioners Bruce and Judy Bartle are fighting for GE Custodians to cancel the mortgage over their homes. Part of the case deals with claims their loan application documents were altered. A High Court decision has been reserved.

The GE Money spokesman said the company had not probed deeply into whether people could afford the mortgages. "In most cases we did not know that people may have taken money out of the equity of their homes to invest in these schemes.

"Our questioning wasn't invasive but based on normal selection criteria for these classes of loan."

GE Money was working to find acceptable solutions for those affected, he said, but "the fact remains that they have entered into legal commitments and we expect to collect on those".