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Blue Chip Financial Solutions advanced "substantial" deposits from investors to a company owned by the property scheme's co-founder Mark Bryers, a 2005 independent report says.
The PricewaterhouseCoopers appraisal report, written for Blue Chip as it considered buying several companies from Bryers, said as at June 2005 the "vast majority" of these deposits were advanced on an unsecured basis to Bryers' property development company Ingot Holdings.
Thousands of Blue Chip investors are owed an estimated $84 million after the collapse of the investment scheme. Many paid out large deposits on apartment developments that never proceeded, and have no idea what became of those original investments.
The Serious Fraud Office, among other Government agencies, is investigating the activities of Blue Chip.
The PWC report said Blue Chip had a five-year supply agreement with Ingot, a property trader and developer. Ingot would supply residential property stock to Blue Chip, which it would then offer as investments to its clients.
At October 31, 2005, Ingot was obliged to supply Blue Chip with 707 properties, the report said.
It said it was clear Ingot's operations were "closely intertwined with those of Blue Chip", and that Bryers was "actively involved in the day-to-day activities of Ingot". Blue Chip's reliance on Ingot was significant enough to rate a mention by the company's auditor in its audit report.
At the time Mark Bryers was still managing director of Blue Chip, and family interests linked to him owned 61 per cent of the then-NZX listed firm.
The PWC report said at the time of writing that Ingot had three major apartment developments in progress.
Blue Chip investors put 10 per cent deposits on a clutch of apartment developments around Auckland which in the end did not proceed.
Some, such as the former Turner and Waverley project and St Martins, both in central Auckland, are now being developed by unrelated companies for new investors.
The original projects were sold to investors through Blue Chip reseller companies, now in liquidation. The liquidators have said investors owed missing deposits will need to claim against these defunct companies.
In the case of each reseller, the liquidators said the company's records were not up to date. They had "considerable doubt as to the accuracy and reliability of the financial records", and the chance of recovering any money was "unknown".
In their initial reports the liquidators said Blue Chip sourced investment properties through a supply agreement, and that deposits paid were banked to the account of "another Blue Chip company".
Blue Chip later bought Ingot's property trading business, but not its property development activities.
It also bought Tasman Mortgages, Tasman Mortgage Brokers, Tasman Insurance Brokers and Executive Mortgages from Bryers.
BRYERS TO BE INVESTIGATED
Blue Chip co-founder Mark Bryers is being investigated under the Companies Act for not turning up to the Blue Chip creditors' meeting last month.
Liquidator Jeff Meltzer told gathered creditors that as a director of three of the companies in liquidation Bryers was required to attend. His non-appearance would be referred to the National Enforcement Unit of the Ministry of Economic Development.
The NEU said this week it could not act until a liquidator reported a suspected offence.
It said it had been formally notified in the past few days of Bryers' failure to attend the March 26 meeting.
