KEY POINTS:
Blue Chip investors in an upmarket country club north of Auckland were told yesterday that the business had a downmarket balance sheet and owed at least $2.7 million.
Twenty-nine investors who bought 35 units at the Gulf Harbour Lodge gathered at the Auckland Club to hear the first report of administrator Bernie Montgomerie.
The luxury waterfront lodge on the Whangaparaoa Peninsula was finished in 2003 and run by Swordfish Lodge Management, whose only director was Blue Chip founder Mark Bryers. Units in the lodge were rented as hotel rooms and investors were paid attractive guaranteed returns - until late last year when the cash stopped.
Montgomerie told investors the lodge consistently ran with a 75 per cent vacancy rate, owed Inland Revenue substantial sums and had accounts which were in a mess.
Investors asked Montgomerie why the lodge was allowed to lose money for four years without them knowing.
"What you had in the Blue Chip scenario is Peter paying Paul to pay Mary to pay Phil," Montgomerie said, describing the business afterwards as like a pyramid or Ponzi scheme.
"That's where the money has gone," he said, adding that it now seemed ridiculous because the investors were entitled to the accounts. But no one asked.
On March 4, Justice Jeremy Doogue of the High Court at Auckland agreed to place Swordfish in administration, after an application from Annette Rawson of Tauranga who owns a lodge unit. The court heard how the 29 investors were owed $457,655.3. Swordfish's sole shareholder is Blue Sky Holdings, one of the group of 20 Blue Chip companies in liquidation.
Montgomerie told the investors that Swordfish had losses of $2 million in the year to March 31, offset by a corresponding $2 million loan from Blue Sky Holdings.
Swordfish owes Inland Revenue $140,852 but its most recent tax return was filed for the year to March 31, 2005. The company had PAYE, GST, KiwiSaver and student loan obligations as well as staff payment and money due on hired equipment.
Montgomerie said Bryers was "too busy to see us" but was legally obliged to meet the administrator.
"He's very difficult to get hold of."
Investors questioned promotional material which said the lodge units could be lived in and had kitchens. They subsequently discovered the kitchens amounted to little more than a kettle and the units were only one room.
MORE WOE
Twenty-one Blue Chip companies owe $72.4 million:
* Nineteen businesses owe creditors $58.1 million
* Franchise business Mide Ltd owes $11.6 million
* The Gulf Harbour Lodge business owes $2.7 million
* The lodge was marketed as "a touch of Paradise"
