Property scam still haunts victims

By ANNE GIBSON

Nearly a year after a flamboyant fraudster killed himself, Auckland investors are still paying the price. A law firm and a bank are the latest shown to have been tricked.

AMP Bank and the nominee company for an Auckland law firm were hoodwinked by Jonathan Powell, who took Aucklanders for at least $3 million, then hanged himself in March, just before he was due to appear in court.

Powell, who once occupied lavish offices on Princes Wharf, had a fancy European car rental business and a pile of worthless credit cards, continues to haunt Auckland businesses.

The latest victims are about 20 clients of a Fortune Manning nominee company who loaned money for what they thought was a sound investment and a 9 per cent annual return.

Also stung was AMP Bank, which also loaned Powell money for a Waiheke Island resort.

Powell, an Englishman who claimed to have been a Falklands paratrooper, served in Northern Ireland and been in Prince Charles' protection squad, committed suicide in a Parnell warehouse on the eve of his scheduled appearance in the Auckland District Court to face about 100 charges involving more than $720,000 of credit card fraud.

Fortune Manning & Co Nominees - a nominee mortgage company associated with Fortune Manning - loaned $1.27 million to Waiheke Island Developments. Powell was its director and shareholder.

Powell hatched a plan to expand the resort and first went to AMP Bank to borrow money to buy 11 units there and the lease on the conference centre.

Next, he went to Fortune Manning with a proposal to borrow the money for the resort, so Fortune Manning commissioned registered valuer Gordon Edginton of Prendos to assess the property. He said it was worth $2.5 million and would be "suitable security for a loan of up to $1.5 million."

The nominee company raised the money from its clients and loaned it to Powell.

Auckland investor and Fortune Manning client Miles Cain was one of those who, in late 2000, sank $100,000 into the nominee company, expecting to get nearly $110,000 back.

Powell's difficulties came to the fore and the loan went bad, leaving AMP Bank and the Fortune Manning investors to retrieve what they could.

But when they sold the resort, they got much less than they expected and certainly less than they had loaned. The business was sold for $1.4 million, according to a letter sent to the nominee investors in January from Fortune Manning.

Getting so little for the resort left everyone worse off - the banks and Fortune Manning Nominees had loaned more than the asset was worth.

Cain was told he would get only 21c for every dollar he put into the venture, amounting to just $21,000. He has lost most of his original investment and faces the prospect of taking action against a law firm.

He is upset that Fortune Manning is charging for the time involved in the deal. "In light of the significant capital and interest loss of about $1.13 million, what justification does Fortune Manning Nominees have for charging its clients $56,000 for managing this disastrous investment that was offered on Fortune Manning's recommendation?" Cain asked the law firm in a letter.

Powell amassed such a long list of credit checks in his short time in New Zealand that bankers said shortly after he died that his past should have rung alarm bells to anyone in business.

Cain is distressed that Fortune Manning has refused to provide him with names of the other investors so he can call a meeting and decide if anything can be done.

He is also frustrated that the investors are being charged by the law firm and he wants to hear from others who have also lost money in the Waiheke venture.

He questions why Fortune Manning did not do a thorough credit check on Powell before it loaned him the money.

But Fortune Manning maintains it did check out Powell thoroughly.

Rob Coltman, a Fortune Manning partner, revealed details this week of his firm's disastrous investment, following a distressed plea from Cain.

Coltman could not talk specifically about Cain's investment due to client confidentiality, but he was willing to confirm that the money was loaned to Powell for conference centre facilities at Waiheke Island Resort and that when the loan was in default, the property was quit in a mortgagee sale at AMP's behest.

"Waiheke Island Developments defaulted on its loan repayment obligations, with the result that the land was sold at mortgagee sale. The nominee company and, through it, its investors suffered a loss on the sum advanced. Fortune Manning and Co Nominees is currently investigating possible steps to mitigate the losses sustained by investors.

"An independent valuer is reviewing the valuations upon which the advance was made and the receiver of Waiheke Island Resort 2000, a related company which managed the resort, is being interviewed to ascertain the precise reasons for the failure of the business.

"Until those investigations are completed, it is premature to speculate as to what will happen next," Coltman said.

Another Fortune Manning partner, David Selkirk, wrote to investors on February 26 saying a mortgage broker - whose name he could not recall when asked this week - had approached the nominee company and everything seemed fine upon investigation.

"At the time the mortgage was advanced, bookings for the conference centre, deposits and cash flow appeared strong.

"It is believed that if it were not for the 'milking' of the company to meet obligations under other enterprises and the high living expenses on the part of Mr Powell, the Waiheke Conference Centre would have been a viable proposition," Selkirk wrote.

Although Fortune Manning did not act for Powell, it got "comprehensive documentation" of the Waiheke venture's financial performance and cashflow forecasts and undertook extensive checks.

Selkirk also revealed that AMP Bank was stung by Powell, loaning money for him to buy the 11 units and the lease on the conference centre. "When default first occurred, AMP's receiver moved in to continue to run the business. This of course was advantageous to AMP, who could otherwise have lost value by the business ceasing to operate.

"It was also of advantage to the nominee company, who likewise would have lost value if the business had ceased," Selkirk wrote.

In the end, AMP and the Fortune Manning nominee company got only $581,000 back, Selkirk told investors in January.

But even that small amount was to be split between the bank and nominee company and "approximately $280,000 is available to our investors".

AMP Banking's head of the property finance and rural division, Martin Blockley, refuses to say exactly how much his staff loaned to Powell two years ago, but maintains the staff at AMP thoroughly checked Powell out, met him and found him to be "a plausible individual".

When Powell defaulted on the loan, AMP appointed a receiver from Gosling Chapman and last year quit its losses in the mortgagee sale, with Blockley saying a loss was suffered partly due to publicity about Powell and his financial problems.

But he remains philosophical about AMP's substantial loss: "We've moved on from there.

"We had a fantastic year last year. We're in a risk business and sometimes loans go off the rails," says Blockley.

When the resort was put up for tender, bids on the supposedly $2.5 million property ranged from only $1 million to $1.4 million and it was eventually sold for an undisclosed sum to associates of Brent Gibson, according to Fortune Manning's Selkirk. "This individual was in fact a second charge holder behind both the nominee company and behind the AMP Bank," Selkirk wrote to investors.

But Gibson said this week he had not bought the property. He was only the manager and the buyer was Palm Beach Holdings, whose director is Simon Barnes.

Gibson said he was managing the resort through his United Leisure Resorts and wanted no bad publicity for the resort, which was now doing well and he wanted to keep it that way.

Fortune Manning is now asking questions about the Prendos valuation and wants an opinion from Evan Gamby of Telfer Young, who will "review the valuations upon which the mortgage was based", Selkirk says.

Investors will be told in the next few weeks what the results of that are. When contacted this week, valuer Gordon Edginton said he had nothing to say about his $2.5 million valuation on the property and the subsequent sale for much less.

In the meantime, Cain fears further charges from Fortune Manning over what started out as a good investment and turned into a disaster.

He still hopes he can meet other investors to talk about what can be done.

* Miles Cain wants other investors who lost money in the Waiheke Island venture to email him at m-cain@ihug.co.nz

Waiheke Resort

Fortune Manning Law Partnership

AMP Banking