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November 2006 Edition ---- to page back through Previous Editions click here
Back to the Feltex saga. Accounting and particularly auditing is at the heart of this issue but everything else can't be isolated if the case is going to be cracked.
Getting resources thrown into a decent inquiry is the key and to get that one needs to expose as many suspicious circumstances as possible.
The impression that is given is that insider trading is as bad as it gets, and the laws have been a bit slack on insider trading in the past and one has to accept that, but the laws have been tightened up recently so the practice should be under control from now on.
In fact insider trading can easily be used as a cover-up pretext for more serious offending such as stealing public trust or managed funds by way of guardians purporting to have made an unfortunate bad investment by the buying of dud stocks prior to them being officially recognised as being dud stocks. The guardians can get a "fair" share of the spoils by making a personal investment in a small company elsewhere which happens to "come good".
Authorities look at the situation as being one of possible insider trading and so, by and large, the practices continue.
We say that public consideration of whether guardians may be up to that sort of thing goes with the territory of being a guardian. Expressing suspicions has got to be a legitimate activity.
Also a fairly easy follow-up tactic where a lot of suspicion is focused on an issue is for an apparent enthusiastic investigator and litigator to come to the fore The aggrieved parties tend to see him as their saviour and decide to leave it up to him, in the first instance at least. Time gets used up and the chances of anything ever happening becomes remote.
Back to Feltex. All that follows is a list of things that are, for the most part, a little strange including coincidences.
About 6 Nov 2006 the Dominion Post reported that an application had been made to the high court for the appointment of activist Tony Gavigan as a director of Feltex Carpets Ltd (in receivership) the previous directors having resigned. This will give Mr Gavigan access to Feltex records. There would seem to be merit for several other activists with investigation skills being appointed. Perhaps the Shareholders Assn could nominate a few mates for him on a board of directors.
Mr Gavigan apparently has had considerable success in pursuit of insider trading compensation in the complex Southern Petroleum case a long time period being involved. As we understand it he is yet to deliver any cash for his efforts but that might be just around the corner.
Mr Gavigans interest in pursuing the Feltex matter has been previously reported. It has been brought to our attention that he is a hard man to contact. Perhaps it is necessary for him to confine himself to the people he needs. He describes himself as an auditor but seems not to be a member of the Institute of Chartered Accountants of NZ which many auditors are obliged to be. His greatest interest now seems to be in the actions of the receiver which one would think would be quite independent of the reasons for the Feltex collapse. (please refer to page update above)
The ACC subscribed to several percent of the Feltex IPO. Not many other institutions were reported to have been "taken in" by the offer. That was the fate mainly of the proverbial mums and dads who were exercising some personal trust in a broker.
There is a sharebroker on the board of ACC, or at least an ex one. This is Eion Edgar who once chaired Forsyth Barr Group Ltd, This firm was a lead manager for the 2004 Feltex float. Not much of a link perhaps as there are not very many of these big firms. But we wonder whether that firm got any commission on the ill-fated ACC subscription. The Investment Committee of ACC contains a couple of members not on the board or staff. One of these is Trevor Janes who is a broker or former broker. He was an ACC board member when the corporation bought into National Mail for half a mil though the kind service of brokers CS First Boston, associates of the Feltex vendor, when it should have known that the National Mail vendor, Cliff Cook, would likely have better information on the risky purchase than they, ACC, purportedly had. NM departed the mail business a week or two later.
ACC's investment manger is, we think, Nicholas Bagnall. He is not frightened to get in the news media but does not get a mention in the Corporation's 2005 report.
We have many doubts about whether the Turner brother's offer for the revival of Feltex was ever genuine. We think the likelihood is that it was to drag the shareholder's equity down to zero with the passage of time so there would be no "fighting fund" as the Shareholders Assn were thinking of. Many shareholders saw hope in the Turner proposal. Cliff Cook and Andrew Bagnall among were backing this proposal, so it was said.
The Dominion Post article referred to above was under the name of person of surname Janes. We worry about how unusual surnames crop up.
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