To Contact Us
to page back through Previous Editions click here Index is in right hand column

November 2010 Edition ----

Well November 8 is apparently another step on the way for the 1800 odd Feltex Shareholders taking a class action in their efforts to get their money back. We are not at all sure what it is a step on the way to. The people running the case are apparently not going along with the fact that senior politicians are involved in this scam. Their case seems to be that the annual (and probably half yearly) accounts have been faked. We don't disagree with this but we say it is a more difficult route to take.

The legal man now running this class action is not Austin Powers, but we think Austin Forbes. We thought he and many others were known as a Queens Counsel or QC until the other day when we become aware that this title ceased to have legal significance on the first of August 2008 when it was replaced by the term Senior Counsel. But the news media seem to have continued to apply the term QC to those who had it. Apart from the name the main difference between the former QC and a Senior Counsel is that the latter is allowed to be a partner in a legal practice firm. It might be prudent to choose a Senior Counsel who is a partner in a law firm because his partners, fearing for their reputation or out of a sense of fairness and decency, might choose to use their influence to modify any wayward tendencies that the Senior Counsel partner appears to be exhibiting. Then again some might think it prudent not to have a Senior Counsel who is potentially subject to such oversight. If a committee is making an appointment there could be conflict on whether the Counsel should have associates.

Anyway the bad news is that, like the knighthood before it, and in New Zealand only, the Queens Counsel who is not allowed to be a partner of a law firm is staging a come-back. The Lawyers and Conveyancers Amendment Bill is now before parliament and it provides for just such a reversal. The reason why NZ is going backward with respect to knighthoods and QCs is that its Government is trying to hide a lot of misdeeds and knights and QCs, adorned with lavish amounts of hype are "not to be challenged".

Titular honours were of course banned from the beginning in the USA constitution because, no doubt, the new immigrants had seen how such systems were used and abused in Britain and Europe.

There are a lot of unblemished knights and QCs to be sure but scattered amongst them are quasi government agents who we believe support the government by not so fair means. Also the status gives temptations to the holders of titles to branch out to where they do not belong. Like perhaps Sir Colin and Sir Douglas might be examples with respect to financial expertise.

But Sir Eion has been brought up in the financial world. He has found advantage in combining sport into his financial activities. There should be no connection between business and sport but in NZ such connection has got out of hand. Business has been made to look difficult and not for the average person to discuss to our great cost. So the average person spends their time talking about sport, giving it a most unhealthy importance. So Sir Eion was probably approached to pull a few strings to get us some Olympic golds and silvers in 2004. To assist him and reward him for his efforts he was given a high NZ honour, the equivalent of a knighthood. We don't know what the name of that honour was and can't be bothered looking it up. Without a title to go with it honours have quite weak recognition. We believe the Government's side of the deal was to ensure that the Feltex IPO was not genuinely investigated and given an "all clear" by Government authorities. We believe also that the shareholders action is being manage by some party to perpetuating the Feltex scam. We think the action is designed to drag on and fissile out. That is the logical thing for scamsters to do.

A ex QC who we have had a interest in is Peter D McKenzie. Cases he has been involved in since August 2008 still seem to be invariably reported with QC after his name. No doubt he will get it back again officially. Mr McKenzie (the Commission chairman) along with R A Anderson, a Christchuch accountant, and R E Baker a Wellington company director, was on the quorum of the Securities Commission dealing with "certain arrangements entered into by Bank of New Zealand in March 1988". Whether the report of the Commission in relation to the matters which was released in May 1993 was endorsed by the other six members of the Commission is hard to say. Among these six was E M Hickey who's actions as an auditor of the bank and submissions to the Commission on the matters came under much scrutiny in the report. Many of her submissions and her actions as an auditor were not accepted as being correct. The other members of the Commission were not disclosed in the report including Ms Hickey who so 'featured" in the report many times. We say that this is contrary to all acceptable reporting. And although directors and auditors were criticised many times for getting the treatment of long term zero coupon bonds wrong in the 1990 accounts and finding invalid items of profit understatement to offset what overstatement aspects they did find, funnily enough they were all found not to have wilfully done anything wrong. Only they the quorum members apparently had the insight to see the improper treatment, according to them. The directors and auditors including their colleague Ms Hickey were just innocently floundering in ignorance. We find this decision ridiculous and completely wrong. Obviously the Government had pressured or lured accountants and bank officials into falsely reporting a modest profit for the Bank and these people have given in. They wilfully did not do their job and this quorum of the Commission likewise covered up for them. They reported a lack of education to the accountants society and many of us poorer accountants had to pay for there wilful wrong conclusions with our careers since the Society or its successor brought in compulsory high priced courses run by people such as Ms Hickey to "cure" the "problem".

Referring to failing to educate the public we bring up again our case against one Kerry McDonald On 15 November 2005 the Dominion Post printed an article on a speech given to a mining conference in Auckland by Mr McDonald which proclaimed that NZ's "exports per capita were almost half that of Australia and 2.5 times less than the United States". In fact the country's per capita exports were 25% greater than that of Australia and 75% greater than the US. Well the actual presentation was eventually found on the internet and it was the change in exports per capita over the last 40 years that he was referring to there. We believe the "mistake" was deliberate. Mr McDonald did not contact the newspaper concerning the "error" about it nor did any of his staff or associates. The newspaper pretended not to recognise that there was an error as well. He was using his "friends" at the newspaper to dis-educate the population so that his own version of proper economic parameters might be implemented. He lost his chairmanships and directorates at the Bank of New Zealand and Oceana Gold soon after this mis-statement was exposed and we believe that was a result of the exposure. But the Government is now resurrecting him by making him chairman of the Savings Working Group. He has picked up some more jobs since losing those two including, chairman of, would you believe it, of the accounting firm Grant Thornton. He does not seem to have accounting qualifications but what the heck that firm would seem to think. Grant Thornton eulogised its chairman in announcing his appointment to the Savings Working Group chair. This accounting group with an overseas name and connections might be close to becoming a member of a big 5. We will but it on our alert list.

Well where are we now? We wish to go back to the factors which prove the Feltex scam to be Government instigate to pick up golds and silvers at Athens. It is important that this gets through to the Christchurch High Court, and the Courts above it if they are going to be consulted.

The conclusion we have reached concerning the Feltex IPO having been initiated as a scheme to illegally gain NZ gold and silver medals at Athens stems from a gaping hole in the Securities Commission's investigation of the IPO. The Government has to be involved and there has to be a reason for the Government being involved.

The holes revolve around the assumptions of 1% p.a. growth of both market size and market share over and above the situation of the last known year being that of the year to 30 June 2003, in projecting a result for the year to 30 June 2005.

Let us start with market size. On page 91 of the prospectus (page 93 the way Adobe counts it) under the heading "industry conditions" it is stated that this 1% p.a. growth "is below the average growth rate over the past 10 years". Then on page 37 (or 39) we see how Feltex goes about measuring this average growth rate.

Say the following were the market size figures for the last 15 years, earliest to latest, 100,95.90,85,5.75,70,65,60,55,50, 45,40,35, 30. Well anyone might describe that as a steadily falling trend with an increasing percentage fall apart from one dud year quite early on. One might easily estimate the figure for two years on to be 20 or if there was another dud year it could be lower still. That is not how Feltex (if they were reconstituted) are likely to see it. They will see the last 10 years only as being relevant and we have no objection at all to that. But they then see 10 years as being 10 intervals and would work on the change over ten intervals being 30 minus 5 equals a total increase of 25. They would then claim to be quite sophisticated and calculate the compounded growth rate over that period. 5*(1+i)^10= 30 would be the formulae and this will give a value of i of about 19.6% So for 2 years hence the value would be 30*(1.196)^2 which is 42.9. They attended school the date they taught calculating compounding interest but wagged on the day least square analysis was taught. They must have all done the same thing.

Well the actual Australian carpet market sizes given on page 37 do not allow one to get an exact answer by casting ones eyes over them but the exact inappropriate method was used by Feltex to come up with the 1.7% growth. The average line for the last 10 years using least squares is slightly positive but it does not pass through the year 2003 figure. The 2005 prediction is 3% lower than the 2003 figure not 3+% above it. This was of course a crooked calculated designed to mislead and rob investors. The difference between -3% and +3% growth over the two years is about $20m revenue for 2005.

With regard to market share no pervious figures are provided although of course they were able to be calculated. Their market share had been falling very fast and a turn around to a 1% increase was quite ridiculous. There is no excuse at all for the Securities Commission and its retained expert Kevin Simpkins not completely rejecting these two assumptions. And it was not a mistake.

We wish to now discuss a half a sentence used by Radio New Zealand in a news item on concern about Joan Withers being elected chair of Auckland International Airport. The article was timed at 6.39am on 29 October 2010.

The part sentence objected to is the second half of the fourth paragraph which reads "even though she left the failed carpet company 15 months before its collapse".

The company being referred to was of course Exftx Ltd in receivership and liquidation, known as Feltex Carpets Ltd during the time being discussed here.

The part sentence appears to have been used by the reporter to ostensibly describe Ms Withers tenure at Feltex but we claim it was in fact a wilful attempt to unfairly minimise Ms Withers involvement in the demise of Feltex. It is in breach of Radio standards 5 and 6.

The NZ Herald quotes Ms Withers using similar wording but she said she resigned 15 months before Feltex's liquidation which is something quite different. We believe that that is the Origin of the Radio NZ statement. It was just twinked a bit to make Ms Withers look innocent.

The "collapse" of Feltex, if one wants to use that term took place either before or during Ms Withers tenure there. We are of the opinion that it took place the day in the year 2000 that it bought the Australian manufacturing plants of Shaw industries. It no longer was a viable operation as a carpet manufacturer after that. The owner nursed it along and was able the make a spectacular sale to an unsuspecting New Zealand public. However from a official public pronouncements point of view the collapse came in early April 2005 when the company issued a substantial profit downgrade from that projected in the prospectus which Ms Withers signed just days after joining the Feltex board. Ms Withers was still a director at the time of this downgrade when share prices fell from about $1.50 to 98 cents.

As far as shareholders are concerned the "collapse" did not occur at liquidation. That event was generally predicted well in advance. That is not where there was a "fall, give way, loss of strength or failure" as my dictionary defines the word. That is when the body went to the undertaker.

The part sentence we complain about suggests that Feltex was going along swimmingly when Ms Withers exited it. At that time, June 2005 a second profit downgrade had been made or was pending. She had only been there for little over a year. She had a duty to the shareholders to try and get them out of trouble if she still saw herself as being a competent director.

The NZ Herald at least quoted Ms Withers admission that she had signed the IPO. The State owned Radio NZ did not do this either. It was out the give Ms Withers the best press it could without ignoring the matter altogether.

Ms Withers of course has been bribed into the Feltex directorate by the Government so as to con the money out of the "mum and dad" investors to illicitly fund some Olympic golds to keep its popularity up. Mum no doubt was quite impressed to see that a relatively young women director had been appointed, while in the modern setting Dad will do just about anything to keep in mum's good books and so retain access to the kids.

Se is now reaping the rewards she was promised as deputy chair of TVNZ, chair of Mighty River Power and chair of Auckland Airport. The airport might not be in government ownership but because it is a strategic monopoly the Government can exercise a lot of influence over it. She "retired" from Fairfax to spend more time with her dog. She should have no such job. It was very obvious the Feltex's claims concerning market size and market share were not correct.

Advertising section

------------------------

Suitable Objectives

Register of Members

Members Forum - Topical
* open to all meantime:

Plenty of Opinion

Magazine Plans

Need an Accountant?
or Prepared to Change?

Users Forum
* have your say

Ready to Join?

Knowledge Tests
* being developed

What's Wrong with
the existing 
accounting body?

So called BNZ Audit
an extensive case study

 Visit our Advertising
page from 
Here