When do you Jump off a Losing Horse?

ADDRESS to Accountability & Performance Committee     

 10^th Feb 2011

 

Mr Chairman, ladies and gentlemen.

I’m here to express my concerns about wasted ratepayers’ money in Auckland Film Studios Ltd. I’ve already provided much information by email and on my blogsite.

 

On 20^th January 2005 Prime West Ltd and Prime West Management Ltd (PMWL) were set up by Andrew Maher as the sole shareholder and director of each company. My blogsite reference is “A Raging Success or a Ratepayer Albatross?”

 

On 9^th May 2005, Kenneth Michael Williams, former Labour Party president, became a director of Prime West Ltd and two weeks later on 25^th May Waitakere City Councillors mooted a proposal (copy enclosed) to form a studio company and management company involving private sector funding. At the time the land and buildings to be provided by Council as its share of the partnership had a valuation of $6m. A Government grant of $1m was available provided private sector funding of at least $2.5m was input. The actual proposal provided for private funding of $9m.

 

A year later on 9^th June 2006 Mike Williams resigned as director of PWL.

On 13^th June Andrew Coldicutt replaced Andrew Maher as director.

On 21^st June Coldicutt’s share was cancelled and 60,000 $100 shares issued to Waitakere Properties Ltd and 75,000 shares issued to Tony Tay Trust Ltd.

 

I would now like to turn my attention solely to PWML for a while. On 15^th June 2006 Maher’s share in PWML was transferred to Coldicutt.

On 21^st July Coldicutt’s share was cancelled and 1000 new $1 shares issued as follows:

400 A shares to Waitakere Properties Ltd

300 B shares to HCFMS Ltd

300 C shares to Tony Tay, Selina Tay, Ron Cherry and John White.

That same day new directors Greg Parker and Tony Tay were appointed.

18 months later on 17^th December 2007 Kieran Fitzsimmons was appointed as a director.

On 21/2/08 the 300 C shares were sold to Tony Tay Film Ltd.

The 2008 Annual Report for Waitakere Properties Ltd showed the net assets as at 30/6/07 to be $1,170. It also revealed net liabilities of $54,682 the following year as at 30/6/08 that took the company into a negative equity situation.

Prior to 30/6/09 Waitakere Properties Ltd advanced an unsecured loan of $49,902 to Prime West Management Ltd for repayment in 2010.

The 2009 WCHL (Waitakere City Holdings Ltd) Report revealed net liabilities as at 30/6/09 had blown out to $111,000.

On 29^th July 2009 Coldicutt resigned from the Board. That same day the 300 B shares were sold to Auckland Film Studios Ltd (formerly Prime West Ltd).

On 13^th October a new director was appointed, John Duncan.

On 11^th December WPL reduced its shareholding from 400 to 240.

On 23^rd December Prime West Management amalgamated with Auckland Film Studios for a nil consideration. PWML ceased to exist but the loan to WPL was not repaid until the following month.

(Provision for repudiation of management contract to the tune of $645,000 in January 2009 had been reported in the Auckland Film Studios Accounts).   

 

In the first week of April 2009 a $4m payout was awarded by the High Court to leaky home owners at Ellerslie Gardens. The order was made against Tony Tay and Associates and builder Robin Frank Sears. However, Tony Tay and Associates went into liquidation on 20^th May 2010. When I saw the liquidation of Tony Tay Group announced in the Public Notices of the Herald a month later, it rang alarm bells for me. I checked the Companies Office records and sure enough he was associated with a growing number of failing companies.

 

I rang Councillors. In most cases they showed little interest. I contacted the WCC CEO and posed a number of questions.

On 7^th July Bob Harvey stated in the Herald “This is a glitch for Mr Tay but not for us. This will have no effect whatsoever on the film studio. The future of the studios is guaranteed. We are fully booked for the next three years.”

I felt otherwise and addressed the Henderson Community Board on the issue the following night. I was told by Deputy Mayor, Penny Hulse, these are not the sorts of things discussed at Council meetings and the CEO said she would reply to me after a meeting with Councillors the following Tuesday. A CAF (Communication & Facilitation) meeting took place the following Tuesday. I had asked the question “Why were Councillors not informed of this (the liquidation) at the Council meeting on 30 June 2010?” The reply was “As there was no change to the risk to either Council or its companies, it was only reported informally to the Council.”

It’s been said that Western democracies operate under the Westminster system. NZ operates under the Axminster system. We sweep everything under the carpet. I hope that will not be the approach of Auckland Council.

 

On 10^th July 2010 I sent an open letter to all Councillors listing recent Tony Tay liquidations, the fact that Prime West Management was insolvent as at 30/6/09, and the fact that it had amalgamated with Auckland Film Studios Ltd on 23/12/09. Only one response was received, that of Penny Hulse, saying “We receive a quarterly update at FOP which includes an update on Prime West. The advice that we have is that we are secure and the issues that Tony Tay is having with some of his wider investments have no impact on the film studio.”

 

In the first week of November 2010 I rang Gary Swift as new CEO of ACIL and sought to find out about the demise of PWML. He told me he did not feel he had the right to ask questions about things that had occurred before 1^st November 2010. I persisted and on 19/1/11 Doug McKay granted me an audience where I was able to raise my concerns. I predicted an operational loss for AFSL come 31/3/11. As you all now know Tony Tay Film Ltd went into receivership on 1/2/11. The impact is huge.

1.   Why did WCC go into this deal as a minority shareholder?

1. How much cash did Tony Tay put into AFSL (formerly Prime West Ltd)?
2. What was the value of the buildings he constructed for the Film Studios?
3. Who did the valuation?
4. Does AFSL currently have any debts?

As a gambling man, I’ve sometimes got off losing horses. Many a neigh of delight I’ve heard when I’ve done that! This is a losing horse. It needs serious reasoned consideration to decide to how to jump but jump we must!  

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