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  • inzvestor
    replied
    also try sfo.govt.nz

    Check out www.sfo.govt.nz for more scams and fraud cases.

    SFO is the NZ Serious Fraud Office

    Always worth a look to see what the crooks are up-to !!

    Leave a comment:


  • donna
    replied
    More on this at the Computerworld site

    from January 2003: http://www.computerworld.co.nz/webho...0?OpenDocument
    from October 2003: http://www.computerworld.co.nz/webho...D?opendocument

    and a write up in todays hard copy.

    Leave a comment:


  • muppet
    started a topic Investment Scam

    Investment Scam

    Hi Guys

    Saw this on Stuff tonite.

    Investment scheme 'too good to be true'
    29 November 2003
    By MATHEW LOH HO-SANG

    It should have been too good to be true, as Justice Ronald Young pointed out in his doorstop of a judgment.


    Yet hundreds of investors poured money into a scheme that could see them hit with penalties totalling hundreds of millions of dollars.

    The bearded and bespectacled judge was referring to the Actonz investment scheme which, by promising vast tax savings, attracted a horde of investors hyped by the 1990s technology bubble.

    However, what obviously appealed to investors as a great idea in 1996 soon foundered as the tech bubble burst and the Inland Revenue Department started investigating.

    Inland Revenue then ruled out claims associated with the scheme. Six investors – representing a total of 211 – took on the department to secure what they believed were legitimate tax deductions.

    After a marathon tax battle and several years of intrigue, including two months arguing in front of Justice Young at the High Court in Wellington, it is not over yet.

    Despite a comprehensive and damning judgment by Justice Young that found the scheme featured "shams" and blatant tax avoidance, Wellington businessman and Actonz promoter Scott Anderson remains defiant and has said he will appeal.

    The tax battle relates to depreciation claims on software. The scheme involved the acquisition of software at a high price with no cash payment. Investors added their share of the depreciation claim on the software to their income tax returns.

    Six software packages with a purported total value of nearly $700 million were bought, leading to claims of $226 million.

    Inland Revenue argued that the software sales were shams, were used to avoid tax and millions of dollars in penalties were owed.

    And, to the surprise of Mr Anderson, Justice Young agreed.

    In his 128-page judgment – apparently edited down from more than 200 pages – Justice Young concluded:


    The purchases of the software known as E-Direct, Linx and Packet Plus/Telemarket Plus were shams.


    Each of the purchases and subsequent claims for depreciation losses for each of the software packages were tax avoidance schemes.


    The commissioner was correct in law to impose a 100 per cent penalty on all taxpayers/investors who claimed a depreciation loss as part of their tax return.

    "At best, these investors shut their eyes to what they must have known was a scheme that was too good to be true," Justice Young said.

    "As is so often the case, where an investment scheme appears to be too good to be true, it is."

    According to evidence presented to the High Court, the Actonz – an acronym for Advanced Communication Technology of New Zealand – joint venture scheme started in October 1996.

    The joint venture agreement was between Actonz Joint Venture Investment No 1, Actonz Joint Venture Investment No 2 and other people who joined from time to time.

    Actonz Management Ltd, as agent for the joint venture, then bought software valued at close to $700 million. However, no cash changed hands and all software was bought through 100 per cent vendor finance.

    Investors were then invited to buy units in the joint venture from which they were told they could expect tax advantages from the depreciation of the software packages and possible revenue from sales of software licences.

    According to Justice Young, Mr Anderson was the pivotal person behind the Actonz scheme and it was his previous experience with a firm called Exicom that gave him the idea for depreciation claims and a gst refund on the purchase of second-hand software.

    "This significant tax advantage first came to Mr Anderson's notice when he used the process to claim a gst refund from a previous purchase of computer software," Justice Young said.

    Mr Anderson bought the software for a remote metering system for utility companies for $47 million.

    He was paid a gst refund of $5.22 million, which he used to buy Exicom out of liquidation.

    "It was this success with the gst refund which inspired the subsequent software purchases, the Actonz joint venture, the gst refund claims and the depreciation loss claims," Justice Young said.

    Once the scheme was set up, investors were invited to invest through a series of information memorandums issued in July 1997, February 1998, September 1998 and February 1999.

    The first memorandum told investors that even if they did not make a cent on software sales, they would make $239,000 on a $300,000 unit through tax advantages over three years.

    Yet despite the attractive proposal, the first memorandum attracted only a few investors who were friends and associates of Mr Anderson.

    After the fourth memorandum, 200 units had been bought involving more than 420 taxpayers. Of those, only 211 remain involved in the case – the rest having settled with Inland Revenue.

    Throughout the case, there were references to the valuation of the software during an era of huge optimism about the potential of new technology.

    Another focus was on whether software was tangible or intangible property and whether those who own or use it have the right to depreciate it.

    The taxpayers submitted that software source code is tangible property and therefore depreciable.

    Justice Young agreed that the case depended on what definitions were accepted.

    "Essentially, this decision depends upon these definitions," he said. "Given the absence of any statutory-based definition in New Zealand tax legislation, it is reasonable to suppose the ordinary English meaning of tangible and intangible apply. Tangible is defined as being able to be touched. Intangible with not being able to be touched."

    Justice Young concluded computer source code was intangible and did not come within the definition of intangible depreciable property.

    "The (Inland Revenue) commissioner was correct when he concluded that the software in this case was not able to be depreciated as claimed."

    Close consideration was also given to Actonz' purchase of billing system Baccis for $450 million (again through 100 per cent vendor finance) after being bought originally for $5000.

    "I am also satisfied the Baccis software when purchased did not meet its claimed functionality," Justice Young said.

    The taxpayers claimed that Baccis and the other software packages had been given multimillion-dollar valuations that were fair and reasonable given the market conditions of the 1990s technology bubble.

    "To give the New Zealand perspective, the purchase price of Baccis at $450 million is the highest price ever paid for a software business in New Zealand," Justice Young said.

    "Indeed, it is approximately triple the highest price ever paid for a New Zealand software business."


    Regards
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