Article in Sunday Star Times today....follows lots of discussion on Dan and his Investors Forum on PropertyTalk.com over the years.
Source: Sunday Star Times
I recall going to an Investors Forum 'free' seminar and Dan was very polished in his presentation and no doubt netted a few 'naiive' Ma and Pa types into his Queenstown development.
It will be interesting to see just how this case develops as it should be seen as a precedent for other 'like' free seminar - property floggers operating in NZ.
I get calls from LJ Hooker quite a lot and wonder just how 'real' their deals are....and there are oodles of these operators in NZ. Kapiti being full of baby boomers is just the market these people prey on. Other small towns with lots of baby boomers get hit on too....I can not wait till there are rules around what they can do, what they need to disclose etc.
Cheers,
Donna
Court Sequel to Property Tactics.
Slick sales pitches that raised $500m from investors will come under scrutiny this month. Garry Sheeran reports.
Controversial property developer Dan McEwan faces a court battle this month in a landmark prosecution expected to clarify rules protecting mum and dad investors.
McEwan has emerged as a major property developer in recent years, channeling more than $500 million worth of investment funds into some of New Zealand's hottest residential spots.
Much of that money has been raised through slick investment seminars run by McEwan's property investors network, the Investors Forum, and attended by up to 30,000 prospective investors.
But some disillusioned investors, as well as property professionals, have expressed concerns to the Sunday Star-Times about the modus operandi of the forum and the McEwan Group.
The court action, being brought this month after a complaint to the Securities Commission and investigations by the national enforcement unit of the Ministry of Economic Development, centres on safeguards designed to protect ordinary retail investors.
The Securities Act makes it an offence to offer a stake in an investment or company to such investors unless a detailed prospectus is issued and other safeguards are in place.
Exemptions are made for professional (or habitual) investors, and people with a lot of money, who are expected to understand exactly what they are buying into.
The charges against McEwan relate to money accepted from an investor by one of his companies, Stakeholder Finance Ltd, for a property development in the Queensland resort town of Agnes Waters.
Subsequently unhappy with his investment, Peter Gale sought legal remedies on his own behalf, but was dissuaded by the time and huge cost involved.
He then made a complaint to the commission which referred the matter to the national enforcement unit.
As a result, charges under sections 33 and 37 of the act, relating to the offering and allotting of shares without issuing a registered prospectus, were laid against McEwan and two companies of which he is the sole director, Stakeholder Finance and Agnes Waters Acquisition Ltd.
A hearing is scheduled for February 20 in the Auckland District Court , when McEwan will be asked to enter a plea.
McEwan told the Star-Times the definition of habitual investors had long been a grey area. "This case will clear things up," he said.
His company had corresponded with the commission on the issue many times, "and we are 100% positive on where we stand".
The act defines habitual investors as people whose principal business is investing money, or who habitually invest money in the course of their business.
Gale, a real estate agent, is not a professional investor and his request to buy shares in Agnes Waters was initially turned down by the promoters for that reason.
But Gale persisted and was subsequently allowed to do so.
Legal sources say the question remains over objective standards. "Does begging make any difference to an issuer's obligation to say no?" asked one. "It will be an interesting day in court."
McEwan is not alone in regarding the upcoming court action as a test case helping to define who is, and who is not, a professional investor.
But legal sources say a district court decision, one way or the other, may not carry the weight of a High Court decision.
"Possibly a good outcome might be to see any decision from this case appealed to a higher court," said one source.
The consequences for the Agnes Water offer are severe if one investor is found to be non-habitual.
The act says the entire offer must be unwound and all funds returned to investors, with a 10% annual interest payment.
Both the company and directors are deemed to be liable.
Meanwhile, newspaper advertisements by McEwan last month offering people with more than $500,000 to invest the opportunity to mortgage, joint venture or develop some of the group's major projects had disgruntled investors speculating that McEwan was finding it difficult to raise further funds from retail investors through his once-popular investment seminars.
McEwan said he was no longer actively seeking money through the forums.
"That is because we have created good, long-term relationships with a lot of people," he said.
"Despite difficulties in credit markets and complaints from some people, we find ourselves very well established."
Those complaints have centred on huge cost-overruns requiring investors to stump up with more cash, long delays on projects, and developments which relied on valuation increases for capital gains.
Since early 2001 the McEwan Group has completed 14 major property projects throughout New Zealand valued at $353m, according to the group's website.
It has further projects now being developed, or on the drawing boards, worth a further $447m.
Those include the luxury spa resort at Waiwera, north of Auckland, valued at $150m, for which McEwan sought investments for luxury apartments in late 2004, and work was due to begin early 2005.
But resort consents have only just been obtained, and work is now due to begin this year.
The projects also include the ill-fated Shearon Hotel in the Cook Islands.
Slick sales pitches that raised $500m from investors will come under scrutiny this month. Garry Sheeran reports.
Controversial property developer Dan McEwan faces a court battle this month in a landmark prosecution expected to clarify rules protecting mum and dad investors.
McEwan has emerged as a major property developer in recent years, channeling more than $500 million worth of investment funds into some of New Zealand's hottest residential spots.
Much of that money has been raised through slick investment seminars run by McEwan's property investors network, the Investors Forum, and attended by up to 30,000 prospective investors.
But some disillusioned investors, as well as property professionals, have expressed concerns to the Sunday Star-Times about the modus operandi of the forum and the McEwan Group.
The court action, being brought this month after a complaint to the Securities Commission and investigations by the national enforcement unit of the Ministry of Economic Development, centres on safeguards designed to protect ordinary retail investors.
The Securities Act makes it an offence to offer a stake in an investment or company to such investors unless a detailed prospectus is issued and other safeguards are in place.
Exemptions are made for professional (or habitual) investors, and people with a lot of money, who are expected to understand exactly what they are buying into.
The charges against McEwan relate to money accepted from an investor by one of his companies, Stakeholder Finance Ltd, for a property development in the Queensland resort town of Agnes Waters.
Subsequently unhappy with his investment, Peter Gale sought legal remedies on his own behalf, but was dissuaded by the time and huge cost involved.
He then made a complaint to the commission which referred the matter to the national enforcement unit.
As a result, charges under sections 33 and 37 of the act, relating to the offering and allotting of shares without issuing a registered prospectus, were laid against McEwan and two companies of which he is the sole director, Stakeholder Finance and Agnes Waters Acquisition Ltd.
A hearing is scheduled for February 20 in the Auckland District Court , when McEwan will be asked to enter a plea.
McEwan told the Star-Times the definition of habitual investors had long been a grey area. "This case will clear things up," he said.
His company had corresponded with the commission on the issue many times, "and we are 100% positive on where we stand".
The act defines habitual investors as people whose principal business is investing money, or who habitually invest money in the course of their business.
Gale, a real estate agent, is not a professional investor and his request to buy shares in Agnes Waters was initially turned down by the promoters for that reason.
But Gale persisted and was subsequently allowed to do so.
Legal sources say the question remains over objective standards. "Does begging make any difference to an issuer's obligation to say no?" asked one. "It will be an interesting day in court."
McEwan is not alone in regarding the upcoming court action as a test case helping to define who is, and who is not, a professional investor.
But legal sources say a district court decision, one way or the other, may not carry the weight of a High Court decision.
"Possibly a good outcome might be to see any decision from this case appealed to a higher court," said one source.
The consequences for the Agnes Water offer are severe if one investor is found to be non-habitual.
The act says the entire offer must be unwound and all funds returned to investors, with a 10% annual interest payment.
Both the company and directors are deemed to be liable.
Meanwhile, newspaper advertisements by McEwan last month offering people with more than $500,000 to invest the opportunity to mortgage, joint venture or develop some of the group's major projects had disgruntled investors speculating that McEwan was finding it difficult to raise further funds from retail investors through his once-popular investment seminars.
McEwan said he was no longer actively seeking money through the forums.
"That is because we have created good, long-term relationships with a lot of people," he said.
"Despite difficulties in credit markets and complaints from some people, we find ourselves very well established."
Those complaints have centred on huge cost-overruns requiring investors to stump up with more cash, long delays on projects, and developments which relied on valuation increases for capital gains.
Since early 2001 the McEwan Group has completed 14 major property projects throughout New Zealand valued at $353m, according to the group's website.
It has further projects now being developed, or on the drawing boards, worth a further $447m.
Those include the luxury spa resort at Waiwera, north of Auckland, valued at $150m, for which McEwan sought investments for luxury apartments in late 2004, and work was due to begin early 2005.
But resort consents have only just been obtained, and work is now due to begin this year.
The projects also include the ill-fated Shearon Hotel in the Cook Islands.
I recall going to an Investors Forum 'free' seminar and Dan was very polished in his presentation and no doubt netted a few 'naiive' Ma and Pa types into his Queenstown development.
It will be interesting to see just how this case develops as it should be seen as a precedent for other 'like' free seminar - property floggers operating in NZ.
I get calls from LJ Hooker quite a lot and wonder just how 'real' their deals are....and there are oodles of these operators in NZ. Kapiti being full of baby boomers is just the market these people prey on. Other small towns with lots of baby boomers get hit on too....I can not wait till there are rules around what they can do, what they need to disclose etc.
Cheers,
Donna
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