MPs investigate dodgy schemes

At least $14 million has been lost in bogus investment schemes based around offshore seminars, Serious Fraud Office head David Bradshaw told members of Parliament yesterday.

"And that is probably only the tip of the iceberg," he says.

Whether they heard him is another matter. The inquiry, which was initiated by Labour MP Clayton Cosgrove, is ostensibly aimed at studying the impact on government revenue of fraudulent investment schemes. The political aim of the inquiry is to "get" Act MP Rodney Hide, who spoke at a seminar in Fiji which was selling one of those schemes.

However, the meeting also diverted into the current row over a 1996 National Party donation from Fay Richwhite.

In between the political catcalls and the wrangling over whether or not Mr Hide really is the target of the inquiry, the SFO head, accompanied by officials from the Securities Commission, did manage to outline the three main types of fraudulent investment schemes which New Zealanders have been hit by in recent years: so-called "prime" banking schemes, investment in bogus US railway bonds, and offshore seminars.

It was the last of these, because of Hide’s presence, which attracted most interest from MPs.

Such schemes try to attract reputable speakers as a way of legitimising their offerings, officials told the committee. Such speakers generally know nothing of the bogus nature of the investments and also leave by the time the sales pitch is made.

This approach was likened to using genuine letterheads from reputable banks and other referees as a way of conferring legitimacy on the investments.

The offshore seminar scams take a fairly sophisticated approach. Often the person "fronting" for the scheme in New Zealand does not realise their investment is bogus (they are people who generally are early investors and have made and made money from it).

Their 'endorsement' gives the sales pitch the added value of sincerity, however later investors are left 'holding the baby' when the scheme eventually goes sour.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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