naked capitalism

By Richard Smith

Here is Dr Wayne Mapp, New Zealand Science Minister (hah), wallowing contentedly at New Image’s web site, on 5th October (bottom right).

But Mapp’s idyll is rudely interrupted; in part, perhaps, by the application of Naked Capitalism’s cattle prod to his temptingly exposed hindquarters, and in part, for sure, by this more demure followup by Radio New Zealand:

University of Otago researcher Michelle McConnell specialises in colostrum and says there have only been a handful of limited trials showing it has any benefit to human health.

Dr McConnell says it is not acceptable for New Image to give sufferers of multiple sclerosis false hope.

She was also surprised to hear that the company and its products were promoted by Dr Mapp in a link on its website.

The minister says he did not intend to endorse the products in his speech and has asked for the video to be removed.

and so, by the 11th, with a bound and a snort, Mapp is up and gone:

“The minister says he did not intend to endorse the products in his speech”: what was he endorsing, then, I wonder? I’m afraid that Dr Mapp’s speech, now, thankfully, lost to view, was of such agonizing tediousness that I only retain a faint impression of it. From what I caught of it, via drooping eyelids, it seemed to be an encomium to New Image’s direct sales methods and export prospects. So what we are now to understand Dr Mapp to have meant is that he may not be all that definite about the value of the products, but the sales technique is just fine, and appearing just below the miracle cure claim was just fine, until it wasn’t.

Let’s see how tenable a fallback position that turns out to be.

If you feel you have missed out on Dr Mapp’s oratory, dear reader, take heart. It turns out that praising New Image’s business model is a stock in trade of successive New Zealand governments. You can read a transcript of something equally dull from 2008, from the then Labour government minister, Phil Goff. If memory serves, this covers pretty much the same ground as Mapp’s speech. Ooh, I wonder who writes these speeches. From Goff’s speech we also discover that New Image got some government aid, back then. Hmmm.

Meanwhile, New Image have some damage to limit, too. Their first move is to bodyswerve the whole thing. They try out the intriguing “a big testimonial writer did it and then ran away” defence on Radio New Zealand:

New Image is standing by the testimonials, saying a woman involved states she does not know if the product will have the same effect on others who have multiple sclerosis.

Read that whole sentence again and see if the second half of it squares with your understanding of “standing by the testimonials”. It looks more like a headlong retreat to me. And if New Image are “standing by the testimonials”, why have the testimonials vanished from the web site? Compare the screen shots, above. Funny sort of “standing by”, that. Perhaps Radio New Zealand will have a followup question for New Image’s harassed spokesperson, about what the phrase “standing by” means, when uttered by a New Image spokesperson.

Elsewhere in New Image’s large but not very thoroughly image-managed empire, they are certainly still standing by some testimonials. For instance testimonials for the utterly worthless Powerpill FE-3 are still up there in lights at New Image Malaysia as of this writing. Oh, here’s a current screenshot, in case New Image’s web team get some new orders. I suppose they are also harassed, but maybe on overtime; hi boys, thinking of ya.

Let’s see if and when the site and the screen shot diverge.

Incidentally I wonder if New Image’s sales pitch really works at all, without testimonials.

By Richard Smith

Our Australian readers may already be familiar with the story of Firepower International. There’s a book out about it, by Gerard Ryle, an investigative reporter at the Sydney Morning Herald; it’s called Firepower: The Most Spectacular Fraud in Australian History. Here’s the blurb, with typos fixed:

A magic pill that cuts fuel consumption and reduces emissions……that was the miracle promised by Tim Johnston’s company, Firepower. Everyone believed him; prime ministers and presidents, doctors and diplomats, business leaders and sporting heroes – even ASIC the corporate watchdog – went along with the myth. Millions of shares were sold to investors, and by 2007, Firepower had become the biggest sporting sponsor in the country. But it was all a sham. In this compelling account, Gerard Ryle demolishes the fairytale, exposing a wobbly financial pyramid and the greatest fraud ever committed in Australia.

You can read a bit more about Firepower at Wikipedia. The amount of money that went for a walk is, by the standards of jaded NC readers at any rate, peanuts, at just AUD100Mn, mostly extracted from Australian private investors. What’s more impressive is the level of official capture that Firepower pulled off: right up to the Australian Prime Minister, John Howard. Oops. Subsidies, grants and, just as handy for your share-kiting scheme, celebrity tie-ups flowed. Yes, that really is the Russell Crowe. Oops again.

Naturally, the Firepower Pill didn’t work:

More recently Consumer Protection has been investigating claims made by Firepower about the Firepower Pill. The Commissioner said the investigation so far had raised some real concerns about the validity of claims made on the packaging of that Firepower made in support of the fuel saving and emission reducing properties of the Firepower Pill.

Product packaging claimed it ‘reduces emissions’, ‘saves on fuel’ and ‘improves fuel economy’.

“As a result of our approach to the company to have these claims substantiated the product has been withdrawn from outlets in Western Australia.

No fraud charges were brought against Tim Johnston, Firepower CEO, much to the disgust of commentators:

It is difficult to exaggerate the scale of the lies, the extent of the damage, the trail of destructive bastardry left behind by Timothy Francis Johnston, who lied to everyone, cheated everyone, and, as you read this, lives in luxury overseas because the Australian authorities are too stupid to charge him with fraud and thus be able to seek his extradition.

Two years later, various authorities are still picking over the mess; and there are still no fraud charges, though there is a private law suit.

So there you have it: a fraudulent Australian company peddling a bogus miracle product while garnering official Government support. And then it collapses, and there’s fallout all over the place.

The similarity with New Image International, last spotted at this blog landing an endorsement from Dr Wayne Mapp, New Zealand Minister of Science (hah), for its bogus colostrum miracle cure, might be enough, all by itself, to cause even the overconfident Dr Mapp a moment’s glimmer of concern.

But if not, there’s more…

Because, you see, New Image is also selling, via its Malaysian subsidiary, and with the help of the same sort of bullshit testimonials that we saw with its colostrum quack cure, a bogus miracle fuel economy enhancer called Power Pill Fe-3. And how do I know it’s bogus? Well, look what it is:

Claims for the Firepower Pill seem remarkably similar to websites around the world that market another product – a product called the Power Pill FE-3.

The Power Pill FE-3 is sold in 70 countries, the websites say, and makes the same claim – that it was tested in Singapore, Hong Kong, Germany and Northern Ireland. It too is said to improve fuel economy, save on maintenance, and be environmentally friendly.

The Power Pill FE-3 is sold by a multi-level marketing company, New Image International, which is listed on the New Zealand stock exchange and mainly deals in health products. Multi-level marketing has been unfairly compared with pyramid selling, but forms of it are used by heavyweights such as Amway and Avon.

New Image claims to have bought the formulation for its Power Pill FE-3 12 years ago from NASA. New Image said it contracts the manufacturing of the pills from a company in the US called US Lubricants, and the pills are packaged for different markets.

In Australia, for instance, the pills are sold as the Power Pill FE-3 through New Image’s Australian subsidiary, another Perth company called Omegatrend.

“Basically Firepower purchase from us,” said New Image’s company secretary, Bill Cunliffe. “The Firepower Pill or the Power Pill [are] one and the same thing. Exactly the same product.”

Five years after the Power Pill first caught the eye of Gerard Ryle, and three and a half years after the Western Australian Department of Commerce debunked the “miracle product” claims, and three years after Firepower went into liquidation, the New Zealand authorities are quite content for New Image to keep on hawking the same bogus fuel economy product. But only offshore: evidently there is less chance that they will have heard of Firepower up in Malaysia. Dumping products that are known to be bogus, on great big neighbouring economies, via multilevel marketing schemes, is certainly aggressively enterprising, but, in the longer term, it may not be the international trade development coup that the New Zealand government believes it to be.

After Firepower, the Sydney Morning Herald’s opinion guy had this to say:

Perhaps “inert” is the best word to describe the collective ineffectiveness of the Australian state and federal regulatory authorities which allowed Johnston to run rampant for the past 14 years, stealing at least $100 million in the process. Or bovine. Or lazy. Or complicit. Take your pick.

I wonder what epithets he’d choose for the New Zealand authorities, given the extra warning they have had, and ignored.

This really is going to get embarrassing.

My last pop at New Zealand’s regulatory set-up mentioned New Image International, the company that uses multi-level marketing techniques to sell Colostrum as a miracle cure. The New Image product pitch is a generic hoax, as explained last time out:

…major warning signs include:

Claims based on patient testimonials. Patients want to believe so much that a treatment is helping them that they can convince themselves that it has. They may even have experienced some recovery unrelated to the treatment. Unless there has been carefully evaluated clinical research it is very difficult to know what is a true effect of the treatment and what you can expect.

Multiple diseases treated with the same cells. Unless the diseases are related, such as all being diseases of the blood, different diseases, such as Parkinson’s disease and heart disease, would be expected to have very different treatments. Also, you want to be treated by a doctor that is a specialist in your disease.

Zooming in on the right hand bottom corner of New Image’s web site, we find both warning signs straight away: multiple diseases treated with colostrum, plus client testimonials. By way of unexpected bonus horror, they are most unfortunately juxtaposed with an endorsement from the New Zealand Science Minister:

And if you click on the image of Dr Wayne Mapp, you land here, and yes, that really is the NZ science minister endorsing New Image. So there he sits, prating away, just under a whole bunch of testimonials unscientifically ascribing all manner of different miracle cure powers to colostrum.

The Multiple Sclerosis ‘cure’ is a particularly nasty pitch. The UK’s Multiple Sclerosis society has this to say about complementary and alternative treatments (CAMs) for MS:

…an area that’s poorly researched, often because these therapies are rarely suited to traditional research techniques. There isn’t much evidence to show how effective or safe medicines are.

Many studies only include a few people, or aren’t conclusive. If a therapy is found definitively to work, it might no longer be known as complementary or alternative, and join mainstream medicine as a proven treatment.

However, many people who use CAMs say that they make them feel better, so it’s often a case of weighing up things like:

• cost – bearing in mind how you’ll feel if the therapy is very expensive and doesn’t make a difference
• how effective the treatment is (efficacy)
• is it likely to make you feel better
• safety – could it make your MS worse or interact with other medications

…
Watch out for products that make big promises, cost a lot, say they are scientifically proven or can ‘cure MS’. Paying for these treatments or therapies can be a waste of money and leave you disappointed, or perhaps even make things worse.

As mentioned in the last post on this subject, over in Oz, there’s a warning sign of a different kind: the Adult Stem Cell Foundation, which appears to be a scam, dressed up as a charity, that claims some sort of link to New Image. For some reason, it has two very similar web sites, this one, and this one. But goodness knows what true nature of the link is between the Adult Stem Cell Foundation and New Image. Are the Adult Stem Cell Foundation just recruiters for New Image? Do they have any relation at all? The Adult Stem Cell Foundation portrays New Image as one of its benefactors. Certainly, many sites pushing New Image products think the Adult Stem Cell Foundation is a pretty important reference for New Image:

http://www.thecolostrumshop.com/new-image-colostrum-stem-cell-enhancing-products.html
http://colostrumnewzealand.blogspot.com/2009/08/adult-stem-cells.html
http://colostrumforme.blogspot.com/2009/10/adult-stem-cell-foundation.html
http://www.colostrum-immunity.com/colostem.html
http://stem-cells-and-health.blogspot.com/
http://colostrumandstemcells.com/links_9.html

And then, we have this site, http://www.newimageaustralia.co.nz/Links.html, which looks as if it’s a New Image site, except that its livery and logo is all wrong, and anyway the proper New Image Australia has contact details that are actually in Australia.

And then, trim the “links” part off the spurious New Image site and you are redirected to http://www.colostrum-immunity.com/, which is in our list above, and has the same look’n'feel as the Adult Stem Cell Foundation‘s site: same designer (same client?).

Whole lotta spoofing going on!

The relationship between New Image and the Adult Stem Cell Foundation really needs to be clarified. Do New Image realise that the ASCF people are recruiting people to market New Image’s products, or at least, pretending to do so? Do New Image realise that the ASCF is leeching off New Image’s corporate image? Do New Image realise that the ASCF is a fraud? Do New Image care?

And if they do realise it, and care, what are they, and the NZ authorities, going to do about it, exactly? This was how the the NZ Herald’s reported Commerce Minister Simon Power’s response to the outbreak of overseas financial fraud that exploited  New Zealand’s lax and outdated company law: “NZ unable to help international agencies combat fraud: Simon Power“. I wonder if NZ will suddenly rediscover that ability, if it turns out that the boot is on the other foot, and they are depending on Oz to combat fraudulent misuse of New Image’s marketing.

And of course if the NZ authorities were to intervene, they would find themselves in the magnificently incoherent position of defending a supposedly legitimate local peddler of hoax health products (New Image) from a fraudulent overseas peddler of hoax health products (the ASCF).

Which explains why you don’t want your Science Minister running around puffing fake cures, and why a spot of international fraud-fighting cooperation is a good idea. You can save all sorts of embarrassment.

By Richard Smith

To start in a surprising but appropriate place, here are four video segments about stem cell heath scams from CBS, last year. If you don’t have time for 20 minutes of video, then at least look at this (just over a minute), which should give the basic idea.

These scams are loathsome, preying on the old, the sick and the desperate.

Back in 2008, the UK’s New Scientist magazine had a helpful article about what it called “stem-cell scams”:

If you or a loved one is desperately ill and considering treatment with stem cells, here’s a document you definitely should read: a newly released guide (pdf) from the International Society for Stem Cell Research to help patients negotiate the minefield of clinics claiming to be able to cure all manner of ills.

Section 11 of that PDF (“What should I be cautious about if I am considering a stem cell therapy?”) gives a list of red flags:

This is not a comprehensive list but some major warning signs include:

Claims based on patient testimonials. Patients want to believe so much that a treatment is helping them that they can convince themselves that it has. They may even have experienced some recovery unrelated to the treatment. Unless there has been carefully evaluated clinical research it is very difficult to know what is a true effect of the treatment and what you can expect.

Multiple diseases treated with the same cells. Unless the diseases are related, such as all being diseases of the blood, different diseases, such as Parkinson’s disease and heart disease, would be expected to have very different treatments. Also, you want to be treated by a doctor that is a specialist in your disease.

The source of the cells or how the treatment will be done is not clearly documented. This should be clearly explained to you in a treatment consent form (see question 8). In addition, there should be a ‘protocol’ that outlines the treatment in detail to the medical practitioner. The protocol is the ‘operating manual’ for the procedure. While it may not be made available to you automatically, you should be able to request this. For a clinical trial or experimental treatment, protocols should have been reviewed for scientific merit by independent experts and approved by an ethics committee to ensure that the rights and well-being of the participants will be respected. Ask who has approved this protocol and when the approval expires.

Claims there is no risk. There is always risk involved with treatment. Information about the possible risks should be available from preclinical or earlier clinical research.

Now it’s time to jump to the Antipodes, where stem cell cure promotion is rife, and work through that list.

Claims based on client testimonials Let’s start with patient testimonials. Here is the rivetting story of Shauna MacDonald, via http://stemcellenhancingproducts.co.nz:

Shauna is a beautiful 53 year young mother of two from the Gold Coast in Australia.

Since 1992, the day her youngest daughter turned two, Shauna was diagnosed with a double whammy: a brain tumour and Hashimoto’s Disease.

After a complicated and dangerous operation to remove the tumour, Shauna recovered, only to be hit soon after with another autoimmune disease, Multiple Sclerosis.

For the last dozen or so years, Shauna has battled to stave off the devastating effects of MS.

By early 2009, the symptoms were at their worst…Shauna was in a wheelchair, living in what MS people call a ‘mental fog’ and her whole body was systematically shutting down.  Her eyesight had deteriorated to its lowest ever level, the whole right side of Shauna’s face had  shut down, her taste was gone and her throat was paralysed on one side.  She was severely unbalanced physically and the mental strain was showing its long-term effects.

Then came a simple phone that changed her life.

Oh, do tell…

Shauna was contacted by long-time friend Bruce Lahey, Honorary Director of the Adult Stem Cell Foundation who encouraged her to try stem cell enhancing products that the foundation had sourced.

Within four days, Shauna’s eyesight had stabilised and for the first time in 15 years Shauna was seeing in ‘single vision’ as opposed to seeing ‘double’. Her eyesight progressively improved to the point where her prescription glasses were now of no use and ‘fine print’ had come into focus.  It was nothing short of Miraculous!

Now seeing better and more clearly, Shauna’s world changed. She began to notice small things at first, then major changes followed. She seemed to be ‘switching back on’ and was ‘with it’ more of each day. Her speech improved drastically and her cognitive processes began to improve. Seeing and thinking more clearly led to walking without wobbling.

Shauna’s whole family has shared in the joy of having Shauna back with us! She is now walking everyday with her husband Neil and their dogs. (This confused the dogs…they were so used to her being in the wheelchair) She is cooking again and breaking out the sewing gear…both of which had been virtually eliminated from Shauna’s life because she had lost dexterity strength In her hands and poor eyesight.

To say we as a family are delighted is a gross understatement!

I should think it is. Shauna seems to crop up all over the place, by the way: written up by naff web newspapers in Queensland, and by a fluffhead “naturopath/journalist” in a New Zealand blog. It’s almost as if there was a bit of a PR campaign underway…

Anyway, Shauna’s story is definitely a testimonial.

Multiple diseases treated with the same cells. At Colostrum Immunity we find the harrowing story of Janelle, who seems to be bent on self destruction. But there’s no need to stop with inclusion body myopathy; in their testimonials section we find a remarkable list of sometimes misspelt afflictions and symptoms that have been cured or at least alleviated by stem cells:

• Parkinson’s symptoms
• fibromayalgia pain
• Chrons disease
• Irritable Bowel Syndrome
• Stomach problems
• Headaches
• Endometriosis
• Inflammation
• Multiple sclerosis
• and so on. That will do for ‘multiple diseases’, I think.

The source of the cells or how the treatment will be done is not clearly documented. These NZ sites have pretty much skipped that part: they just want you to order the “meds” from the sites! Here is Stem Cell Enhancing Products’ order form , and here is Colostrum Immunity’s (with an email address too).

Claims there is no risk. In fact, neither of these sites is claiming to be performing clinical trials at all. They are just flogging the pills! So neither site has anything whatsoever to say about risks.

This stinks. But there are a couple of leads to follow. Both Stem Cell Enhancing Products and Colostrum Immunity web sites carry the following text in their banners: “Our Products are endorsed by the Adult Stem Cell Foundation”. We have a name, Bruce Lahey, to follow up on, too. While we’re at it, let’s take a note of the “New Image” branding from that email address admin@newimageaustralia.co.nz and see if we spot it again.

Well the Adult Stem Cell Foundation, (web site), of Gold Coast, Queensland, isn’t exactly hiding away, and Bruce Lahey is its Executive Director. The Australian tax office seems to have fallen for all this baloney, and given them a tax break.

I haven’t checked whether Adult Stem Cell Foundation really is a registered charity in Queensland. I didn’t spot a ref number, and the Queensland Charities Register apparently requires you to know everything about a charity (including its charity ref number), before you can find any info out about it (ahem, info such as its charity ref number!). I assume, though, that if the Tax Office fell for it, the Charities registrar did too, and sooner. Or both registrations are fake, though I doubt it.

At any rate, this seems to be an Australian charity that operates as an endorser for New Zealand scams. Ugly. I think the Queensland Charities Register and the Australian tax authorities might have some explaining to do. And I’m sure the Australian Competition and Consumer Commission (ACCC), who run the SCAM Watch site over there, ought to be interested too.

Finally, let’s have a quick look for New Image. First we find this, which might give some idea of the intended scope of the operation. Their NZ contact page leads us to New Image International Limited at 19 Mahunga Drive, Mangere Bridge, PO Box 58 460 Botany, Manukau 2163, New Zealand. Looking up the address 19 Mahunga Drive at NZ Companies Register we find this lot. Amongst them, New Image Group seems to be the master, with its own web site and, get this, its own listing on the NZ exchange.

It’s a pity the NZ listing authorities didn’t read New Scientist before they let that one through.

There do seem to be some actual medical practitioners peddling this stuff, too, so the New Zealand and Australian medical regulators, if there are any, have a busy time to come.

You can get an idea of what the US drug regulator, the FDA, thinks of stem cell treatment peddlers on its home turf from this recent investigation (as you will see, the detail of the ‘treatments’ is even worse than what is going on in NZ, actually):

A Las Vegas man who purports to be a retired physician and allegedly caused over 100 chronically ill patients to undergo experimental stem cell implant procedures and investors to pay him large amounts of money, has been indicted on federal mail and wire fraud charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada
…
According to the Indictment, from about January 2005 to the present, Sapse allegedly devised a scheme to defraud patients and investors by claiming to have developed a novel medical procedure involving “stem cells” that would cure or improve certain severe, incurable diseases, such as multiple sclerosis and cerebral palsy. Sapse purports to be a retired foreign physician, but Sapse has never been licensed by the State of Nevada, or any other state, to practice medicine. Sapse formed Stem Cell Pharma Inc., a Nevada corporation, in May 2005 allegedly to create the false impression that he operated a legitimate pharmaceutical company. Sapse also controlled several websites and issued dozens of “press releases,” which promoted a novel procedure that Sapse claimed to have developed to extract stem cells from human placentas. By misrepresenting his credentials, the nature of his treatment, the source of his “stem cells,” and the adverse effects suffered by previous patients, Sapse convinced chronically ill patients to undergo experimental implant procedures and convinced investors to pay him large amounts of money without knowing the short- or long-term effects of the implant procedure he was promoting.

As we see, New Zealand’s extra twist on this is that in NZ you don’t even have to pretend to be a doctor…

In the same way that NZ company incorporation laws facilitate tax fraud in Russia, illegal arms deals, and $400Bn moneylaundering by Wachovia, New Zealand’s business and medical regulation seems to permit end-runs of the FDA’s protections against fraudulent treatment.

Or perhaps the NZ authorities are just waking from a long sleep and starting to catch up. “NZ unable to help international agencies combat fraud”, says the headline on a recent NZ Herald piece on financial scams. That sounds gormless: sort your laws out so you can help, then.

The NZ authorities should sort the quack cures out too, otherwise one might as well add the FDA to the already long list of overseas regulators and agencies that have cause to get mighty irritated with New Zealand’s regulatory environment.

By Richard Smith

The little story NC carried a couple of months ago about New Zealand scam companies has come out from behind the paywall, courtesy of the NZ Herald (hat tip: John G.), and with the help of some nice follow up from Niko Kloeten of New Zealand’s National Business Review. We hinted at the time that the problem’s large and nasty, and the NZ Government admits this in a cabinet paper:

A New Zealand registered company with its effective base in Panama recently committed a significant tax fraud in the United Kingdom. This sort of fraud affecting our OECD partners impacts negatively on New Zealand’s international reputation.

IRD is concerned that New Zealand will receive a poor report in an OECD forum later this year because it is unable to provide information which many other countries would be able to supply about such companies.

There seem to be rather a lot of banks, for instance (one “offshore financial institution” for every 5,000 New Zealanders):

Power also says that the Reserve Bank believes about 1,000 shell companies incorporated in New Zealand over the past three years have been used to carry out banking activities free of regulatory oversight and “many” seem to be undertaking fraudulent activities.

The Reserve Bank has received frequent complaints and enquiries about “offshore financial institutions” incorporated in New Zealand but with no other connection to the country.

“It estimates that there are at least 1,000 such companies on the register, of which a number are suspected of carrying out fraudulent activities.”

Naturally, there’s now a bit of ministerial headscratching about possible solutions. This seems to be the nub of it:

Power puts forward four major changes. These are; Requiring companies to appoint at least one director or an agent who is ordinarily resident in New Zealand; Requiring directors to supply date and place of birth information; Requiring all companies to apply for an IRD number as part of their registration application process; and Bolstering the ability of Registrar of Companies Neville Harris to investigate, respond to or remedy issues arising in regard to “the bona fides” of directors and shareholders and any integrity or compliance issues relating to company registration.

So, will that work? It’s a mixed bag.

Requiring a resident director: a prior NC post pointed to existing dubious New Zealand finance companies that have local directors. The post also sketched out how easily they can be recruited by faceless overseas types. As far as I can see this requirement just makes it compulsory for dubious overseas types to do something they were doing already.

Requiring directors to supply date and place of birth information: would be fine, if there was a way of checking that it’s not made up! For foreign directors, that’s quite an overhead, at least, and most likely, impossible. Readers may remember an NC post that mentioned the will-of-the-wisp Rod Alvar, a company director in NZ and Panama and Sweden, each time with different addresses. Making up a date and place of birth for the likes of our Rod is just a few extra keystrokes. This requirement won’t make much difference for overseas directors.

Requiring an IRD number from companies: the IRD number is a unique number issued by NZ’s Inland Revenue. The company application form for an IRD forces disclosure of shareholders. This could be a really good idea (and trust the IR to come up with an idea that has some teeth). But there’s still a ‘but’ – are the shareholders individual people, or nominees? Nominees could still be pretty much anyone anywhere.

Another worry with this measure must be that it might be too fierce to make it into the final legislation. Disclosure of shareholders certainly doesn’t sit well with John Key’s vision of NZ as a prosperous tax haven. Those tax-avoiding types strongly resemble gangsters, moneylaunderers and fraudsters in at least one respect: they love their anonymity. Lastly, if this disclosure requirement is in place, the info has to flow from the IRD to the Companies Register. That might take a spot of budget.

So out of three measures we appear to have one with a half-chance of having an effect.

That just leaves the Company Registrar. Let us hope that he gets some useful new powers (and some assistants), because it looks like it will be more whack-a-mole for the Registrar!

Fired up by my recent posts about dodgy New Zealand companies, Nick Shaxson asks what the hell is going on at 369 Queen Street, Auckland?

It is a first-class question, and by way of compensating for the fact that Mr. Shaxson and I are nearly five years late to this story, I have a snazzy elaboration. To fend off accusations of recycling old news, I also have an update that shows that this story is still of some current interest, notably to the cretinously blithe deregulating New Zealand Prime Minister, John Key.

My update may also add further to the workload of an athletic-looking but possibly harassed New Zealand regulator; there is already a pile of Questions in Parliament to Answer, arising from previous forays into this terrain by Naked Capitalism and NZ’s National Business Review.

So, to start on this shaggy dog story, what connects:

President Barack Obama and Senator Carl Levin and Representative Rahm Emanuel,
an aspiring actress in the Seychelles,
a fake English lord,
an intercepted illegal arms shipment,
Wachovia’s $380- billion Mexican drug cartel moneylaundering scandal (yes, billion),
“Russia’s largest tax fraud, an alleged $US230 million heist that led to the untimely deaths of four people and threatens to damage the Russian government”, according to the Sydney Morning Herald,
…and 369 Queen Street, Auckland, NZ

?

Let us start with the future POTUS and his mates (third download link here), who, in their letter to governors of February 2007, are concerned about the level of background checking performed in the US when companies are formed:

The central problem is that the 50 states are currently forming nearly 2 million companies each year with little to no information about who is behind those companies. While the vast majority of those companies operate legitimately, a small minority do not, functioning instead as conduits for organized crime, money laundering, terrorist financing, tax evasion, and other misconduct.

So, the US is just like New Zealand, then, but with volumes two orders of magnitude larger, and with no US-wide standard of disclosure or data presentation, either, which multiplies the complexity of the problem by another chunky factor, I suppose. By way of collateral, the three Congressmen append a couple of press stories, one from USA Today, from which we snip these details:

Wyoming incorporation records show that at least 90 companies created since 2002 list Stella Port-Louis as the sole listed officer. Many of the firms, such as Export Deutschland AG and Motorcomsa S.A., have foreign corporate names…

JoLyn Jordan, an official of Registered Agency Services, a firm that files incorporations, said she believed Port-Louis was a nominee for owners outside the USA. “I don’t know who she is, or if she’s for real,” said Jordan. Asked how to determine if they were shell firms created for crime, Jordan said, “You don’t know.”

Jack Blum, an international tax expert and former special counsel to the Senate Foreign Relations Committee, said money laundering investigations have historically focused on the Seychelles. While saying he had no information about the Port-Louis firms, he said the filings seemed designed to frustrate.

“Whoever’s trying to research it will go batty,” said Blum.

Well, I know that feeling; in my last post on NZ companies, I ended up wondering whether Rod Alvar was a real person. But Stella Port-Louis is less of a will of the wisp: here she is, looking winsome, and lo, not only is she in control of 90 Wyoming companies, she also helmed, by January 2010 at any rate, 338 New Zealand ones. Stella turns out to be an aspiring actress; socially a narrow cut, maybe, above the auto mechanics and taxi drivers to be found running spurious banks in NZ, but just as much in need of some spare cash. Evidently, we have the same background-check-defeating business model identified in the last NC post; having started the companies, she innocently hands them on their real end-users: crooks.

The same article gives most of the promised connections in one hit:

Her companies, with names like Petro Tex Ltd, El Mondo Ltd, London Group and Nelson Trading Ltd, are based at Level 5, 369 Queen St, Auckland.

A co-director at the same address is Lu Zhang, gender uncertain, who is the director of dozens of companies. One of them, SP Trading Ltd, rented a plane that was used to fly arms from North Korea to Iran, but it was seized by Thai authorities in Bangkok.

….

Lu Zhang may be little more than a figment of the imagination of a “professional client” in London who needed to hide their activities from the US, which has sanctions on North Korea and Iran. Providing just such a service is GT Group, based in Vanuatu, a Melanesian country that receives $18 million a year in New Zealand aid.

Vanuatu, like the Seychelles, is a no-questions-asked tax haven, or, as it likes to put it, centre for international business corporations.

GT Group is owned by accountant Geoffrey Taylor, who claims to be an English lord, and his family. It set up and owns Vicam (Auckland) Ltd, which appears to do nothing but clone itself into more than 1000 other entities, such as SP Trading.

There is more about the buffoon Taylor and the arms trading deal here, if you like a spot of colour. Then we have a connection to the Wachovia moneylaundering scandal via the Sydney Morning Herald:

Last year police intelligence sources told Fairfax newspapers and the ABC’s 7.30 Report that about half the cocaine now entering Australia was being sent from Mexico, and that the Sinaloa cartel was behind many of the shipments.

During the court proceedings it was alleged that four New Zealand firms registered by the GT Group – Keronol Ltd, Melide Ltd, Tormex Ltd, and Dorio (NZ) Ltd – helped launder about $40 million of the proceeds using Latvian bank accounts and Wachovia’s London branch.

The US investigation provided a suggestion that the Taylor name was linked to an infinitely wider and more complex global network.

Indeed it was; via those companies,

…the GT Group was linked to the biggest money-laundering operation in US history.

Wachovia Bank – now a subsidiary of the global financial giant Wells Fargo – was fined $US160 million for helping to disguise the illegal origins of up to $US378 billion for Mexican drug lords.

And there was more:

The business magazine Barron’s reported that late last month documents emerged out of London that linked a shell company called Bristoll Export, registered in New Zealand by GT Group, to a scandal that some commentators claim has the potential to be Russia’s Watergate.

It centres on Russia’s largest tax fraud, which occurred on Christmas Eve, 2007, when Moscow tax officials approved a same-day refund of $US230 million to a gang masquerading as representatives of Hermitage Capital, once the largest portfolio investor in Russia.

You may or may not be surprised to hear that:

The Taylors…said they were blameless. In a press release issued in New Zealand by Ian Taylor – another of Geoffrey’s sons – he explained GT Group’s role was simply to incorporate and to act as a registered agent for SP Trading ”at the request of one of our professional clients based in the United Kingdom”. It was not responsible for and had no knowledge of what the company got up to.

As no law was broken, the authorities had no choice but to agree.

Taylor’s friends at Sorenson Law, mentioned in the linked piece about Stella Port-Louis, don’t think they’ve done anything wrong either:

Mr Sorensen said GT Holdings were just “one of a number of people who are there”.

He would not guess at how many companies were registered to the floor.

“What’s their business is their businesses and I don’t entertain what other people’s businesses are about at all.”

Looking at the distinctive addresses of a Sorenson Law company and an Ian Taylor company, one suspects, on purely stylistic grounds, that the association of Taylor and Sorenson may in fact be a little closer than Mr Sorenson would have us believe:

LANGATE LIMITED (2097954) Registered NZ Limited Company

C/-Gt Group Limited, Level 5, 369 Queen Street, Auckland, New Zealand

and

LIFETIME CORPORATION LIMITED (1220738) Registered NZ Limited Company

C/- Sorensen Law, Level 5, 369 Queen St., Auckland, New Zealand

They do seem to have hit on precisely the same abbreviated style, precisely the same punctuation, and precisely the same way of referring to Level 5, 369 Queen St. As it happens, that’s a style that the many other non-Taylor, non-Sorenson-Law companies in that building never adopt. I’d be interested in the Sorenson Law companies, if I were a regulator.

Anyway…here we are, finally, at 369 Queen St., Auckland. An impressive 1,450 companies have been registered there, of which ~1250 have been struck off.

So “what the hell” is going on there now? Three salient things.

First, despite the complete innocence of Messrs Taylor and Sorenson, the authorities seem to have judged that the Geoffrey Taylor companies are better struck off the register, and someone is gamely ploughing through those, turfing them out again. Perhaps it is a taxi driver or an aspiring actress, working the other side of the street. I notice that one of the struck-off companies, Oilex Ltd, still seems to have a web site, of sorts. Is it still trading, or not? A grown-up should check.

Second, our striker-off-of-companies may get a good long gig, because other hands are at work too. Someone called Ian Taylor is still busy: a director of 179 companies. And though they may not all be the same Ian Taylor, the history of a few of these companies does suggest that the GT Group business model is still running smoothly. For a start, when we wade through a sampling of the above, we find an unrepentant Ian Taylor still registering companies in late 2010 and in 2011. Is this the same Ian Taylor as the GT Group one? I think it must be – compare addresses with this Vicam-linked, Vanuatu-linked and so, GT Group-linked company, still not struck off. And there is an Ian Taylor company, ECOPAR LIMITED, with a Panamanian connection (which are the subject of a recent round of Parliamentary questions). And in another hint of the now familiar methods, we have Taylor (founding director) handing over another NZ company, GT Gloria Trading, to an improbable Czech! There is a recent twist to the MO, too. Taylor appears to have found a stooge to help keep his name off the register: this company was registered on 28th June 2011; it isn’t directed by Taylor, but it is wholly-owned by the Taylor company RSHRS LTD.

Third, there seems to be some kind of emerging Irish connection. Are the Irish horning in on this NZ company formation lark? It would make sense. They have a lot of debt payments to make. Note the company address history of Peter Keogh and Sons (NZ). And then see the company address, and directors’ addresses, of

CARRAIG DONN NEW ZEALAND

EAST COAST CATERING (NZ)

GRANDFORD

MARCON NZ

Now you may well think, reviewing all this, that the NZ authorities haven’t really done a bang-up job of sorting out their company register. In fact, they don’t even seem to be able to stabilise the companies registered in one floor of one single building, even when they already have a massive red flag planted firmly over this one address. Though I have to admit, the NZ company registry is very nicely designed. It is just the contents that are garbage.

I suppose that’s it’s not a great job the NZ authorities are doing, really, but as long as they’ve got political constraints, and budgetary ones, and mutts like Niko Kloeten of the NZ National Business Review, and me, to ferret through their register for them, buckshee, they have the best outsourcing deal of all.

Until they get the authentication of their registrants sorted, and better legal protections for the register, it’s just a game of whack-a-mole, after all, though with several hundred billion dollars worth of international relations at stake.

You see, I wouldn’t like to be in Prime Minister John Key’s shoes when he explains, to US President Barack Obama, how the NZ government’s inept custody of New Zealand’s Company Register continues to facilitate money laundering, just after the biggest moneylaundering ring in world history was shown to depend on shoddy New Zealand registration, and four and a half years after Obama’s first warning.

Nor, come to that, would I particularly relish the prospect of explaining to Prime Minister Medvedev Putin whoever of Russia how a key component of the biggest tax fraud in Russian history was facilitated by other shoddily registered New Zealand companies.

Oh Mr Key, if you don’t want New Zealand to be either an international pariah, or a laughing stock, I’d take a look at the New Zealand Company Registry and its protections right now. Perhaps there will be another 200+ parliamentary questions, about this new batch of companies, in another couple of weeks. Would that get your attention?

From a first post at NC on the 27th July, and via detailed feet-on-the-ground sleuthing and followup from the National Business Review in the week following,  summarized here, we have some official attention.

Splendid. I suspect the NBR, and some nudges from an NC-reading local, deserve much more credit than I do for getting this onto the official agenda.

Anyhow, encouraged by that responsiveness, I will be offering up a couple of hundred more companies for scrutiny in my next post, due very soon…

Six months or so ago John Key, New Zealand’s no-nonsense Prime Minister, wanted quick action to promote New Zealand’s development into a “Financial Hub“:

Prime Minister John Key has slammed bureaucratic pin-pricking over the proposed New Zealand financial services hub as “absolute rubbish” and stepped in to put the project on the fast-track.

One day Mr Key may  have cause to regret getting what he slammed for.

Alas, from the MSM follow up to my last post on Antipodean scammery, one sees that Mr Key’s pet project was coming off the rails even before he gave it that noisy push. It turns out that some libertarian religious types in the US are already nursing burnt fingers from a New Zealand financial company’s affinity fraud/Ponzi; not a good start. No atheist pinko demurral in the comments please: you might be next, and the scams cost you too, even if you don’t think you’re a victim.

The NC story observed that dubious companies with Panamanian connections were setting up as financial operations in New Zealand. New Zealand’s National Business Review (NBR)  has done its own extra digging this week, and trumped me, a stroke I shall repay here, in the spirit of friendly competition. Some of you curious NZ types may feel that it’s worth shelling out NZD89 for a six month peek at the NBR’s online output, just on the off chance that this gets to be a Big Story. I have no pecuniary interest to disclose…

So here is a summary of NBR’s articles about dodgy Panamanian companies this week. The journalists covering the story there are Niko Kloeten and Colin Willscroft.

NBR/Kloeten tells us that NZ’s Financial Markets Authority has been shaken from its slumbers (by the NBR, is my guess…) and is investigating the Panamanian connection.

NBR/Kloeten enlarge the network of scam companies that I plucked at last week, and finds a $21Mn Ponzi associated with one of them (First Capital Savings and Loan), a religion-based scam going to trial in the US. So don’t kid yourself that this is an overseas story, US readers. Now that the mortgage bubble has died, there are a lot of underemployed crooks in the US who need a new way to rip you off. Evidently some of them have found New Zealand to be an attractive new location for scams aimed at the US.

Third, Colin Willscroft of the NBR reports that questions have been asked in the NZ parliament about the government’s view of the legitimacy of the companies flagged up by Niko Kloeten’s article and the NC piece. There is some traction!

Lastly, and this is my “in”, Kloeten spots a curiosity: auto mechanics and Elvis-impersonating taxi drivers in rundown New Zealand suburbs appear to lead a double life, for they also direct international investment banking operations from their reportedly modest abodes. Hat tips to roy_baldman and Antipodean Sleuth 5 for serving me up major components of that story via their own enquiries.

So what is going on here? Perhaps there really are no social barriers to that sort of career trajectory in NZ: car mechanic one minute, international banker the next. Hardened NC readers will naturally pine for evidence of the reverse path, or make the rejoinder that auto mechanics and taxi drivers could hardly perform worse, as captains of finance, than stony-eyed bunglers such as Stan O’Neal, Jimmy Cayne,  Dick Fuld, or “Sir” Fred Goodwin.

Fair point, but it’s still odd, this, isn’t it? It gets odder when one realises how thin this newly-discovered banking talent is stretched, for each of these unassuming entrepreneurs directs more than 30 other companies as well.

With truly bankerly discretion, the taxi-driver and the auto mechanic clammed up, when doorstepped, but in the last of the NBR pieces I mentioned above (quoted with permission), another interviewee had this to say:

“We basically administered the set-up of the company at the beginning and then the company was on-sold. I don’t know who it was sold to.”

He said Investment Suisse is “basically an FSP shelf company.”

These sorts of companies “set up in New Zealand because our company law allows it,” he said.

“I originally got involved because I have a friend who is connected with the parent company and he assured me it was all legit and fine.”

However, he didn’t know who it was sold to: “Since it’s sold it’s out of my hands.”

So that’s how it works.

For crooks, it’s worth paying people who have time on their hands, and a slight cash shortage, to set up and administer shelf companies. Once it’s set up, by someone legit, with a passport and address and a face and all, you take control from them, by agreement, and appoint your own shadowy overseas directors, anonymous shareholders, or whatever, and your scam shelf company is ready to roll.

This end-runs any identity checking imposed at company inception time. Meanwhile, to your down-at-heel legit person, it just looks like another work-from-home data entry job, earning a welcome few extra bucks out of hours. Until the NBR knock at the door, anyway.

Thanks to the New Zealand Ministry of Economic Development’s miserably porous authentication of company register updaters, which they might have had a better chance to get right, if slamming Prime Minister John Key had kept his ears open and his mouth shut, it is very easy for the legitimate person who starts the company to hand it over to the bad guy, and voila, you have a production line of untraceable dodgy companies. Do what you will with the pipeline’s output – launder money, dodge tax, rip off disorganised religionists. Whatever you like. No-one has a clue who you are any more.

Neat.

Such is New Zealand’s gift to the world of finance (well, not just New Zealand’s, but that’s for another time).

It is a wild variation of Gogol’s “Dead Souls”, which related how the paper identities of dead serfs were bought up by a sharp eyed scammer, with the intention of turning them into security for a dodgy loan. But the scammer’s plan was busted. Except that this isn’t 19th century Russian satirical fantasy, it is 2011 in New Zealand, and it’s really happening, and it’s not been busted.

All of which leads to another glimmer of inspiration. Since this has to look like a work from home scheme, it will be advertised as such, in NZ. And as it happens, we have also a dodgy looking company register updater, Rod Alvar, or Rodrigo Edgardo ALVARADO, whom we found in our last post flitting between Sweden and Panama, with his long name, and skulking somewhere in New Zealand (supposedly), with his short name, when he updates NZ company registers; a veritable Pooka McPhelimy of dodgy international companies, and about as likely to have a physical existence.

At this point yet another of my informants, a Mr Wire Fence-Wales, starts to feel lucky, and shoves “Rod Alvar” into NZ’s bit of www.adpost.com, web small ads. And lo

So we have a hypothesis confirmed in one hit, for once, and another lead on the elusive Rod Alvar, and it takes us to  Zealand Financial (not a name that a local would pick, IMO; I think it is always New Zealand, but Kiwis out there are welcome to enlighten me if I am wrong).

Zealand Financial is your one stop shop for dodgy finance-related NZ companies. It blandly offers:

Turn Key Solutions

You can acquire an existing Company which has already been registered as Financial Service Provider (FSP) and as member of the Government Reserve Scheme (Dispute Resolution Scheme) and thus authorized to offer services to retail customers without restrictions. Turn key packages can include NexorOne® Online Banking System, Debit Card Issuing and Banclear payment processing facilities among other features.

…so you can get your dubious quasi-bank going, at one fell swoop, if you wish, and

Banking Services

A New Zealand Financial Service Provider (FSP) can offer banking services to any type of client of any nationality and resident in any country. The legal requirements vary depending on whether services are offered to New Zealand residents and depending on the types of customers served. Our online FSP Guide makes it easy for you to identify the requirements applicable to your specific FSP operation.

…which looks ripe for abuse by tax-dodgers, moneylaunderers and fraudsters (but that does seem to be the entire point of this regulatory loophole, Mr Key), and

New FSP Formation

You can form a new Company with the name of your choice and use this Company to join the Government Reserve Scheme and to register as an FSP. The process from start to completion will typically take 3-5 weeks. Membership in the Reserve Scheme is only required for FSPs offering services to retail customers. We offer complete formation and registration packages suitable for any FSP scenario.

That is the glossy end of the work from home scheme, right there on the web site. That is how you have, first, Elvis impersonators running banks, and then, invisible Panamanians running banks.

To fend off as best I can the unsophisticated “free markets” types who invariably chime in at this point about the miracles of deregulation, and wish to defend companies like Zealand Financial, or parts of what it does, anyway, I should point out that an enquiry to New Zealand’s whois about Zealand Financial gives a strangely familiar address:

…none other than the office address of Auckland Compliance,  one of the companies under investigation by the FMA, and the former office address of First Capital Savings & Loan, which is the bust American Ponzi I mentioned earlier. So I would simply say that Zealand Financial is startlingly close to some of the companies that, via the Rod Alvar connection, one knows that it serves, and incredibly unlucky to have somehow inherited the office suite that recently hosted a $21Mn US fraud. And the versatile and flighty Rod Alvar has yet another hat, but still, most likely, no certain location or identity.

So there we are: the laws and regs, political climate, IT infrastructure and business activities of New Zealand all combine, in this one little spot, to facilitate tax-dodging and money laundering and fraud. Scam Central.

Now, only hopeless sentimentalists and downright fools get worked up enough about Ponzis and other such frauds to go after them; the obstinate deludedness of the victims is pretty soul-destroying, as is all the collateral damage on families and friendships, and the inertia-is-better-than-prevention apathy of law enforcement agencies, who insist on ignoring reports of fraudulent activity until “a crime has been committed”. And if if the victims are would-be tax dodgers, or other crooks, no one minds very much about that either.

But the worst of this nonchalance about New Zealand’s registers and financial regulation is the potential it offers for New Zealand to be transformed into a full-on tax-dodging and money-laundering centre.  Then it won’t be Elvis impersonators or invisible Panamanians that one worries about, it will be the Mob.

What, exactly, is John Key’s aspiration for New Zealand, again? Does he want it to be a Financial Hub, or Panama, or is it to be Sicily?

…which is not good news for honest New Zealand investors trying to do a due diligence exercise; nor for the New Zealand Ministry of Economic Development’s reputation, if it has one; nor for the NZ Government’s promotion of igovt.

First, though, a detour: the first stop on our trip to New Zealand is…Panama.

Panamanian lawyers, if they are not 100% scrupulous, can earn an easy living by promising fraudsters more confidentiality than Panama can actually deliver. From Panama-Guide.com, here’s an article by Don Winner about the resonantly named pseudoreligious fraudster Quintin Sponagle:

…since I first published the original story about Quintin Sponagle, the guy who victimized 178 members of his own church and family to steal about $4 million dollars in a Ponzi scheme, I have received a bunch of emails and calls with additional information on his activities here in Panama. For example, he moved to Panama in 2006 when things got too hot for him in Nova Scotia. He apparently used the stolen money to establish several offshore corporations here in Panama in an attempt to cover his tracks – for example WATERNISH TRADING, INC. which is advertised as “C/O Sovereign Management Services, Avenida Ricardo J Alfaro Edificio Century Tower, Panama City, Panama, Panama, 260-4524.” That leads to a company called e-pharma24.com, and from there you can branch out into a whole network of online pharmaceutical companies all apparently owned by the same group and interconnected, but under a lot of different websites and operating names. This all ties back to another Panamanian Corporation called Miriad Inc.. Both Waternish Trading Inc. and Miriad Inc. have same resident agents and subscribers – Aknia Chi Pardo and Marga Quintanar de Calderon. If you then do a Google search on those two names, you will see how they are involved in literally dozens of companies, and their names pop up again and again on Internet forums of people trying to recover their money. Therefore, they are likely just setting up front companies for guys like Quintin Sponagle who are trying to hide behind a complicated web of offshore Panamanian corporations. And why would Quintin Sponagle want to hide the money he stole in Nova Scotia? Because Price Waterhouse is suing him for $1.8 million dollars.

I didn’t find that much about Marga Quintanar de Calderon, but when I looked into Aknia Chi Pardo, I hit the jackpot. Here is another of Don Winner’s stories, from 2006, a dodgy Panamanian company shut down by the Canadian regulator; the company treasurer is Aknia Chi Pardo. And here is an enormous list of all the Panamanian companies with which she’s associated in one capacity or another. She must be a very busy lady indeed, trousering all those service fees. If I were her I’d be concerned about who was paying me all that money and why.

If you relax your Google search criterion a bit, you get more hits. Here is plain Aknia Chi, a lawyer in Panama, here’s the same name cropping up in connection with a suspected scam, and here is Aknia Mayn Chi Pardo, who, with her very un-Swedish name has somehow got the role of director of a Swedish company, Transocean Savings and Trust ekonomisk förening,  that’s going into bankruptcy (that’s what “Konkurs inledd” means); the sort of thing a scam front company does once it’s done it’s work, or failed to hook anyone. I wonder which it is.

So that’s the MO, and it sounds great, from the fraudster’s point of view, doesn’t it? You commit your fraud, then stash the proceeds in a web of Panamanian companies, or a company tolerated by a dopey offshore company register, like the Swedish one. The trouble is, fraudsters can’t necessarily rely on the lawyers to stay onside once someone’s called the cops. Don Winner again:

In Panama it’s relatively easy to penetrate the supposed cloak of secrecy surrounding these companies and corporations. As long as you’re not doing anything illegal, then you have a right to privacy and protection. However as soon as you’re doing something like trying to hide the $4 million dollars you stole in Nova Scotia from the members of your church, then any prosecutor will order full an investigation, together with full and complete disclosure. The lawyers who set these things up promise the moon when they are taking your money, but when the investigators from the Public Ministry come knocking they simply say “we didn’t know” and roll over like ducks on a pond. It’s actually a pretty good gig for the lawyers. And, there’s steady flow of new suckers like Quintin Sponagle who are willing to drop down some of their hard-stolen money to try to buy anonymity. And once you start penetrating one company, then you find bank accounts, and the bank accounts lead to other information, and before too long it’s all coming down like a house of cards, and Quintin Sponagle is on a plane for Ecuador.

So that’s my tip to the fraudsters: you can’t trust the Panamanian lawyers that you are dealing with. They are scamming you. If they get into trouble, they will turn you in.

So much for Panama; what’s the New Zealand connection? Well, chasing Aknia Chi Pardo led me to New Zealand. And that got me started ferreting about in the NZ company register, looking for Panamanian connections. I found some. No-one expects a company register to be clean as a whistle – there will always be frauds and fronts in there. So this sort of garbage:

…is arguably not all that surprising. For some reason this New Zealand company has just one director, and he’s in Panama. I hope readers will recognize the smell of that by now. But still, you’d think someone in the NZ registry would be looking out for that sort of thing: it does stick out like a sore thumb; what on earth is the point of registering something like that? How will anyone be able to do the due diligence anyway? It looks remarkably like a front company, just like the bankrupt Swedish one we found before. Another funny thing: it says it’s a Savings and Loan. That’s an extremely strange name for a New Zealand company to give itself, with associations of American financial fraud. Of course if you know nothing about the history of financial fraud, that won’t ring any alarm bells for you. So the sort of person who would do business with a company with a name like that just might be a little naïve. A company name like that is just what a fraudster needs – a filter to keep savvier types away.

Next let’s do the obvious and let’s see what else we can find at the NZ address “9/22 Curran Street”. Garbage always comes in heaps, doesn’t it? Here’s the heap:

Oops, they all look like a bit like financial services companies, and they’ve all been registered in the last nine months or so. Someone’s brewing up a fraud in New Zealand! Rather than delve into all those front companies (there will be links to unverifiable overseas entities all over the place, no doubt) let’s keep our eyes on two big points:

1. It’s an offence under NZ’s 1993 Companies Act to make false statements in documents required under the act (such as registration documents).

2. Financial Service Providers (FSPs) have to be registered in New Zealand, at the New Zealand Ministry of Economic Development. And it’s an offence under NZ’s Financial Service Providers (Registration and Dispute Resolution) Act 2008 to put rubbish on the FSP register.

So that’s OK then, isn’t it? The New Zealand Ministry of Economic Development can be as ineptly trusting as it likes when registering FSPs: the dual deterrents, the Companies Act and the Financial Service Providers act, will deter, won’t they? And besides, the FSP register is protected by New Zealand’s splendid igovt identity scheme, which actually makes you input an address when you get an ID. There’s a spot of extra registration to do when you are registering a financial company, that’s all. You can be an American blogger or a Panamanian crook with a false name or any damn thing you like. Peachy.

And how is all this going, in practice? Not that well, as it happens, as readers who still remember the title of this post will probably have guessed. “Total trainwreck” might be nearer the mark, in fact.

Let’s stick with the first of our garbage companies above, NEW ZEALAND INTERNATIONAL SAVINGS & LOAN LIMITED. Right now it is under the leadership of the Panamanian director, Rodrigo Edgardo ALVARADO, and is owned by a Swedish company, Eurocapital New Zealand Limited Partners SA, Frejgatan 13-882, Stockholm, 11479 , Sweden.

Delving into its brief but already exciting history, we find (01 October 2010 12:14:58) that the guy doing the updates to the company records is Leon QUIJADA, who despite his possibly Panamanian name is apparently resident at 9/22 Curran Street, Herne Bay. That’s this place, as near as I can make out, or something nearby, and very similar. It doesn’t look much like a nerve centre of international banking. According to the New Company Incorporation, the company was then called NZ GENERAL ADMINISTRATION LIMITED, the director being WOOD, Warwick, also resident at the manifestly capacious 9/22 Curran Street. There is a company name change later.

Next (21 October 2010 09:18:55) it gets another director, our Panamanian Rodrigo Edgardo ALVARADO, but mysteriously translated from Panama to Sweden (Frejgatan 13-882, Stockholm, 11479, SE, again). So at least he gets out and about a bit.

Lastly (27 October 2010 08:49:18) it gets yet another director, Rod ALVAR, likewise resident at 9/22 Curran Street. Warwick WOOD, exhausted by all the comings and goings at 9/22 Curran Street, and the ceaseless registration changes, stands down.

And if you don’t already think the whole of this history is bullshit, something about the name Rod ALVAR ought to make you pause for thought. Just compare it with the name Rodrigo Edgardo ALVARADO. My bet is that at least one (most likely Rod Alvar) of these two characters doesn’t exist.

All of which means that quite possibly, actual bad people don’t care a bit about the legal penalties for putting dodgy entries on the NZ company registrar (1993 Companies Act). There may be a whole bunch of them doing it already! Or maybe just one guy out in cyberspace somewhere. You just can’t tell.

If I were the NZ police, with no travel budget, and searching for the chimerical Rod Alvar, I’d now be very curious about the denizens of  9/22 Curran Street, and all of the people who’ve left their digital fingerprints on NEW ZEALAND INTERNATIONAL SAVINGS & LOAN LIMITED.  And of course, any other company on the register with associations to any of these bods or that address, is tainted.

Happy searching. There will, I suspect, be plenty to find.

Obviously the authentication part of the NZ company registry is utterly hopeless, but that isn’t necessarily all the system designers’ fault. Perhaps, if the security internals of the NZ company registry are as good as its GUI, there will be some logs somewhere that say something useful about where web updates to NEW ZEALAND INTERNATIONAL SAVINGS & LOAN LIMITED actually originate from. Is it Herne Bay, Panama, Stockholm, or somewhere else altogether? Who knows, but it must be worth a quick look.

So we have a profoundly dodgy company, NEW ZEALAND INTERNATIONAL SAVINGS & LOAN LIMITED and a profoundly dodgy made-up individual, Rod Alvar, and what look like offences under the 1993 Companies Act. Surely a company that ragged couldn’t possibly make it onto the register of Financial Service Providers, could it? Its mere presence there would make one wonder whether there had been an offence under the Financial Service Providers (Registration and Dispute Resolution) Act 2008, too.

Oh dear; here is its FSP register entry.

Helping to apply a veneer of respectability to dodgy companies, by not monitoring who is registering as an FSP, can only facilitate fraud. Perhaps I am an old fart, but I don’t think the purpose of the New Zealand Ministry of Economic Development’s imprimatur is to facilitate fraud. Of course if the Ministry are actually aiming at Panama’s “dodgy company” franchise, they should carry on just as they are.

And whoever put that register entry in, brushed igovt aside, too. But then, igovt has been broken ever since the NZ Powers That Be stopped insisting that people wanting an igovt ID had to present themselves at a government office with paper documents. Now you can just lie your head off about who you are, and you still get a login.

UPDATE: Igovt has two components – a logon, that is doled out to anyone, and an ID scheme, for which a face to face meeting, paper ID, address verification and so on is required. Evidently the ID scheme isn’t in use for protecting the Companies register and the FSP register. Or if it is, it isn’t working. Perhaps foreign nationals should be put to the extra inconvenience of identifying themselves, rather than getting the opportunity to corrupt the two registers.

Of course, NEW ZEALAND INTERNATIONAL SAVINGS & LOAN LIMITED has a website. And it’s quite umm…dubious. There are tells aplenty, but what a magnificent one on the main page! NZISL declare:

NZISL offers banking services as a registered Financial Service Provider in New Zealand and not as a registered bank under the supervision of the Reserve Bank in New Zealand.  New Zealand International Savings & Loan is regulated by the Ministry of Economy and Finance of New Zealand which is responsible for supervising Financial Service Providers (FSP).

Well, there is no such thing as the “Ministry of Economy and Finance of New Zealand”. FSPs are regulated by the NZ Ministry of Economic Development (via the Companies Office). They’re the folk who registered NZISL as an FSP.

In short, we appear to have the magnificent spectacle of a non-existent financial institution staffed by non-existent people announcing to the world that the Ministry of Economic Development has nothing to do with regulation, and that a fantasy Ministry of their own devising does it instead.

And do you know, I think they might have a point. If this is how closely the Ministry of Economic Development monitor the FSP register,  it might as well be like that.

Welcome to the new world of igovt, by the way.

Oh, that’s enough. Here’s a far from exhaustive summary, based on this and other digging. There will be lots more to pull at before the whole furball is extracted. Let’s wrap it into one nice parcel for the various NZ authorities who ought to be interested in all this.

1. The New Zealand company register is in the process of infiltration by Panamanian front companies.

2. The New Zealand Ministry of Economic Development Financial Service Providers register is in the process of infiltration by fraudulent companies. This will be very bad for its credibility.

3. Given the pace at which these companies are being registered one has to imagine that a rash of attempts to defraud NZ nationals is imminent. Or rather, looking at NZISL, underway.

4. “igovt means that government service providers can offer you more personalised online services involving more valuable transactions because they have confidence in your identity”, the igovt site tells us.  UPDATE: True only for the ID part of the scheme.  It might be worth rolling that out further, to protect the company and FSP registers against corrupt entries.

5. The following NZ companies look likely or very likely or dead certs to be frauds or fronts. This might be far from an exhaustive list. One has to stop somewhere.

• Bantec Financial Limited
• Bantec Savings and Trust Limited (FSP 60882, registered end 29 Jan 2011)
• Investment Suisse Depository Savings Loan and Trust Limited
• Investment Suisse Limited (registered mid July 2011, something interesting going on there)
• New Zealand International Savings and Loan Limited (FSP 11201, registered 05 Oct 2010)
• Overture Global Limited
• Pluthero Investment Trust
• Trillion Private Wealth Limited
• Worldwide Forstock Financial Group Limited

6. The following NZ addresses are strongly associated with dodgy NZ companies.

• 48b Bond Street, Auckland 1021
• 9/22 Curran Street Herne Bay Auckland

7. The following names are associated with dodgy NZ companies. It’s possible that none of them refers to a real flesh and blood person.

• KELLY, John, 4556 QLD, Australia (director of Pluthero Investment Trust, Auckland).
• STEWARDS FIDUCIARY SERVICES INC (also owns) of Torre Banistmo, Calle 53,, Marbella, Office 1002,, Panama City, Panama, owns Pluthero Investment Trust
• Timothy Wayne JAMIESON, New Zealand. Director of the NZ company Investment Suisse Limited. Why, of all names, did JAMIESON choose the mongrel English/French “Investment Suisse”, which the internet already associates with scams. JAMIESON comes up in association with 50+ other NZ companies by the way.
• Aknia Mayn CHI PARDO, aka Aknia CHI PARDO, aka Aknia CHI, Panamanian lawyer, director or officer of many front companies in Panama, see above. Director of the NZ company INVESTMENT SUISSE DEPOSITORY SAVINGS LOAN AND TRUST LIMITED.
• Rodrigo Edgardo Alvarado, a Panamanian who registers companies at the NZ registry, perhaps under the alias Rod Alvar, a truncated version of his Panamanian name. He has also changed details for Investment Suisse Limited.
• Mike Hanson, who updates some of the same companies as Rod Alvar.

8. The folk who run the Swedish company register might want to check out how many strange-looking companies they have, too. Perhaps Swedish Lex is in a position to give them a little nudge about dormant companies with overseas directors, especially Panamanian directors. Or they might start with the address Frejgatan 13-882, Stockholm, 11479.

9. This is farcical. If, against all the evidence I have accumulated, there really are any NZ authorities who do happen to be mildly interested in preventing their country becoming a one stop shop for financial fraudsters, and who don’t want to just sit and wait for a boatload of fraud cases to hit the headlines, I have more info, and can be contacted via yves@nakedcapitalism.com.

UPDATE 29/7: I  was far too hard on igovt first time around, as an anonymous commenter below warns. It has two components, a logon (which is doled out to all and sundry), and an ID (which still involves a face to face check, documents, etc). The logon isn’t meant to guarantee anything about the user’s bona fides.

That makes more sense…but the key problems are still that too much rubbish is ending up on the Company and FSP registers. I’ve made some deletions and updates to the post.