Friday 4th June 2004 |
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FCA claims it was duped because Baycorp intended Finance House to be a business and financial failure.
Court documents claim Finance House was an "experiment" by Baycorp to learn about and develop management techniques and to gain an understanding of information and technology tools necessary to operate its other business.
"Baycorp never intended to fully commit its resources and efforts to the long term success of Finance House," FCA claims.
Last week NBR reported how Baycorp was enmeshed in court action in the US and Auckland over the dispute, which dates back to a 1996 deal.
The plaintiff FCA Investment Company, a Delaware corporation which operates out of Houston, invested $US130,000 in Finance House, a Baycorp-linked company which was described as a specialty financier in the sub prime-lending market.
The company later failed and FCA is now claiming in the US District Court in the Southern District of Texas that it was duped into investing.
The American plaintiff is able to file proceedings in that jurisdiction because a meeting to discuss the transaction were held in the US.
FCA's statement of claim, or complaint as it is called in the US, says in 1996 Baycorp's chairman Jim Boult met on one or more occasions with Robert Scharar, the president of FCA Investment Co on trips to the US.
"During these discussions Jim Boult assured Robert Scharar and FCA that Baycorp would be involved in the operation and management of Finance House and Baycorp would not compete with Finance House's business operations or customers. These inducements and promises...were false," FCA alleges.
FCA claims it made a request for a seat on the board of directors of Finance House so it could monitor its investment but Baycrop made "misleading statements" that Baycorp would monitor Finance House on behalf of FCA.
Last week Baycorp managing director Andrew Want released a statement to NBR describing the principal of FCA as a "sophisticated US-based investor and lawyer with strong connections to and knowledge of the New Zealand marketplace."
This local knowledge does not appear to extend to FCA's lawyers who describe Baycorp as a Sidney (sic) company.
Since the proceedings were before the court Want said he could not go into detail. But other New Zealand finance sources said the lesson to be taken from the case was "don't do business with Americans."
The source said the case showed how litigious US companies were.
Baycorp's group marketing and communications manager Adam Cooke said from Australia that Baycorp held a minority 30% stake in Finance House, but FCA's documents claim Baycorp owned 50%.
Companies Office records are unclear about the shareholding details but record the other shareholders as Jarden Investments, a company linked to high-profile businessmen Bryan Johnson, David Wale and John Benton, and Hong Kong-based Supurimex Corporation.
FCA is claiming damages of $US131,000 in lost earnings and profits, exemplary damages for fraud and treble damages under the Texas equivalent to the Fair Trading Act.
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