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THE SPRUIKING SCAMS


Henry Kaye and NII


The Henry Kaye saga may have been the most widely reported case, but it represents a small fraction of the national spruiking menace. Currently, Neil Jenman, who is writing a book about wealth spruikers, has a ‘cast of characters’ containing the names of 88 wealth spruikers plus dozens of companies.

Much of what has been learned in the fight against Henry Kaye can now be applied to other spruikers, many of whom are former Kaye associates or whose wealth creating claims are similar.

National newspaper The Australian said this of Henry Kaye: "His get-rich-quick schemes were symptomatic of the craze in which many tried to become property millionaires."

Journalist Maurice Dunlevy attributes the downfall of Kaye and NII to the actions of Neil Jenman, who he described as Kaye’s "personal nemesis".

Henry Kaye’s spruiking empire closed-down in November 2003. Dunlevy reported in The Australian on 26 November: "Jenman pursued Kaye to the end."

Neil Jenman believes that the arrival of Denise Brailey was a huge boost in the fight to protect consumers from Kaye. On October 31, 2004, Colleen Egan, a journalist with The West Australian, quoted Neil, "If it were not for the actions of Denise and some in the media, Henry Kaye would still be operating today," Mr Jenman says. "I was tossing matches at Henry before Denise arrived: she was the petrol."

Aside from the seminars, there was another side to the Kaye operation - a large property operation in which buyers purchased over-priced investment properties from Kaye and his network of companies. The Fund is in regular contact with many of these buyers today.

Kaye and NII attracted court action from both the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) in the second half of 2003.

In July ASIC went to the Federal Court to force Kaye to pay clients refunds of up to $55,000 each, after NII had claimed its courses were ASIC-approved. ASIC went back to the Court in October alleging Kaye had breached undertakings given in the July case. ASIC alleged Kaye offered the required refund to clients only if they fulfilled a series of conditions - including swearing an affidavit, providing supporting documentation and being cross-examined by a QC paid by NII. ASIC alleged clients were threatened that they could face imprisonment for any false statements.

On October 8 2003, in the Federal Court, the ACCC alleged that NII’s strategies did not enable ordinary Australians to become millionaires, and that neither Mr Kaye nor NII had reasonable grounds for such claims.

A year later, on October 22, 2004, Judge Susan Kenny ruled in favour of the ACCC. Neil Jenman attended the Federal Court to hear the judgement. The full reasons for the Court’s ruling are contained in an 80-page statement. It is clear, from studying the Judge’s comments, that many other wealth spruikers should also face prosecution and similar judgement.

For example, the term "property millionaire" which is used by several spruikers who say it means "to secure" a million dollars worth of property (with no allowance for debt) is deceptive. The Judge found that "property millionaire" means "a person having a net wealth in property exceeding $1 million". The Judge also found that it would be "virtually impossible" for ordinary Australians to become millionaires (in the time periods quoted) simply by applying the knowledge from NII’s course. The same reasoning, of course, could equally apply to other spruikers.

The Chairman of the ACCC, Graeme Samuel, told the Australian Financial Review (October 23, 2004), "As they [the spruikers] keep popping up, like the Luna Park machines, we will knock them down with a mallet."

If this is correct, the ACCC will be using their mallet a great deal in
the future.

The AFD Class Action
In June 2004, former clients of Henry Kaye launched a class action against the finance company which financed them into high-priced wealth courses.

Law firm Slater & Gordon filed proceedings in the Supreme Court
of Victoria on behalf of lead plaintiff, Daniel Hall, of Sydney. Mr Hall is seeking to undo his financial contract with Australian Finance
Direct Limited (AFD), a subsidiary of the New Zealand based
Hanover Group.

The class action has the support of Neil Jenman and the Fund. While the prospects of success seem good, the Fund could be liable for substantial legal costs if the action fails.

It is estimated that several thousand consumers may join the class action. The lawyer handling the case, Rob Lees from Slater & Gordon says, "Claimants in the class action relied on misrepresentations by the National Investment Institute that their course was ASIC-approved, and that they could get a refund on their fees at any time if they were not satisfied with the course".

"With National Investment Institute now in liquidation, AFD is continuing to pursue former students for the fees they borrowed, despite many students being dissatisfied with the course and seeking refunds, while some received no tuition at all.

"In addition to the class action seeking to terminate these financial contracts, Slater & Gordon is representing former students who are being sued by Australian Finance Direct."

The class action has been welcomed by consumer representatives including Denise Brailey, president of the Real Estate Consumers Association, and solicitor Paul Gillett from the Consumer Credit Legal Service, which has brought numerous individual actions against AFD and NII on behalf of consumers.

"We are pleased to see this class action launched," Mr Gillett said. "With a case of this magnitude, Slater & Gordon’s resources and experience are a valuable addition to the fight for a fair outcome for all the ripped-off consumers out there."
The case is likely to commence in early 2005.

Other wealth-spruiking operations

While Kaye and his web of companies have been the ugly face of the get-rich-quick industry, they are not the whole problem. Many other spruikers are preying on consumers.

The Fund has received hundreds of complaints about other companies running wealth-creation seminars and schemes. Victims cover the broad spectrum of Australian society - from 16-year-olds whose parents have gone guarantors on loans through to elderly folk with terminal illnesses. The spruikers don’t discriminate with whom they target.

In many cases, letters from the Fund to the spruikers have secured consumers’ release from onerous situations. A letter from Neil Jenman to one group ended a threatened law suit against a former employee who had spoken to the media about the company’s operations which are based on a claim to secure properties at below-market values despite charging a 6.6% commission to the seller.

Thousands of consumers have been assisted by the Fund. Such assistance may be as simple as reading an article on the Jenman web site or seeing a media report. Or it can involve a major legal fight to secure the release of trapped consumers, as is happening in the AFD class action matter.

Often, Fund personnel are able to save consumers before they commit to spending thousands of dollars on seminars. There is barely a wealth spruiker operating in Australia or New Zealand about whom we do not have detailed information.

It is our opinion (and fervent hope) that most of the wealth spruikers will eventually be shut-down as a result of consumer anger which will lead to increased government action. We are confident that many spruikers will face criminal charges. For some spruikers, criminal charges will be nothing new as they have previously been convicted of criminal offences.

Where else but Australia?



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