Feltex (FTX) - All over for shareholders

[COLIN]

quote:Originally posted by Panic E-Button

How much payout/share current shareholders can expect?



The answer is zilch, and unsecured creditors are also going to be left in the lurch. Its all turned to mulch. (Assume you've been out of the country, or in the bush?)

[tsb]

Bought my carpet today - the place said that they hadn't sold any Feltex carpet since receivership - as they are not able to guarantee any warrantee.

And bugger buying Godfey Hirst – Ended up with a good deal on Victoria Carpets stuff.

[Mr_Market]

quote:Originally posted by tsb

Bought my carpet today - the place said that they hadn't sold any Feltex carpet since receivership - as they are not able to guarantee any warrantee.


How much discount did you get?

[tsb]

carpet court
special purchase 100% wool, textured, $105.00 mtr

[whatsup]

The sad state of affairs is that Feltex carpets is the best in the business , I do hope that when the "dust" settles that Feltex carpets will still a)be around
b)be available at a competitive price.

[minimoke]

Here’s a lesson for investors;
What contingent liability does a company carry to cover potential redundancy situations.

It seems strange to me that FTX (actually it doesn’t!) would allow itself to be put or remain in a situation where the redundancy provisions of its workforce (up to $50,000 a worker at Riccarton) would totally erode shareholder value of any net property value in a closure situation.

The Riccarton plant looks like it has had close to zero value in any sense for quite sometime. If producing product at break even wasn’t bad enough it looks like any residual land / plant value would be gobbled up by redundancy payments leaving other creditors / shareholders with nothing. This is obviously a situation that has been around for some time and probably pre-float but I bet this wasn’t disclosed in the IPO.

[COLIN]

quote:Originally posted by belgarion


quote:Originally posted by minimoke

Here’s a lesson for investors;
What contingent liability does a company carry to cover potential redundancy situations.




Surely this would violate the 'going concern' nature of the business? I.e. if the business was a 'going concern' then no such provision should ever be made.


?????????????????
You can still have redundancies in a "going concern"!

[minimoke]

Belgarion
A Gong Concern is defined by the GST Act which is shown below. There is nothing in this definition that requires the concern to be “profitable”!

Perhaps its more about the Riccarton operations probably shouldn’t be (if indeed it was) an "asset" part of the accounts.



“going concern, in relation to a supplier and a recipient, means the situation
where---

(a) there is a supply of a taxable activity, or of a part of a taxable
activity where that part is capable of separate operation; and

(b) all of the goods and services that are necessary for the continued
operation of that taxable activity or that part of a taxable activity are
supplied to the recipient; and

(c) the supplier carries on, or is to carry on, that taxable activity or
that part of a taxable activity up to the time of its transfer to the recipient”

[minimoke]

Chairman Tim is booted out by the receivers of FTX, takes the moral high ground with PGC and resigned on Friday. Will he loose his seat on CEN or wait to be kicked off?

[tsb]

As one of the 8893 shareholders I recieved a letter from Wakefield Associates - inviting me to retain them at an initial cost of $380.00 for their helpin recovering up to 6.6cents a share.
Not much substance to the letter except that $380.00 should only be considered as a sort of part payment!
Very lukewarm about it

[COLIN]

quote:Originally posted by tsb

As one of the 8893 shareholders I recieved a letter from Wakefield Associates - inviting me to retain them at an initial cost of $380.00 for their helpin recovering up to 6.6cents a share.
Not much substance to the letter except that $380.00 should only be considered as a sort of part payment!
Very lukewarm about it

"Recovering" - who from?

[kura]

quote:Originally posted by COLIN
Recovering" - who from?


Perhaps recovering from the ferocious drinking session, once the full extent of FTX losses sunk in ?

However, on a more serious note, I was/am a shareholder in CRS (an ASX listed gold miner that went into administration) chance of any payout is about the same as FTX (ie snowballs chance in hell) however, as a CRS shareholder I received a letter from a firm of "legal parasites" inviting me to contribute towards cost of legal action against directors & administrators etc. It's nothing more than some down and out lawyer touting for a bit of bizz, sure throw good money after bad if you must, if nothing else it will be entertaining !

[minimoke]

quote:Originally posted by tsb

As one of the 8893 shareholders I recieved a letter from Wakefield Associates - inviting me to retain them at an initial cost of $380.00 for their helpin recovering up to 6.6cents a share.
Not much substance to the letter except that $380.00 should only be considered as a sort of part payment!
Very lukewarm about it

Say legal costs come to a grand a head you would need a shareholding of 15,000 to break even at 6.6 cent return. Like Kura this sounds like another way of throwing good money after bad to me.

[Steve]

I hold 100 shares in FTX and I have not received a letter. Perhaps my holding is too small to count?!

[kura]

quote:Originally posted by Steve

I hold 100 shares in FTX and I have not received a letter. Perhaps my holding is too small to count?!

Even if you were successful in getting the 6.6 cents per share, for your 100 shares, you would get $66. Would you really want to pay out $380, for a chance of $66 ?

[tsb]

yus - If they had asked for nothing but stated that they would take a percentage of any gains it would have been a bit more believable.
Also got a letter from the shareholders association taking pity on the poor feltex people offering a reduced subscrition.
I look forward to Winnie Peter's gold card in a day or two!

[Jim]

I 've 100,000 of FTXs and I received a letter from someone offer to get something back (??????) and I received an email from NZSA and offer me to take litagations to liquitate FTX. As far as I am concerned I have written FTX off and paying $380 and hopefully 10 years and get something back........ HaHaHa Don't be silly and get suck in by those lawyers or liars

[Steve]

quote:Originally posted by kura


quote:Originally posted by Steve

I hold 100 shares in FTX and I have not received a letter. Perhaps my holding is too small to count?!

Even if you were successful in getting the 6.6 cents per share, for your 100 shares, you would get $66. Would you really want to pay out $380, for a chance of $66 ?

I'm not interested in taking up their offer, I'm just wondering why I haven't received a letter like everybody else...

[Yossarian]

you'd get $6.60, not $66... perhaps they decided that you weren't worth the stamp.

[Panic E-Button]

If 1/3 of shareholders accepted the offer, than layers will collect $ 1,126,400 regardless of results.

Mathematics exercise at glance.
[8]

How about - 50% of recovered money, whats wrong with this? Even better revenue. So more these fellows can have a taste of risk too.

If one got time - tell em.

[metro]

From: NZ Herald

The Feltex debacle: pointing the finger
Monday January 22, 2007
By Rebecca Macfie


More than 170 workers lost their jobs as Feltex's new owner shut factories
On September 22 last year, less than 2 1/2 years after it was floated to New Zealand investors in a $254 million initial public offering, Feltex Carpets collapsed into receivership.

Some 8800 investors, many of whom had bought shares at $1.70 in the May 2004 IPO, were left with nothing but worthless scrip and a long list of questions about whether the initial prospectus had given a truthful account of the company's fortunes.

Unsecured creditors - owed $13.1 million, according to the receivers - were told to flag away any hope of recovering their losses.

Over 170 workers lost their jobs as Feltex's new owner shut factories in Christchurch and Kakariki.

The chief beneficiary of the Feltex collapse was its old rival Godfrey Hirst, which had been circling its prey for months in a series of on-again, off-again negotiations. Within a week of the receivers being called in, it had secured a deal to buy Feltex's assets.

The sale price enabled the ANZ bank, owed $135 million, to walk away with just a "small loss" on its investment, according to the receivers.


Few corporate stories have provoked as much public anger and indignation in recent years, which is why The Business undertook a major two-part investigation into the IPO and subsequent collapse - published in October and November last year.

The investigation unearthed a number of things investors could not have discerned from the glossy prospectus, including that the Feltex board had serious misgivings about the abilities of the chief executive at the time of the IPO, Sam Magill. The prospectus, instead, touted him as a skilled and experienced industry veteran.

Nor could shareholders have known that the company went into the IPO in dire need of major restructuring - restructuring that the board knew was necessary but which management had failed to carry out.

The investigation also concluded that the prospectus conveyed a highly optimistic view of Feltex's prospects, given the firm's wildly fluctuating fortunes in the years before the IPO, and the intensely volatile and competitive industry conditions it faced.

Indeed, just three years before the IPO, Feltex had nearly been sent broke by harsh trading conditions and an enormous debt burden.

Perhaps inevitably, Feltex failed to meet its first full-year profit projections after the IPO, setting in train a series of crises from which it was never able to recover. Debt levels blew out, customers lost confidence, and chief competitor Godfrey Hirst took advantage of Feltex's weakness by aggressive cost-cutting.

By mid-2006, the ANZ had lost patience with Feltex - which by then was in breach of its banking covenants - and wanted out. It saw a sale to Godfrey Hirst as the best option, and was frustrated when the Feltex board repeatedly failed to seal a deal with Hirst. Despite the emergence of a determined, credible and well-funded bid led by the Turner brothers, of Sleepyhead fame, the bank opted for receivership.

With the Feltex assets promptly sold to Godfrey Hirst and the company aptly renamed EXFTX, the Shareholders Association successfully applied to the High Court in December to have the company put into the hands of liquidators McDonald Vague, who are empowered to investigate its affairs.

However, another shareholder group, led by investment banker Tony Gavigan - who failed in a bid to have the High Court appoint him a director of Feltex - says it may appeal against the decision to appoint a liquidator.

Gavigan had wanted to implement a scheme of arrangement to take the company out of receivership, keep the shell company trading on the NZX, and seek funding from shareholders to investigate Feltex's recent history. He is also considering action under the Fair Trading Act against some brokers who promoted Feltex shares.

The Securities Commission, which last August gave the Feltex IPO a clean bill

[Steve]

quote:Originally posted by metro

The Securities Commission, which last August gave the Feltex IPO a clean bill of health, is still investigating the company's continuous disclosure and financial reporting since its April 2005 profit downgrade

How long is this investigation expected to take? Is this breach what the NZX 'fined' FTX for previously? I don't recall

[Crypto Crude]

I live just around the corner from the Feltex carpet factory in Christchurch...
on Athol tce is the factory...
Today I noticed that they have a for sale sign up..
the site area is 4.0566 ha, Building area 21,680m^2....
in prime real-estate area...
sale should be good for house prices in our area...

also....Why is it that everytime I open up the press, or flick on teletext that Feltex is still quoted...
[8D]
.^sc-Disc-SC never held this stock :)

[Steve]

I still own 100 shares, which I am deciding if I should put into my bottom drawer for when the liquidated shell is re-listed with something even more unfortunate backed in to it...[:p]

[Toddy]

The picture that Feltex painted was a masterpiece according to the Securities com.

Feltex IPO prospectus not misleading: Securities Commission
2:04PM Thursday October 11, 2007



Feltex Carpets' prospectus wasn't misleading but it failed to disclose a breach of its banking covenants, the Securities Commission has found.
Feltex Carpets' prospectus for its 2004 initial public offering (IPO) was not misleading in any material particulars, the Securities Commission has found.

But, releasing the findings of an inquiry today, the commission said the collapsed company failed to disclose certain material information to the market concerning changes to its banking facility agreement with ANZ in October 2005.

Feltex also failed to disclose a breach of its banking covenants and did not properly classify its debt in its half-year financial statements at the end of 2005, the commission said.

Work undertaken by Ernst & Young New Zealand in its review of Feltex's half-year financial statements at the end of 2005 were found to have failed to meet the required standards.

The commission looked into Feltex's 2004 IPO prospectus, and into the company's compliance with financial reporting and continuous disclosure obligations in the period between its listing in 2004 and the appointment of liquidators to the company in late-2006.


The commission said that while the issues identified raised questions about the performance of the Feltex board and its auditors, it was not suggesting those issues were the reason Feltex failed.

It had heard from witnesses that the collapse of Feltex was due to a combination of factors.

They included the high fixed costs inherent in the carpet manufacturing industry and those particular to Feltex, the need for restructuring, the decline in the Australian housing market, and the competition from Asian carpet manufacturers.

"It is the commission's view that the FTX (Feltex) collapse was not caused by securities or financial reporting matters, and accordingly, the commission will not comment on the FTX collapse," the commission said.


Its views on the standards of the work done by Ernst & Young had been referred to the New Zealand Institute of Chartered Accountants.

Matters arising from the inquiry's findings had also been referred to the Registrar of Companies, and the Accounting Standards Review Board.

"Careful attention to continuous disclosure and financial reporting is vital to allow investors to make informed decisions about holdings in listed companies," commission chairwoman Jane Diplock said.

"This becomes all the more important when a company is facing difficult circumstances."

During its inquiries, the commission obtained documents and heard evidence at hearings from people including former directors and management of Feltex and representatives of Ernst & Young and ANZ.

As liability for continuous disclosure breaches lay only against the issuer concerned, and with Feltex now in liquidation and its shares no longer trading, there was no realistic chance of taking enforcement action, the commission said.

Under the law in force in 2005 directors and officers of companies could not be held liable for continuous disclosure breaches. Therefore, no question arises of action against any individuals.

In late 2005 it was widely known that Feltex was in difficulty. At that time the company was dependent on the continued support of its bank, ANZ.

"It appears that the FTX directors failed to comprehend the significance of changes made to the debt facility agreement that were designed to protect the position of the bank, and so failed to adequately inform the market of these," the commission said.


The Feltex board's failure to disclose the breach of the company's banking covenants in its December 31, 2005 half-year financial statements raised questions of compliance with the Financial Reporting Act, the commission said.

Certain defences may be available to the directors, including that they "took all reasonable and proper steps to ensure that the applicable requirement of this Act would be complied with".

While the directors did take certain steps, the Feltex board failed to pay sufficient attention to the breach and failed to consider whether there were financial reporting obligations arising from the breach, the commission said.

- NZPA

[The Doctor]

would you rob banks ,risk getting caught and going to ..jail?

[pietrade]

As a 'burnt' Feltex holder, I thought this might be of interest to others. The full article is on the CAFCA website.---------------------------------------------------

A “softened” version of this article, by Bill Rosenberg and Sue Newberry, was published in the Business section of Friday’s Press (12/10/07) under the title “Feltex Carpets: Firm’s Collapse Raises Questions”.

Bill comments: “It has generally been softened (in the Press version). McKendrick didn't "clearly" profit - "a McKendrick company" "appears to have". The assertion that the structure was deliberately planned has been removed. Etc. I guess people can read between the lines”.

It is not available in the online Press or on the Stuff Website (presumably because it was written by “outsiders”).

Murray Horton,
Secretary/Organiser
CAFCA
Campaign Against Foreign Control of Aotearoa

Box 2258, Christchurch, New Zealand

cafca@chch.planet.org.nz

www.cafca.org.nz

[winner69]

Sue Newberry still on the case

Old hat but most of what she comments on in the article has been aired (including the bit about 'creative transfer pricing arrangements' ) on Sharetrader over the years ..... before the float and during its short tenure on the NZSX

Never mind ....... the rich guys should be pleased that [quote] 'a whole bunch of suckers in New Zealand got screwed'."

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10480775

[warthog]

Having previously held a position of little sympathy for FTX investors, many of whom the hog assumes were along for the ride and would have been quite happy to accept disproportionate returns if they arrived yet exhibit not insignificant surprise when the company fell over, this old hog still admires those who, believing that they have a case, stand by their beliefs and put them to the test.

So below are some links for FTX shareholders who don't know about them already.

Disc: no FTX.

Are you affected?
You're in the shareholders group if you:
* Bought or beneficially bought Feltex shares in the June 2004 IPO.
* Bought Feltex shares on market before the April 1, 2005 profit downgrade announcement.
* Lost money by either selling those shares for less than the purchase price, or by holding those shares until the December 2006 liquidation of Feltex.
If you are happy to stay with the action, do nothing. If you are not happy you must opt out by 4pm, April 11, 2008.
You can opt out by:
* Writing to the The Registrar of the High Court (Christchurch), Private Bag 4618, Christchurch; using an online form at feltex.investment.co.nz/notice.aspx; or going to feltex.investment.co.nz/completeoptout.aspx
* See www.ftxit.com

[kura]

Having previously held a position of little sympathy for FTX investors, many of whom the hog assumes were along for the ride and would have been quite happy to accept disproportionate returns if they arrived yet exhibit not insignificant surprise when the company fell over, this old hog still admires those who, believing that they have a case, stand by their beliefs and put them to the test.

So below are some links for FTX shareholders who don't know about them already.

Disc: no FTX.

Are you affected?
You're in the shareholders group if you:
* Bought or beneficially bought Feltex shares in the June 2004 IPO.
* Bought Feltex shares on market before the April 1, 2005 profit downgrade announcement.
* Lost money by either selling those shares for less than the purchase price, or by holding those shares until the December 2006 liquidation of Feltex.
If you are happy to stay with the action, do nothing. If you are not happy you must opt out by 4pm, April 11, 2008.
You can opt out by:
* Writing to the The Registrar of the High Court (Christchurch), Private Bag 4618, Christchurch; using an online form at feltex.investment.co.nz/notice.aspx; or going to feltex.investment.co.nz/completeoptout.aspx
* See www.ftxit.com

I also admire those who are prepared to "have a go" though most of legal costs seem to be funded on a speculative basis (If you don't win, you don't pay, sort of thing) which I don't particularly like.



What I still have difficulty understanding, is why FTX had to have a receiver appointed by the bank at all, sure the bank was uncomfortable with the debt levels, but look at SKL (and current rights issue) where bank was also concerned about debt levels, in the case of SKL the directors are doing something to allay the banks concerns, in the case of FTX the directors simply did nothing !

[POSSUM THE CAT]

Kura a rights issue for Feltex would have had to be that they pay you to accept at the time the bank put it into recievership. The Management had allready turned down a purchase offer for company.

[kura]

Kura a rights issue for Feltex would have had to be that they pay you to accept at the time the bank put it into recievership. The Management had allready turned down a purchase offer for company.

What I was getting at, was the directors should have looked at a rights issue well before receivers were appointed, yes, I'd forgotten about the directors also turning down a purchase offer.

To me it seems to be a competence type issue here, the directors never appreciated how dire the situation was, untill it was too late to do anything about it.

[Toddy]

people like Belgarion should be shot - literally put down

internet pumper with NO spine after the fact

Steady on. He gave others an opportunity to sell while he was buying. I say that he saved investors thousands of dollars.

[kura]

Steady on. He gave others an opportunity to sell while he was buying. I say that he saved investors thousands of dollars.

And to be fair, for every positive comment Belg made, there was something like 10 times that number to the contrary, so it was a reasonable debate to my way of thinking. Belg was more of a lone voice in the wilderness.

If anyone was influenced to buy FTX due to Belg's posts, please put your hand up !

[Scuffer]

What about all the people who relocated and are now out of a job again, a distinct lack of conscience from a company that seemed to have a plan that left two winners and we all know who they are, no wonder everyone is up an leaving for Oz, ya can't beat em so join em.

[Steve]

thats a good point, didnt think of it that way

how about the newbies he sucked in with his constant ramping?

The newbies would have learnt that nothing beats doing your OWN research...

[kura]

See Directors are being charged

Five former Feltex directors charged
NZPA | Monday February 2 2009 - 01:56pm
The Registrar of Companies has laid criminal charges against five former directors of failed Feltex Carpets.

The charges relate to information provided in the company's interim financial statements for the six-month period ended December 31, 2005.

"In these statements, Feltex Carpet Ltd failed to disclose a breach of its banking covenants, and did not properly classify its debt," said Registrar of Companies' national enforcement unit manager Shane Keohane.

Those facing charges are John Michael Feeney, John Carlaw Hagen, Peter David Hunter, Timothy Ernest Saunders, and Peter Thomas.

The defendants appeared in the Auckland District Court today and entered pleas of not guilty, the Registrar of Companies said.

The matter was remanded to April 7 for a status hearing.

If convicted, each director is liable to a fine not exceeding $100,000.

A statement from the former directors today said they were confident they would successfully defend the charges.

They believed they acted appropriately by relying on the professional advice they received, they said.

"We do not believe there is any proper basis for the decision to bring these charges, and we will vigorously defend them."

Feltex Carpets went into receivership in September 2006 and subsequently into liquidation in December 2006.

When Feltex was floated in 2004, more than $250 million was raised from mostly New Zealand investors.

Following an inquiry by the Securities Commission into the initial Feltex share float and the company's compliance with financial reporting standards, the matter was referred to the Registrar of Companies' national enforcement unit for further investigation.

The Registrar said each of the directors was charged with two offences under the Financial Reporting Act 1993, relating to Feltex's interim financial statements for the six-month period ended December 31, 2005.

The first offence related to the failure to disclose the breach of a loan agreement -- the ANZ Bank debt facility -- that had not been remedied on or before the balance sheet date, the Registrar said.

The second offence concerned the classification of the ANZ Bank debt facility as "non current", whereas it should have been classified as "current".

[AMR]

Good!

Not sure the shareholders will recieve anything at all though.

Are any of them looking at jail time? The cynical bastard in me thinks they will get off with paying a 20k fine which they will recoup by attending an extra meeting at CEN.

[Dr_Who]

I hope the judge make a good example and not just a slap on the wrist.

[The Doctor]

I hope the judge make a good example and not just a slap on the wrist.

dream on...as you say ...a magic show!

[Kees]

the rope is slowly being pulled around the neck of these directors.

http://www.stuff.co.nz/business/industries/2721604/Feltex-case-granted-stay-of-proceedings

[thorel]

In the 1960's Feltex was in South Africa. My family had huge investments in the company. Feltex did something and I am not sure what it was but everyone lost everything. They closed the doors and ran away with all the money. I was surprised to see them trading on the exchange here. If it is the same company maybe the NZX should be liable. If they are the same people then they should all be put in a very low class prison. ( no windows, very little food, no light, basically lock-up and throw away the key). I would hate to think that the tax payer is funding their comforts in the cosy NZ prison, that everyone seems to try so hard to get into. They always seem to be fully booked.

[Steve]

I had forgotten that this was still happening...

[kura]

Saga update ...

"It was the accountants fault" : http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10637893 (yesterday)
[/url] (today)

Belg, this is the same John Hagen that was once the president of the NZ Accountants Society ? (Institute of Chartered Accountants of NZ) (ICANZ)

To me it seems a bit rich for the president of such an esteemed society, to say "don't blame me, I just followed what our dumb advisors told us, without applying any independant thought process of my own" ,particularly given his experience is in the area of "Corporate Finance"

Extract from something I found on John Hagen (Though most recent info has his directorship of Feltex deleted, Hmm funny how that can happen )

20 October 2005:

Hagen joins Feltex board

Recently retired Deloitte NZ chairman John Hagen was appointed to the Feltex Carpets Ltd board today.

Mr Hagen spent 24 years at Deloitte, 10 as chairman. He was a partner in the corporate finance area. He’s been president of the Institute of Chartered Accountants and was the inaugural chairman of the Accounting Standards Review Board. Other directorships include Datacom Group Ltd, Trustee Executors Ltd & the Auckland Regional Chambr of Commere & Industry Ltd, and formerly Gough Gough & Hamer Ltd. He’s a fellow of the Institute of Chartered Accountants, the Institute of Directors & the Arbitrators & Mediators Institute.

Mr Hagen fills a vacancy left by Joan Withers, who resigned when she was appointed chief executive of Fairfax NZ Ltd. The Feltex board will seek confirmation of Mr Hagen's appointment at the annual meeting on 1 December.

Please also note that this criminal prosecution has a "mere" maximum fine of $100,000 However a successful criminal prosecution will make it a lot simpler for liquidators/creditors to make a claim against these guys for a far larger civil type claim (ie reckless trading)

[beacon]

Please also note that this criminal prosecution has a "mere" maximum fine of $100,000 However a successful criminal prosecution will make it a lot simpler for liquidators/creditors to make a claim against these guys for a far larger civil type claim (ie reckless trading)

This has taken a long time coming. If they are held liable, as they should, it would be a good outcome. Baby steps, but will be a step closer to NZ capital markets finding a firmer footing...

[whatsup]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10639951

Friggin' un-believable! You borrow millions from a bank and no-one, not the accounts nor the directors, checks compliance? Case over as far as I'm concerned. Directors are guilty and accountants should be sued for gross incompetance!

Whats the betting that they get OFF with a slap of a wet bus ticket. Here in N Z the law (imho) is P!ss weak just no real culperibility over in the U S these guys would get 20 years (and frig the expense) and all other directors would sit up and notice---what did Brian Clegg get, from memory 1 years home detention , utter B S, and he was seen attending MASS for god sake, the N Z justice system IMHO is utterly devoid of justice!!!.

[Balance]

This is becoming farcical!

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10641389

Is the directors sole defense that the accountants should have told them that they were not doing the jobs they were paid to do?

A valid defense nevertheless?

[moimoi]

and almost beyond farcical...


Former Feltex executive director Peter Thomas says he played no role in the decision to float the carpet company in 2004, despite his position as head of Credit Suisse First Boston’s private equity activities in Asia/Pacific at the time.

I was indeed surprised your honor when the firm that i was head of decided to float it....GET REAL.

[peat]

Even the judge appears incredulous at the defense
Judge Jan Doogue questioned Saunders on this: "Didn't your management slip up? You didn't join the dots in your own organisation. You'd have to concede that."
And the CFO couldn't see the 400 pound gorilla in the room either?
"Tolan [Feltex's chief financial officer] had a huge amount on his plate, I'm not making excuses, but there is a limit to what a CFO can do. He conceded there were mistakes made. The finance team was always a diligent and competent department. Why did they slip up this time? I go back to Ernst & Young," he [Saunders] said.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10641702


I may be out of turn and have limited information but fwiw I'm not really buying that as a defence either
Although that is an interesting article giving us some detailed information.
What they need to be able to do to substantiate their defence claim is to produce a report or possibly an email produced at the time where it states categorically that Ernst and & Young are being engaged to assist compliance with the NEW accounting regime of IFRS. To me those are material factors as to whether blame can be shifted. The onus is surely on the directors here.

From earlier
Ernst & Young partner Stuart Painter, said the company had conducted an interim review of Feltex's financial statements for the six-month period to December 31, 2005. The directors had adopted the international financial reporting standards for that period for the first time.
He said the change in reporting standards was part of a worldwide process.Painter said a review was different to an audit, and that the directors were responsible for the corporate governance of the company.

So its just a court-room blamefest really. Maybe they're all at fault to some degree.
Its still a failure of competency to not know you're in breach however a failure of competency isnt necessarily fraud.
The fines dont seem that large at 100k (and no jail) so can I take it that the charges arent of a fraudulent nature?

[Kees]

The fines dont seem that large at 100k (and no jail) so can I take it that the charges arent of a fraudulent nature?

That will come later its jail time for this lot in the next round.

[minimoke]

That will come later its jail time for this lot in the next round.
Sorry Kees - this is in NZ jurisdiction. That means, at worst, they get to spend compulsory time at home with the missus.

[Balance]

Sorry Kees - this is in NZ jurisdiction. That means, at worst, they get to spend compulsory time at home with the missus.

Worse than jail?

[Corporate]

My view:

Directors and Management are at fault. They would have been in contact with the bank and had full knowledge that they were in breach of their covenants.

EY should have picked it up. Unfortunately they didn't. However, the onus has to be on management/directors.

[moimoi]

Peat...In my mind accounting standards are irrelevant to this (or should be) the reality is that the debt to the bank was current.! The directors signed off a document stating that it wasn't...during the reporting of the trial there seems to be alot of references to the IFRS standard. Bugger the standard...the debt is either current or it isn't, no matter what standard one uses....

And at the very least a CFO, despite a huge amount on his plate (that he was aptly rewarded for) should be able to state whether debt is due for repayment or rollover / refinance in the near future.

[Lizard]

And at the very least a CFO, despite a huge amount on his plate (that he was aptly rewarded for) should be able to state whether debt is due for repayment or rollover / refinance in the near future.

The term loan facility was not due to expire until 2009. I am presuming that the definition of "current" under IFRS would have been called for solely because of the effect of the breach of covenants on the rights of the bank to be repaid.

[winner69]

So “There is not one skerrick of evidence of intention to mislead the authorities, the market, shareholders, potential investors or any other person.”

NOT GUILTY

So it does come down to individuals doing their own due dilgence .... caveat emptor and all that

[Kees]

At least the shareholders have the satisfaction of karma.
"There was never any grounds for this case to be brought. There was never evidence that we hadn't done what we were supposed to have done as directors and in the weeks ahead I will take this up with Neville Harris, the Registrar of Companies, so that he realises the damage he has done to people's lives.
Ad Feedback "This case has done a lot of damage to people's reputations with no chance for redress and that makes me and the other directors very cross and as shown by the judgment today this case was totally unnecessary."

[peat]

This makes a mockery of the concept of a fiduciary relationship between management and investors.
If they were committed to the concepts of of professionalism and integrity they would never have questioned disclosure of this material information to the market. They were talking to the bank so they knew it was borderline.

This is how regulations never seem to protect people. Each time the world goes through financial crisis regulators zoom in and rewrite and lo and behold years later there is another crisis even though no rules were broken. Whether this teaches us to deregulate or to regulate harder is uncertain. (This paragraph only marginally relevant to the thread)

[Placebo]

Well the directors had no financial gain from the matter so it wasn't fraud. At worst they are guilty of incompetence and ignorance. But I wonder if ignorance is a valid defence? I guess the judge thought so.

And what of Ernst & Young?

[COLIN]

"There is also overwhelming evidence that these directors are honest men," the judge said
http://www.stuff.co.nz/business/industries/3981833/Feltex-directors-found-not-guilty


Well I hope Allan Hubbard gets such an accommodating judge if he is brought to court.

Remind me, how much did FTX investors lose?
And how much had Aorangi investors lost (i.e. before the Government alsatians were set loose on the Hubbards)?

[peat]

Well the directors had no financial gain from the matter so it wasn't fraud. At worst they are guilty of incompetence and ignorance. But I wonder if ignorance is a valid defence? I guess the judge thought so.

And what of Ernst & Young?

You'd need to examine the share register to know that - by creating an information asymetry there was a huge potential for insiders to benefit.
E+Y will probably be relieved as well. If the directors were held liable then no doubt they would have talking to their lawyers about recovering from E+Y.

(disclaimer - had no interest in this particular incarnation of FTX.)

[moimoi]

and this judgement confirms that there is no requirement in NZ to classify debt correctly..call it current or non current, pay a small fee for a "review" and its clearly possible, and legally defensible, to classify it as whatever you want it to be with total impunity...

New Financial Advisors Act, upgraded Securities Commission, new "super regulator"...all a pathetic waste of time.

[Balance]

Fortex, Feltex, Nylex - just stay well clear of those ex!

[lewinsky]

Hi Balance,

Include in that my-ex.

My liabilities are both current and non-current and I didn't need E&Y to classify.

The Securities Commission and the Companies Office are a joke. I have been trying unsuccessfully to find out why when the ASIC banned the Bridgecorp prospectus in Australia, our Securities Commission let it carry on business raising money, even though everyone knew it was a dog.

I am refused access to this information as it may prejudice the case against Rod. What about the rights of the Investors who lost money through incompetence?

[trackers]

Well the directors had no financial gain from the matter so it wasn't fraud. At worst they are guilty of incompetence and ignorance. But I wonder if ignorance is a valid defence? I guess the judge thought so.

And what of Ernst & Young?

Yeah looks like Ernst & Young get off scot free? Being paid $100k to provide the wrong advice seems a bit wrong, hope they paid it back.

Perhaps this court case should never have been brought but its a bit rich that these guys who are ultimately responsible for this company failing miserably are now talking about compo!!


Carpet firm's directors want compo



The Feltex trial has highlighted the risks of being a director at a time when New Zealand needs good people on company boards, the failed carpet company's former chief executive Peter Thomas said yesterday.
Feltex's five directors have waited for four years to be cleared of Financial Reporting Act (FRA) charges.
Thomas said the directors would be seeking compensation and would take any redress options available to them.http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10663167

[macduffy]

I would think that all they'll get is their trial costs which technically, as the case was thrown out, they're probably entitled to.

Luckily, Feltex was one debacle that I managed to avoid.

[kiwi_on_OE]

I found it interesting to read the judgment, http://www.lawfuel.co.nz/releases/release.asp?NewsID=1985

Various points can be taken from it. Some that I took are: -

- not guilty of the charges is the right result - they specifically got in E&Y to advise them on IFRS, and E&Y were fully aware of the status of the loan.
- under old rules 'current/non-current' status of loans was based on directors expectation of when they expect to repay the loan, under IFRS it is 'current' if it could be requested to be repaid within 12 months. A fundamental change.
- the loan was in breach in Feb 06, but directors didn't think they would have to repay it (non-current under the old rules), and in May 06 ANZ gave them a written waiver (confirming non-current under IFRS). It is actually just the period from Jan 06 to May 06 where it was technically current under IFRS, and the charges arise.
- E&Y are entirely to blame.
- I think the judge went over the top in her 'praise' of the directors - they aren't that good, competent etc.

I think that a professional director can't be expected to know all details of IFRS, but they should be doing personal training to keep themselves up to date with laws, standards, best practice etc. for a being a director. Understanding loan classification would've been particularly relevant to them and others involved. But that's an assessment of their competency, not whether they are guilty/innocent.

[macduffy]

Pretty good summary of the position, kiwi.

As is also Brian Gaynor's comment this morning.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10664173

[Lawso]

Excellent piece by BG, as usual. To sum it all up, E&Y stuffed up and the Feltex directors' actions/inaction may not have been criminal but they were certainly lazy and incompetent.

[kiwi_on_OE]

Agree BG did cover it fairly well. One bit in particular got me thinking. I assume the law says something like the directors are responsible, but they are entitled to rely on expert advice, which they did. But the advice included the usual waivers in essence saying it's not the experts fault if it's wrong etc.. I'm just thinking a different interpretation of the waivers could be that the experts are in fact saying they aren't experts, or that their advice should not be relied upon. In which case it could be argued that the directors are in fact responsible because they didn't have expert advice that they could rely on.

Mmm, I wonder if that line of argument was looked at in the case?

It's pretty poor that both the directors and E&Y can 'get away with it' because of contradictory laws/advice waivers.

[minimoke]

Seems the feltex five have deluded themselves into thinking they're blameless ... Compo? Its the shareholders that need compo. Not the directors that took their fees for a job very, very, very poorly performed.
Doesn't look like the courts agree. The directors have just been given $952,000 as one of the biggest ever awards for costs. Thankfully MED has some balls and they are appealing the decision. At best, though it will just be a reduction in costs. At worst it will be the $952k in costs plus costs of the appeal hearing.

[Marilyn Munroe]

The judgement in this case means that if the directors have taken professional advise of whatever quality they can behave with deliberate carelessness.

I support the appeal of this decision and if the courts are unable to rule against the actions of the directors then the matter be refereed to to the legislature so the law can be amended.

Boop boop de do

Marilyn

[minimoke]

The judgement in this case means that if the directors have taken professional advise of whatever quality they can behave with deliberate carelessness.

I support the appeal of this decision and if the courts are unable to rule against the actions of the directors then the matter be refereed to to the legislature so the law can be amended.

Boop boop de do

Marilyn
MM As i understand it there is o appeal about the not guilty decision - its is an appeal over the amount of costs awarded to these reckless destroyers of wealth.

[metro]

Hey Paper Tiger

thanks for welcoming me back! Was going through some old posts and came across this beauty. At the time I think FTX were trading at 164. :D

Disc: Post made in good humour. Ive made my fair share of mistakes over the years NZO, PRC, NZO, NZO again, NZO again. Hmm I see a pattern here. Some people never learn.


Ahem to that, Lawso.

I really believe that the market is under-rating this company, a view that has strengthened with time. Hopefully one day the rest of the world will come round to this view :).
Sam & Co, I believe are really on the ball and are willing to make the necessary decisions and investments to enhance the turnover and profit of Feltex.

[Balance]

Justice for shareholders could be on the way?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10849565

Feltex directors fail in bid to stop class action
6:13 PM Friday Nov 23, 2012

Attempts by the former directors of the failed carpet-maker Feltex to halt a class action by 2852 shareholders who lost $250 million have been thrown out by the Court of Appeal.

All five appeals against the class action started by Feltex shareholder Eric Houghton were rejected in a judgment issued by the court today, clearing the way for the class action seeking repayment of shareholders' original investment to proceed.

Feltex made an initial public offering of shares in mid-2004 and by December 2006 was in liquidation with all shareholders' funds lost.

Shareholders are alleging Fair Trading Act and Securities Act breaches, negligence, dishonesty and deception, although claims of breaches of fiduciary duty have been struck out in earlier appeals.

Former Feltex directors named in the action are its chairman and one-time Contact Energy director Tim Saunders, current MightyRiverPower and Auckland International Airport chair Joan Withers, Feltex's then chief financial officer, Sam Magill, and directors John Feeney, Craig Horrocks, Peter Hunter, and then chief executive Peter Thomas.

The appeals fell broadly into three categories: the way the case was being managed should not be allowed; statute of limitation rules should prevent shareholders seeking redress; and that some claims were not sufficiently made out to pass tests of arguability.

Counsel for the Feltex directors objected to the way in which the courts allowed Tony Gavigan, a former Fay Richwhite investment banker who has undertaken to organise case management, time to source guaranteed funding of at least $200,000 to meet court costs in the event the shareholders' action failed.

They also objected to Gavigan's conduct in the proceedings, including delays and missed deadlines, which a previous appeal court decision had found were more the product of "an excess of enthusiasm rather than bad faith.''

"What was critical was securing Mr Houghton's access to justice through appropriate funding arrangements. That objective has now been satisfied,'' Court of Appeal president Mark O'Regan and fellow judges Tony Randerson and Rhys Harrison ruled.

On the complaints alleging Magill "engaged into manipulation'' of Feltex's earnings, the judges agreed the "evidence in support was not strong'', but that it "provided a sufficient factual foundation for arguability, involving as it does an element of deceit.''

"Mr Houghton is on notice that he has a significant hurdle to cross if he is to prove'' that Feltex had engaged in so-called "channel-stuffing'', where goods in excess of those ordered had been sent to customers to boost reported revenue, along with alleged attempts to shift the timing of receipts.

"But for now, the action must remain,'' the court ruled.

Apparent conflicts between rulings in other Commonwealth jurisdictions were also rejected as grounds for appeal, with the judges siding with Australian judgments that justified the class action moving forward, rather than a "narrow'' English ruling on statutes of limitation.

The appellants were, in effect, arguing for an unmanageable and wasteful exercise in which as many as 6,000 separate causes of action would be required, rather than a single class action, the judges said.

Reduced to its essential elements, this element of the appeals related to High Court rules intended to prevent "stale'' or "ancient'' claims being pursued, and the inability of defendants to mount adequate defences. These could not be held to apply in this case.

- BusinessDesk

[Balance]

https://www.nbr.co.nz/article/appeal-court-knocks-back-feltex-shareholder-suit-b-195353

No justice yet for shareholders yet - but shareholders done out of hundreds of millions of dollars could have a case now based upon the Fair Trading Act.

Well worth while reading.

Interesting that the directors, Credit Suisse and ForBar have kept quiet this time round about the COA decision.

Here's hoping that Judgement Day is coming for the deceitful behavior and actions of them.

[Balance]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11827026

http://www.scoop.co.nz/stories/BU1703/S00875/feltex-claim-progresses-to-sc-leave-hearing.htm

The battle for justice continues.

Let's hope that the shareholders of Feltex wins this very final battle in the war against deceitful behavior and greed (well documented now via the court case).

How the hell can Forsyth Barr get away with stuffing some of their clients' portfolios with this rubbish to get the IPO away, and for them to earn their multi-million dollar IPO fees?

Even more amazing how the promoters (Forsyth Barr and First NZ Capital) and vendors claimed the IPO to be 'fully' subscribed when some of sub-underwriting firms were left with stock which they dumped day 1 of IPO.

[Balance]

https://www.stuff.co.nz/business/94739454/joan-withers--a-womans-place-extract

Smart player - she bailed out after the first profit downgrade.

Well she should feel 'overwhelming sadness' at the loss suffered by Feltex shareholders - for as she well knows, the vast majority were mum and pop investors hoodwinked into the IPO by the lure of high dividends and the confidence in some of the board members - badly misplaced confidence.

Who can forget the 'There's some goodness left in the lemon but we squeezed most of it out. Not bad for a company that was bankrupt 18 months ago.'

Absolute disgrace that the court system fail to hold the directors to account for all the glossy representations made in the prospectus.

[Balance]

And despite what Joan Withers may think that the directors have been vindicated in the courts, there is still one more leg to go in this sorry saga of corporate greed and obscene disregard for basic ethics and decency - the Supreme Court hearing starting this month.

Anyone following the court case as it went through the High Court and Court of Appeal cannot help but observe the length to which the directors and company went through to hoodwink the market and shareholders.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11848593

The law is a jackass.

[Balance]

And despite what Joan Withers may think that the directors have been vindicated in the courts, there is still one more leg to go in this sorry saga of corporate greed and obscene disregard for basic ethics and decency - the Supreme Court hearing starting this month.

Anyone following the court case as it went through the High Court and Court of Appeal cannot help but observe the length to which the directors and company went through to hoodwink the market and shareholders.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11848593

The law is a jackass.

Supreme Court may have been reading this thread and realized that the law had been a jackass in the High Court? :D

http://www.scoop.co.nz/stories/BU1808/S00457/judgment-feltex-ipo-prospectus.htm

Justice coming hopefully for the hoodwinked Feltex investors.

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12107616

"We conclude that the FY04 forecast was an untrue statement," Justices Glazebrook, O'Regan and Kos said in the written judgment.

"We stress that this stage of the inquiry is to determine if the prospectus contained an untrue statement. We have not considered the materiality of the shortfall. This is because materiality is, contrary to the approach of the High Court, not relevant when considering if a statement is untrue."

High Court Judge Dobson has been suitably reprimanded for a faulty determination.

[percy]

Supreme Court may have been reading this thread and realized that the law had been a jackass in the High Court? :D

http://www.scoop.co.nz/stories/BU1808/S00457/judgment-feltex-ipo-prospectus.htm

Justice coming hopefully for the hoodwinked Feltex investors.

Pity so many have died waiting.!

[Balance]

Pity so many have died waiting.!

Sadly, so true Percy.

What happened to them was an absolute disgrace and a total indictment of the IPO process.

[Beagle]

Excellent decision by the supreme court. I remember very well the "extremely creative" window dressing that went on with that Feltex IPO process. Thankfully the good Lord gave me a good brain so I could see through the half truth's and disingenuous statements in that IPO but I feel for the investors who were relying on firms like Forsyth Barr that were really pushing this onto their clients with all the determination of a used car salesman trying to sell an end of life vehicle that had sat on the car lot for years, for a premium price. I named that firm because their behavior was reprehensible and I experienced the really hard sell, but there were other firms pushing it hard too.

Hopefully those investors that are still alive will get some decent compensation. This decision gives me some hope that the NZX is not at the extreme wild west end of the capital markets spectrum that it might otherwise be viewed as.

[minimoke]

I found a few of these in an Estate wind up (along with ALF and Dominion finance). I dont think I binned them - but I dont think they were IPO bought. Will they still apply?

[Balance]

Excellent decision by the supreme court. I remember very well the "extremely creative" window dressing that went on with that Feltex IPO process. Thankfully the good Lord gave me a good brain so I could see through the half truth's and disingenuous statements in that IPO but I feel for the investors who were relying on firms like Forsyth Barr that were really pushing this onto their clients with all the determination of a used car salesman trying to sell an end of life vehicle that had sat on the car lot for years, for a premium price. I named that firm because their behavior was reprehensible and I experienced the really hard sell, but there were other firms pushing it hard too.

Hopefully those investors that are still alive will get some decent compensation. This decision gives me some hope that the NZX is not at the extreme wild west end of the capital markets spectrum that it might otherwise be viewed as.

Get the transcripts from the case and Forsyth Barr's behavior in pushing this dog and stuffing the shares up the discretionary managed portfolios of its many elderly South Island clients is beyond despicable.

[Beagle]

Yes I couldn't agree more Balance. I used to be with them many years ago and left for a number of reasons, any one of which in hindsight are a breech of their fiduciary obligations to clients.

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12108106

Excerpts :

"The Institute of Directors says the length of time of the Feltex court case is concerning and highlights the complexity and liability of governance roles."

"The timeframe is concerning....the length of time this is taking is difficult and challenging for all those involved. The IoD will monitor what the courts decide and consider what learnings there are for governance best practice."

The wheels of justice turn slowly but let's all hope that in this case, the promoters and directors who ripped tens of millions of dollars by selling a lemon to investors get their just dessert.

The length of time taken is because these scumbags (who openly boasted that they did very well selling the lemon without juice left in it) chose to fight the search for justice and compensation every step of the way with their QCs and legal maneuverings - paid for from the tens of millions of dollars they hoodwinked out of investors.

https://www.nbr.co.nz/article/feltex-float-%E2%80%98squeezed-juice-lemon%E2%80%99-lawyer-says-citing-director-email-db-153408

Disgusting and despicable beyond contempt.

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12201774

Date for 5 weeks' hearing set from Nov 4th, 2019 - almost another year away and 13 years since Feltex collapsed, and 15 years since it IPOed.

Inconceivable that a high court judge could ruled that an untrue statement (incorrect forecasts) in the prospectus is IMMATERIAL!

Deceptive behavior of raising additional IPO money to pay dividends to make the IPO attractive to Mum & Dad investors - okay with the judge too!



Let's