Transcribed is Mr Bolger’s response dated 8 October 2008

Dear Mr Eatwell

Your letter of 17 September relating to the employment of Donal Curtin as an economics spokesman for Kiwi Bank has been received.

I can advise that Mr Curtain no longer speaks on behalf of the bank and no longer is contracted to Kiwi Bank.

Yours sincerely
Rt Hon James B Bolger, ONZ
Chairman
New Zealand Post Group

Transcribed is Mr Anderton’s response dated 13 October 2008

Dear Mr Eatwell

Thank you for your letter 17 September 2008 regarding Mr Donal Curtin’s position as Chair of the Public Trust.

I agree the people appointed to the boards of Crown owned businesses need to have the highest level of ethics. I am also very aware of the issues surrounding the losses recently incurred by the failure of the number of finance companies.

As you have noted, the Commerce Commission is currently undertaking an initial investigation into certain aspects of the appointment process that lead to Mr Curtins appointment as Deputy Commerce Commissioner. I am following the process and will note the findings when they are released.

As Minster responsible for the Public Trust, I appoint all the members on the board of the Public trust, including the chair and deputy chair, based on the skills and experienced needed to do the job. Mr Curtin is an experienced economist and company director and I have confidence in his ability to lead the Public Trust. I have no reason to reconsider Mr Curtins membership of the Public Trust Board. I will, however, consider the outcome of the commerce Commissions inquiry in due course, and act as appropriate if any issues arise that are of relevance to Mr Curtins Public Trust Role.

Yours sincerely
Hon Jim Anderton
Minister responsible for the Public Trust.

Thanks for pointing out my apparently defective character judgement skills. As I mentioned, I don’t claim to know Donal Curtin well, only that when I did have dealings with him, he came across as a person of integrity. Perhaps you’re right in suggesting “greed and shrewd marketing” but perhaps it is also only fair to do as you say and “wait for the outcome” – and not to make unproven allegations against the individual’s reputation. I expressed a view that, to the limited extent I know the man, there is exists reasonable doubt not to “convict” him out of hand.
Maybe the Commission should have conducted appropriate research before inviting Donal Curtin to join – or is that another knee jerk/comment on my part? And by the way, you might have the good grace before making such personal remarks to get the spelling of my surname right.

Northplan/Vestar may have negotiated a better return for investors, no fees for those in the FIMS service, and very high fees for those in managed portfolios, but they also negotiated lucrative deals for themselves and didn’t deal with companies that wouldn’t play ball. That’s why rock solid finance companies like South Canterbury, Marac, UDC didn’t feature in their recommendations but E-rated companies such as Bridgecorp and Capital+Merchant did.

And then there’s the fact that Northplan commissioned a ratings agency report on Boston Finance in 2005, then quietly shelved the report when Boston failed the evaluation. The report gave Boston a dismal one-and-a-half-star rating, far below the three stars necessary for investment grade. This information is in the public domain.

Graham says that “if two otherwise similar companies offered different rates of return on investments it would be appropriate to choose the higher return as that would be to our benefit” and of course he’d be right. But the problem is, the companies were not equal. Northplan/Vestar put us into dreadful companies that maybe paid half a percent more than good companies, which in no way compensated us for the substantial additional risk. If they had passed on the additional commissions and other fees they were able to extort, maybe, just maybe, it would have been adequate compensation for the extra risk.

But not for the risk-averse investors who were categorised by Northplan as conservative. There’s no way they should have been invested into companies that in reality were junk bond status investments.

What I do know is that Northplan/Vestar did approach potential investment companies with a view to negotiating a better return for investors and a reduction in the fee charged for the investments. The argument was that there were economies inherent in the bulk nature of investments made through Aegis which is a piece of investment amalgamating and managing software partially developed by Northplan. We regularly received better return rates and any fee reduction thus negotiated was passed on to us, my portfolio returns show the figures separately. I imagine that if two otherwise similar companies offered different rates of return on investments it would be appropriate to choose the higher return as that would be to our benefit.

I have lost very significant money from the failed investments through Northplan and Vestar but I have yet to see any real proof of unethical behaviour in the management processes followed. There were however in my opinion, ethical issues in the behaviour of MFS, the parent company of Vestar.

An article on this very website dated 28 July 2006 titled “Northplan moves into the Sourth Island” states:

“All decisions relating to the composition of every one of Northplan’s client portfolios is made by the company’s investment committee – a think tank comprising well-known independent economist Donal Curtin, Northplan managing director Kelvin Syms, and director Simon Purvis and chartered accountants John Perris and John Price.”

There’s also a Vestar press release dated 24 May 2005 which quotes Donal Curtin but doesn’t say what his role is, other than referring to him as “one of New Zealand’s foremost economists”.