The Commerce Commission enquiry into Donal Curtin’s appointment as deputy chairman is nothing but a classic case of arse covering.
The whole thing raises some big questions and hopefully Hugh Rennie QC will give the commission and the minister’s office a kick in the butt over the affair.
Curtin’s background has always been transparent. Before he was appointed to the position of deputy chair, all that someone had to do was sit down at a computer and a) google his name, and b) go to the Companies Office and do a director search. It would take less than five minutes and all the information would be there.
I am certain this was never done by the minister’s office and if the commission didn’t do it what does it say about its powers of investigation?
I’ve known Donal for sometime now, many years in fact, and he is a straight up guy. He has written an economics column for ASSET magazine since it started and was used one year as a judge in the Financial Planner of the Year Awards.
The bit I don’t understand is what his role was as head of the investment committee at Vestar. Clearly Vestar had a knack of picking, with a high degree of accuracy, all the dud finance companies.
I’ve, for a long time, had a suspicion this was done outside of the committee, and was very much based around whether Vestar could squeeze extra commission out of a company for its support. I know that it approached some finance companies and asked for a special rate for bulk business – or some other cute expression. If the company said no, then clients weren't put into the company’s debentures even though that company had a rating from an international agency.
This sort of practice is something which appears to be part of the Vestar model. When the company was called Northplan it did a similar thing years ago with property syndicated, especially from managers like Waltus.
It brings me to the question was Curtin involved in this finance company area with Vestar? My view is no. But as head of the investment committee he would have seen what finance companies were used and that should have set off alarms.
As for the commission appointment it would be useful to see a timeline of when he took on various roles as he had been at the commission for many years.
On 16 September 2008 at 10:30 am David Whyte said:
I've also known Donal Curtin for some time. Not well, but well enough to testify to the man's integrity and his scrupulous attention to anything which might have the remotest connotation of a conflict of interest. We can all get caught up in unfortunate circumstances retrospectively, but when these circumstance are created by actvities which are/were beyond our control, personal vilifcation is futile, vindictive, and unprofessional. While we live in an age of inccreasing sensitivity toward ethical corporate governance, this 'investigation' does the reputation of the Commerce Commission no good whatsoever. Like you, I believe Donal Curtin is a worthy appointment to the Commission, and that his integrity is beyond question. This knee-jerk response to noise from some ill-informed and (understandably) aggrieved investors is totally mis-directed and thoroughly inappropriate. The kick-in-the-arse should extend to the wrong-headed ninny who instigated this piece of nonsense.
On 16 September 2008 at 11:37 am Philip said:
This email came in on the above post:
Phil
Your blog is not quite correct.
Vestar was only in the driving seat for a few months.
Northplan did all the selection based on commissions.
Northplan due diligence = what commission do they pay?
And we know who that was
Feel sorry for Donal in a way.
In another way we all have to be careful who we associate with & sometimes courageous enough to walk away.
It's interesting as, yes, the whole thing was really Northplan not Vestar. Likewise sometimes we need to make judgment calls on what to do, and we don't always get them right. Maybe this was the case here?
On 16 September 2008 at 11:56 pm Verne said:
MFS entered into an agreement to buy Northplan in December 2006. The deal went through on 31 January 2007. Donal Curtin was chairman of Vestar's investment committee at least as early as March 2007. That places Curtin at the head of Vestar's investment committee for over two years, and Vestar "in the driving seat" for over two and a half years.
Curtin chaired Vestar's investment committee in a period in which it invested clients in a string of failed finance companies and sister companies to Vestar. Mint Asset Management’s products were also sold to investors.
Two years was plenty long enough for Curtin to realise that things weren't right and walk away. Instead he allowed his name to be used to promote the bunch of commission sales reps that Vestar was for over two years.
Either Curtin really did intend investors to use debentures in only those companies who were prepared to pay Vestar 2% p.a. brokerage and marketing subsidy, or his judgements were able to be over-ridden by marketers.
If the former, he's a fool. If the latter, he should have walked.
He doesn't appear to be a fool, in which case he should have had the courage to walk away. Instead he continued to take the money and allow his name to be used to lure more suckers into doomed finance companies.
By failing to walk, he effectively condoned the despicable practices of Vestar. That's why he's culpable.
On 18 September 2008 at 9:23 am Majella said:
Verne - is my maths all wrong? It sounds to m like January 2007 was only 20 months ago, and March 2007 was just 3 months before Bridgecorp fell over. How do you calculate 2 & 1/2 years?
On 18 September 2008 at 1:08 pm Verne said:
Majella - you are absolutely correct. I inadvertantly overstated all the number of years in my comment by one. I posted a second comment within minutes of the first one with the correct text and asked Phil to update my comment. When that didn't happen I emailed Phil directly and via this website with the same request. It still hasn't happened but I am hopeful Phil will find time soon to make that change.
On 19 September 2008 at 1:52 pm peter harrison said:
Does anyone know whether Donal Curtin was involved weith Northplan before the MFS days? My recollection is a bit vague but I think he may have been
On 19 September 2008 at 5:57 pm Verne said:
Yes, Donal Curtin was in bed with Northplan prior to the MFS days.
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".
On 19 September 2008 at 8:44 pm Graham said:
I was an investor with Northplan and Vestar and Donal was around for a long time. I want to comment on the references here to Vestar being a 'bunch of commission sales reps' and similar. What Northplan/Vestar received in commissions from various companies compared to what other investment advisors received from those same companies is not known to me, however I imagine it could be clarified with some appropriate research by the right people and this research would be well worth doing because a lot of what I read appears to be speculation dressed up as fact.
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.
On 19 September 2008 at 9:45 pm Agreived investor said:
I complained to the Commerce Commission in 2007 about Mr Curtin and his involvement in Vestar, yet they still promoted him. Their was a clear conflict of interest and as an suckered in former Northplan/Vestar/MFS client, his name and status was promoted heavily to us. You can't tell me as the Chairman of the Committee he didnt know what was going on? It is called greed and shrewd marketing! If he was such a man of integrity what is he doing to help out the poor suckers who have lost it all and are facing terrible financial crisis. He deserves to swing just like the other cronies!
On 20 September 2008 at 8:14 am Meg said:
In response to David White, I feel you are perhaps being a little bit naive in sugesting that Donal Curtin's integrity is beyond question.
It seems that the Commerce Commission were unaware of his other business interests so by investigating him, the Commerce Commission's reputation will remain intact if that is your concern.
Many so called "people of integrity" have been all too consumed with the power of money and become addicted, like gambling and innocent people suffer because of them. Your loyalty may be misdirected as well so wait for the outcome before you knee jerk/comment . Verne, if Curtin "Walked" without exposing the despicable practices to the investors then in my mind he would still be culpable.
On 21 September 2008 at 4:56 pm Verne said:
We know that Northplan/Vestar profited handsomely from their use of dodgy finance companies. The details will come out in the court case that victims of Vestar are funding. See http://www.vov.co.nz for details.
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.
On 2 October 2008 at 2:01 pm David Whyte said:
Meg,
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.
On 15 October 2008 at 6:54 pm Suzanne Edmonds said:
On 17 September 2008 EUFA finance Spokesman Gray Eatwell wrote to Mr Anderton, Minister responsible for the Public Trust, and Mr Jim Bolger in relation to Mr Donal Curtins position with the Public Trust and Kiwi Bank.
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.
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