A year after a dramatic police raid on the Remuera home of Charlotte and Kenyon Clarke, the fallout from the $300m collapse of Du Val continues to spread, writes Catherine McGregor in today’s extract from The Bulletin.
To receive The Bulletin in full each weekday, sign up here.
The unmaking of a property giant
Du Val once billed itself as one of the country’s largest private residential developers. It undertook major apartment builds in South and West Auckland and boasted various development schemes which, as the Herald wrote, aggressively targeted mum-and-dad investors. But in August last year, the Financial Markets Authority and police raided the home and businesses of Charlotte and Kenyon Clarke, and their empire – a complex web of 62 separate business entities – became the first corporation to be put in statutory management since South Canterbury Finance in 2010.
The Clarkes, who once posted videos offering to teach the secrets behind “[building] a hundred million-dollar, or a billion dollar, business and property development empire”, are in receivership, their assets frozen while they live on allowances of $1500 a week each. On Saturday, they released a statement marking the first anniversary of the raids to BusinessDesk (paywalled), which has been tenaciously investigating Du Val since well before its collapse. “We remain confident that we have not taken, misappropriated or risked investor funds,” the Clarkes wrote, “[and that] … if permitted to do so, the companies would still be trading today by building and selling homes for the community and returning jobs, incomes and profits to the community.”
No charges have yet been laid. “The FMA is pithy and non-committal as to when [their] investigation might conclude, whether charges are imminent, or what further impediments any allegations face,” writes BusinessDesk’s Garth Bray, who notes that it took well over a year for criminal charges to be laid in previous serious fraud cases against companies like Lombard Finance.
An unusual case and a trail of unpaid bills
This wasn’t any ordinary receivership: as a blog post by law firm Wynn Williams explains, the statutory management proceedings Du Val entered are “intended to take over where the ordinary law cannot cope and stronger measures are needed”. A company can only be placed under statutory management by the governor general, on the advice of the minister of commerce and consumer affairs. In March, receivers PwC put the total amount owing to creditors at over $306 million.
That breathtaking figure includes millions lost by companies in the construction and trades sector. One creditor told RNZ his company was owed $230,000 and had been “just hanging by a thin strand of hair, not even thread” since the collapse. Another told BusinessDesk he had seen the collapse coming. “We could see [the Clarkes] on social media, hiring helicopters, and we thought that doesn’t look good for payments, so we’d managed to get to monthly terms on one site in Mt Wellington. We just got caught that last month.”
Court cases on both sides
As the receivers do their work, the Clarkes have stayed busy too. In June they went to court in an attempt to overturn the receivership and asset seizure orders. That case was dismissed last month. The couple are also appealing a High Court decision forcing them to be interviewed under oath by PwC, RNZ reports.
Meanwhile, a group of Du Val investors turned their frustration toward the Financial Markets Authority. The group argued that the FMA failed to provide them with vital information about an “equity swap” which saw them exchange their units in Du Val funds for shares in a new company which became all but worthless shortly after. In a court case, the plaintiff alleged that FMA had a statutory duty of care and was negligent in failing to intervene.
But in a ruling handed down last month, the High Court concluded that the FMA’s responsibilities were to the public at large, not to individual investors. To allow otherwise would encourage risk-averse regulation and “create a de facto insurance scheme for investors at taxpayer expense”, BusinessDesk’s Garth Bray reports (paywalled).
A year on, while side-cases continue to play out in court, the only charge the Clarkes have faced is one count of wilful damage, following a street fight between Kenyon Clarke and a car dealer outside the Clarkes’ Remuera home.
