Highest ever Fair Trading Act order: Maximus pyramid selling scheme liable for more than $3.1 million
Published13 Sep 2000
The Auckland High Court today imposed the highest order yet under the Fair Trading Act when it ordered that Maximus Intermediaries Limited was a pyramid selling scheme and entered judgment against the defendants who are liable to pay more than $3.1 million to people who had bought into the scheme.
However Commerce Commission Chair John Belgrave warned that it is highly unlikely that the 12,000 people who bought into the illegal scheme will get any of their money back.
The liquidators appointed by the court have stated that the "preferential creditors" that is the people who must by law be paid first are Maximus' employees, who are owed $18,585 in pay, and the Inland Revenue Department (IRD), which is owed more than $1.3 million.
As a result of the Commission's court action Maximus' bank accounts have been frozen, assets, including uncut gemstones, have been seized and the Court has appointed accountants Thomas Rodewald and Sheree Jefferson as liquidators to distribute the money from the scheme.
To date, the liquidators have gathered $90,000, $250,000 more is in the bank accounts and, depending on how much the gemstones can be sold for, up to $447,000 will be available from the sale of the gemstones. It is unknown yet if there are any other assets.
"Only if there is any money left after the preferential creditors are paid, would the 12,000 who bought into the scheme get any money back," Mr Belgrave said. "There are strong messages here. All pyramid selling schemes are illegal in New Zealand and they are a good way to lose money.
"In this case we know that people borrowed money to buy into Maximus, encouraged friends and family to join, some of them borrowed money to join and almost all have lost out.
"Do not buy into pyramid schemes. If you do, then not only will you almost certainly lose your money, but so will all the people you might have recruited.
"All pyramid selling schemes must fail. It is mathematically impossible for them to work. No matter how a pyramid selling scheme is set up, most people must lose their money.
"If you are involved in a pyramid selling scheme, then you can also be taken to court. It is not only the people who started a scheme that break the law. If you are involved in a pyramid scheme and try to recruit anyone else, then you too break the law. And anyone a person you tried to recruit, other individuals or the Commission can take you to the Disputes Tribunal or a court.
"In this case we chose to take court action against the company and the people who ran it, Kerry Lindsay Paul and Coralee Ngaio Judson. We do not intend to take court action against the 12,000 other people involved in the scheme."
The Commission and the liquidators will write to all 12,000 people who bought into the scheme. If they wish to, they will be able to file a claim with the liquidators in the hope that they might receive some payment after the debts owed to Maximus' employees and IRD are repaid.
The liquidators are from the chartered accountants, Rodewald Hart and Associates Limited in Te Puke, phone (07) 571 6280.
Background
The Commission's court action was against Maximus Intermediaries Limited, Kerry Lindsay Paul and Coralee Ngaio Judson trading as the partnership Croesus Finance, Mr Paul as an individual and Ms Judson as an individual. All four defendants are based in Tauranga.
In Court today, all four defendants admitted that they breached the Fair Trading Act by promoting a pyramid selling scheme, Maximus.
Maximus has now been placed in liquidation and its assets will be used to repay creditors. An associated company Hot Ice International has also been placed into liquidation and the first $447,000 from Hot Ice will go to Maximus' creditors.
Brother and sister Mr Paul and Ms Judson promoted Maximus nationally as a retail discount scheme. Behind this façade, Maximus relied on each person who bought in to the scheme, recruiting more people into the scheme, those people recruiting still more and so on.
Mr Paul and Ms Judson set up Croesus Finance to lend money to people who wanted to borrow to buy into Maximus. People paid $506.25 to buy into Maximus, and some people bought in several times. A loan of $506.25 cost $600 over 30 weeks.
In August last year the Commission obtained interim injunctions stopping Maximus and freezing its bank accounts.
Later that month it obtained court orders to seize emeralds and other gemstones from a Tauranga Company, Hot Ice International Limited. The uncut gemstones were bought with $447,000 advanced from Maximus to Hot Ice. The Commission believes that the gemstones were to be cut and resold in New Zealand.
