Flattened by franchise master

His card was fast reaching its credit limit and he said he didn't know how much longer he could continue to make his $710 weekly payments to ANZ.

The New Zealand Herald
February 8, 2008

Flattened by franchise master
Banking Story
Lincoln Tan and David Eames

Franchise fugitive Keith Lapham expects loyalty from his friends and offers the same in return.

"I have a great set of friends, am loyal and expect that in my friends or partners," says the 51-year on his NZ Dating website, where he goes by the name Stylishk.

Lapham, who is gay, says he is seeking "that special someone", but is also keen simply to make new friends, go to dinner, have a drink or take in a movie. Embittered and out-of-pocket ironing franchise-holders might be interested to see he also describes himself as "financially secure".

The webpage has not been updated since mid-October, but his current financial position is likely to be a line of inquiry for the Serious Fraud Office.

Lapham is the alleged brains behind a scam that has seen about 200 immigrants each lose upwards of $20,000 on non-existent Green Acres ironing franchises.

The SFO is investigating to see if any criminal offending has taken place in a suspected scam some say could top $5 million.

The prospect of a work-from-home ironing franchise sounded like the answer to Ulka Joshi's prayers, with no need for English, a guaranteed income working from home and no driving.

Life in New Zealand had been a struggle for the Indian immigrant - there's not much opportunity for a 34-year-old professional classical dance teacher with two children to feed.

"It was like we had struck the lottery when we first found information of Green Acres ironing business on the internet. I thought to myself, 'Finally, some financial stability'. It allowed me to work from home where I can look after my daughters, and also met all my other requirements because I am uncomfortable speaking Kiwi English and don't really know my way around Auckland."

In October she borrowed $20,000 from Green Acres-owned finance company FBL Finance for the franchise, and a further $5000 for ironing equipment from Lapham-recommended Finance Now.

The franchise guaranteed a minimum income of $1000 a week, but Joshi has yet to earn a cent, as the ironing equipment never arrived.

Finance Now is looking for repayments on the $5000 she borrowed for the gear - at 18.95 per cent.

"I paid a few instalments but now I have no money to pay for them."

Now Finance chief executive Phil Ellison said this week 30 loan agreements had been paid out between October and December last year to clients brought to Finance Now by Lapham in his capacity as a "business introducer".

Weekend Herald inquiries have identified at least 11 loan-takers who have yet to receive ironing equipment.

Green Acres bosses moved quickly to finger Lapham when the story broke the weekend before Christmas.

On December 23, chief executive Andrew Chisholm told the Herald on Sunday their franchise master of some seven years had gone to "relatively extraordinary lengths" to provide people with fake customers over the course of up to a year.

Green Acres Franchise Group co-director Logan Sears described the scam at the time as "incredibly elaborate".

"The fact that it hasn't surfaced to date, something of this scale, is absolutely mind-boggling."

Ironically, however, many people - on either side of the debate - do not believe Lapham is kicking back somewhere, enjoying his profits.

Most reckon he simply became overcommitted signing new franchises to generate the income to maintain guaranteed weekly incomes for existing franchise holders. The reason he had to do that will be likely to form the basis of any future SFO charges.

The theory that he had to keep selling franchises to maintain older ones is similar to the practice described by Canadian franchising expert Les Stewart as "churning.

Stewart describes it as "the rapid creation and destruction of individual franchised businesses, where the assets are purchased at a steep discount and resold to the next franchisee prospect."

But many people doubt Lapham was really capable of such an arrangement. A Thai man, who had known Lapham socially and wished to be known only as Stevie, said it was impossible a "simple-minded man" like Lapham could engineer such an elaborate scam.

Neighbours on Mt Albert's Ennismore Rd describe the Fijian-born Lapham as quiet, but also warm and friendly.

Ken McCulloch, a driver employed by Lapham since April last year, said he was a hard worker and a great salesman, but not much of a businessman.

Another Lapham friend, who also chose not to be named, agreed it was his lack of business skills that got Lapham into trouble.

SFO chief executive Grant Liddell told the Weekend Herald this week that "substantial progress" had been made on the investigation since the SFO was formally alerted by Green Acres bosses on January 4.

The department had interviewed "most of the individuals of significance" including Lapham in the presence of his lawyer, he said.

"The interviews and the documents have generated a substantial amount of work that our specialist forensic accountants are pursuing in analysing financial transactions and money trails."

At least 50 franchisees had been spoken to but Liddell could not put a timeframe on the investigation.

Chisholm told the Weekend Herald Green Acres had taken steps to help franchisees caught out by Lapham, including offering them uniforms at half price and helping them deal with banks and restructure loans.

He confirmed Lapham had bought a Green Acres master ironing franchise business about 2001, but would not confirm a purchase price, understood by Weekend Herald to be about $100,000.

Auckland lawyer Raymond Huo, who represents the 190 franchisees left in the lurch by Lapham, says he is finalising details of a legal challenge against Green Acres but will not discuss the finer points before papers are filed with the High Court, probably in the next couple of weeks.

Police Asian Liaison Officer Raymond Wong says the guaranteed income offered by franchise masters was a big attraction for immigrants who struggle to find work in this country.

Franchises appealed for the simple reason that having an income - even if only on paper - helped to secure bank loans.

National MP Pansy Wong says new immigrants to New Zealand were a vulnerable segment of society for franchise fraudsters.

"They are even more vulnerable because they perceive New Zealand as a country of trust where everybody is honest.

"I have asked the Green Acres victims if they would do the same if they were in India or China and they said no. Their guards would be up."

She added: "The franchise business is also attractive to immigrants who can't find jobs and are desperate to make a living. They will cling on to what little hope [they have] that claims made by the franchiser are true, even those they find hard to believe."

Wong says there needs to be exposure in the mainstream media about the perils of buying a business but not asking the right questions in the process.

She intends to expose the dangers of buying franchises - using the Green Acres saga as an example - in Chinese and Indian newspapers.

Betrayed in the country they trusted
Kris Divate thought the Green Acres ironing business would help make his dream of owning a property in New Zealand come true. Instead it has left him struggling to repay the substantial mortgage he took to buy his $410,000 home a month after signing the contract with Keith Lapham.

"This month I used my credit card to pay my mortgage, next month I don't know what will happen," said Divate, who moved to New Zealand from Mumbai, India, in 2005.

His card was fast reaching its credit limit and he said he didn't know how much longer he could continue to make his $710 weekly payments to ANZ.

"I borrowed the money to buy this business because I knew the $1000 guaranteed weekly income combined with my income would make the bank approve the mortgage," said Divate, a civil engineer.

He borrowed $21,393 from FBL Finance Ltd for the ironing business he bought for his wife, Ujwala.

He borrowed another $5000 from Finance Now for ironing equipment he never received, a loan in dispute because Divate claimed neither he nor his wife signed for it.

They have not been making loan repayments but are now feeling the pressure from Finance Now, which is sending them weekly reminders.

"I thought the business could help me own a property in New Zealand. I am now worried that it would make me lose everything instead."

Ulka Joshi is desperately looking for a job, knowing that if she fails to get one soon, she stands to lose not just the roof over her head but everything in the house as well.

After signing an agreement with Lapham last October for an ironing business, she rented a bigger house and bought new furniture on hire purchase.

Now the mother of two young girls says she is having sleepless nights thinking about how she can meet more than $400 in weekly repayments.

She is stuck with a $20,000 loan for a business which doesn't exist, and a $5000 loan for ironing equipment she never received.

She says her husband's income as an accountant is not enough to make ends meet.

"Finding a job is really tough here, and I don't know if I can get one soon," said Joshi, an Indian classical dance teacher.

"My skills are not really wanted in New Zealand, but most of the companies also require Kiwi experience which I don't have."

Joshi, who came to New Zealand from Gujarat, India, in 2003, says she had never taken a loan before her move here.

"I really didn't know what to expect or what questions to ask when applying for a loan," she said. "I just signed whatever papers Keith [Lapham] asked me to without really reading the conditions."

"The ironing business sounded like a dream come true … instead it has turned out to be my worst nightmare."

Her mother-in-law, who is here on holiday from India, is helping with the children as Joshi continues with her job hunt.

Phoebe Yang said becoming a victim in the alleged Lapham scam had come as a shock.

Before she bought the business, Yang had spoken to other ironing franchisees - friends who had bought businesses from Lapham - and was told they were legitimate.

"Other than getting their guaranteed income late, they tell me the business is okay," Ms Yang said in Mandarin. "Also, I trusted the good name of Green Acres, and that unlike China there are systems in place to make sure scams don't happen."

Last September she took a $20,000 loan from FBL Finance to buy the business and $5000 from Finance Now for the ironing equipment.

Even when she didn't receive the ironing equipment she didn't sense anything was wrong, because she thought it just the usual delay, like those for the payments her friends had told her about.

Besides, she had been reassured when she received a new franchisee welcome card signed by Green Acres bosses Andrew Chisholm and Logan Sears, and when her name was mentioned in the November issue of Green Acres' FBL World newsletter.

So when she was informed by Green Acres last December that the business she bought was non-existent, she said it came as a "total shock".

"I felt really angry and betrayed" said Yang, who has a 3-year-old daughter.

"I cannot believe such a thing can happen in New Zealand, and didn't know who I could turn to for help," said the immigrant from Guangzhou, China.

She has since approached National MP Pansy Wong for help and found work at Foodtown as a cashier working night shifts, but says she still faces a huge financial struggle.

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