Commission airs RJI dispute

Press, 22 July 1989, Page 27

Commission airs RJI dispute

By

PATTRICK SMELLIE

in Wellington

Details of a dispute between the Securities Commission and property investment group, Robt Jones Investments, were made public yesterday by the commission.

The commission has begun court proceedings against the company and its chairman, Sir Robert Jones, for allegedly refusing to supply information to a commission hearing, under section 32 of the Securities Act.

Sir Robert last evening disputed the commission’s actions. He said the commission’s investigation was a waste of taxpayers’ money.

The dispute relates to RJl’s on-again-off-again purchase of the Price Waterhouse Centre building in Auckland from Chase. The purchase was annnounced last year, but fell through when RJI told Chase the conditions of sale had not been met. The commission decided to examine RJl’s original announcements to the stock exchange that it had in fact purchased the building. In its report, the commission also poses questions about the nature of the deal RJI did with Chase. In particular, it questions the decision to strike the purchase at $145 million, rather than the $135 million initially discussed, according to documentation obtained by the commission. The additional $lO million was accounted for by a “non-refundable deposit” on the building by RJI, cancelled by a $lO million “inducement fee” paid to RJI by Chase, the commission alleges. The commission also raises questions about the treatment of the full purchase cost over time under the new accrual accounting tax regime. While the announced purchase price

had been $145 million, financing costs related to the staggered payments for the property meant the ultimate cost was $186,722,696, the commission alleges.

The commission also homes in on RJl’s announcement of the deal as a completed deal, making no mention of the conditions attached to the sale.

“Our opinion is that a fair reading of the announcement by RJI is that Chase and RJI had entered into binding obligations,” the commission says. Mr Jones told “The Press” the commission was splitting hairs over the failure of a business deal.

It was common practice to announce deals as closed when in fact there will still work to be done on them. Failed deals were an occasional fact of life. RJI had been trying for three weeks to have the report released to expose what Sir Robert considered the waste of time the commission had put his company to. The report recommends a possible addition to the New Zealand Stock Exchange listing requirements, making it clear whether contracts being announced were subject to conditions.

“Care should be taken to ensure that a conditional contract is not held out as an unconditional or completed transaction.” The view that it was permissible to make conditional announcements as if they were completed “should be corrected immediately.

“Prolepsis (anticipation) has no place in announcements to the Stock Exchange,” the report says. An exchange of letters and a transcript of proceedings of the commission were released with the report.