Disabled reel from gingko no-go
Disabled reel from venture's collapseMARTY SHARPE
Chris Kitto wishes he had never heard of ginkgo.
The father of an adult disabled daughter was led to believe it was a sure-fire money spinner for Napier's Disability Training Services.
The idea to offer the trust's properties as security for loans to the gingko venture was pitched by trustee John Knight and Ron Massey, who was the Napier City Council's economic development officer.
Mr Knight and Mr Massey founded Nature Green NZ with the aim of growing ginkgo trees in New Zealand to export the leaves and extract to make alternative medicines.
Services for the disabled were to have benefited from profits.
Ginkgo trees were sold to landowners around the country, and harvested leaf was to be sent to Napier for drying.
The trust and its investment arm put in $50,000 in 2004 and later a further $60,500.
ANZ Bank was also granted security over its properties for Nature Green's bank overdraft, which was $90,000 when Nature Green went into liquidation last year. However, pledging of the trust's assets to support Nature Green did not stop there.
In 2010, it borrowed $250,000, primarily secured over stocks of ginkgo leaf, but backed up by a second mortgage over the trust's Austin St properties.
In 2011, Nature Green borrowed a further $400,000 by using the properties as security for a third mortgage.
In all, some $850,000 of trust assets were pledged to fund and secure the borrowings and operation.
When Nature Green collapsed due to what liquidator David Petterson reported was reckless trading and insolvent trading, the disability trust was called on by creditors to sell the land and buildings in Austin St to cover the shortfall.
The buildings in the suburb of Onekawa have been used by the trust's clients since the 1980s.
One, valued at $426,000, sold for $337,000 in December. The other, valued at $570,000, is for sale.
Earnings from both sales are unlikely to cover the full debt of Nature Green, according to Mr Petterson's report.
For Mr Kitto, who has been involved with the trust since the early 1990s, said it was devastating for all clients and families to see what had become of its ' financial position.
The trust's investment arm was formed in 2008 as a means of separating its assets - the properties - from the service arm DTS, which then leased the buildings.
The service will survive in some form, even if the assets are lost.
"The income they [the buildings] generated could have benefited the clients," Mr Kitto said.
"It's a major loss.
"We all thought the ginkgo idea was great at the time, but that's when we thought they knew what they were doing.
"When it was first set up and we went to a meeting, we were told [by Mr Massey and Mr Knight] that within three years it would be making millions of dollars for DTS and it would be self-funding."
His daughter Paula, 35, and the service's other 55 clients would hopefully find another base when the Austin St property sold, Mr Kitto said.
An audit of the DTS Investment Trust Board in November found it had failed to comply with its trust deed because of its exposure through its advances to Nature Green.
Mr Petterson's report said Mr Massey and Mr Knight, and possibly the Napier City Council, should be held liable for Nature Green's losses.
- The Dominion Post