'Richer than Bill Gates' assertion

A Richmond businessman who claimed to have developed a revolutionary method of compressing data boasted he was "richer than Bill Gates", a court has been told.

A trial for Philip James Whitley, 48, started in the Nelson District Court yesterday. He faces two charges, laid by the Serious Fraud Office (SFO), of making a false statement as a promoter between July 2006 and May 2007.

In his opening statement, prosecutor John Upton, QC, said Whitley claimed to have developed a "lossless" data compression system which would allow original files to be reconstructed exactly from the compressed file.

"If the technology the accused stated did exist it would potentially have been worth billions. But it did not. It was a scam," Mr Upton said.

Whitley's company NearZero attracted $5.3 million from about 490 investors from New Zealand and overseas.

Nelson State Cinema director Mark Christensen, the first of 35 witnesses to be called, told the court he was among a small group of businessman who financially supported Whitley while he developed the compression technology.

He said he had invested "more than he cared to think about" in Whitley, and had only recovered a very small amount.

In May 2006, Mr Christensen said he borrowed $60,000 against his house to finance Whitley while he continued his work.

He and his colleagues had put in $292,000 into the project and a further $125,000 after Whitley became unwell in 2002 and the technology had to be rebuilt from scratch from 2004, he said.

Mr Christensen said he met Whitley in 1999 as someone who could help him build a new ticketing and candy cash register system at the State Cinema in Nelson.

Whitley told him he was working on software which could compress data at a rate of four to one. "I'm no great expert in compression, but knew enough to know that was extremely good by current standards."

Mr Christensen, Whitley and three other men became shareholders in Astute Software, which was set up to work on both the compression technology and software for point of sales systems.

Mr Christensen said in 2001 he attended meetings in Australia with Ball Aerospace, IBM and Cisco Systems. Ball Aerospace and IBM were very interested in the technology.

At the end of the trip they had been offered a letter of intent to put forward $30 million if the technology could be proved.

The software was tested by Canterbury University associate professor Tim Bell who said the technology Whitley was claiming to have built did not exist and Whitley's claims were similar to other worldwide scams in that area of technology.

However, Mr Christensen said he and two other directors of Astute believed Dr Bell's testing to be flawed and they agreed further testing should not be carried out until the technology had been developed further.

Prior to Christmas 2005 he saw Whitely compress a file on his desk top computer and re-open in its full size on his laptop, he said. He did not see any wires between the computer, but admitted he did not check to see if there was a wireless connection.

During his time on the stand Mr Christensen described the extreme mood swings Whitley experienced.

He said in 2002 Whitley was so ill he could not string a sentence together, but also had periods of being "supremely confident".

Mr Christensen said when Whitley came back from the United States after seeking advice on getting his technology patented, he told him he was "richer than Bill Gates". "I said no way are you're richer than Bill Gates as the money is not in the bank yet, after you get the technology to market you will be rich."

Mr Christensen said he was overseas when the Companies Office took action against NearZero.

"It was a melt-down type of situation as far as we were concerned."

He said Mr Whitley told him he destroyed his technology when the Companies' Office intervened.

Mr Christensen said he thought Mr Whitley was not without foundation to destroy the technology as it had not been patented yet, but he would have preferred the technology to have been put somewhere safe.

The trial is before Judge David McKegg alone and is set down for four to six weeks.

- © Fairfax NZ News