Failed Dunedin businessman Paul Nicholson - whose previous investment company Hurricane House collapsed owing southern investors $4.2 million - has been soliciting for new investors to participate in buying a troubled $12 million subdivision in Central Otago.
Despite admitting yesterday to a "brain implosion" in lending more than $4 million of Hurricane House funds without security, Mr Nicholson is defending his decision to re-enter the property market.
He justified his move to solicit more funds from new investors by claiming he wanted to pay back out-of-pocket Hurricane House investors still owed $3.7 million from the company's liquidation - "not from a legal obligation but a moral obligation", he said.
"Just let me get on with it and it will happen," Mr Nicholson said yesterday, angry that his email offer on April 20 had been leaked to the Otago Daily Times by disgruntled Hurricane House investors.
The emailed offer, and Mr Nicholson's attached curriculum vitae, both omit to mention his last private investment company - Hurricane House - collapsed owing investors $4.2 million.
However, Mr Nicholson said the content of the documents leaked to the ODT did not reflect what was sent to the majority of would-be investors.
He conceded some "content [became] altered" because of the large numbers of emails which went out, but said he had given instructions his CV "should have been amended" to include Hurricane House information.
Some investors remain bitter over the liquidation, which saw family homes having to be sold off, life savings lost and, in some cases, refinancing to cover huge, new, debt levels.
Mr Nicholson claimed yesterday only "about four investors" had been non-supportive, while he had the "support from lots more [former Hurricane] investors" to try to repay them.
In the email, Mr Nicholson issued no prospectus offering would-be investors a profile of risk and reward, and instead addressed it to "habitual investors".
Habitual is a controversial financial term supposedly making a distinction between inexperienced "mum and dad" investors and experienced "habitual" investors - those who make their living from investing.
Mr Nicholson yesterday defended the use of "habitual", saying the offer was to "friends and family ... people I have known for years ... not a public offering".
In his email, Mr Nicholson was seeking investors to contribute to a $1.2 million deposit for the Bendemeer 24-site subdivision near Lake Hayes, offering them a "secure short-term investment opportunity", saying, "trust me this is a good one".
Earlier this week, Mr Nicholson declined to reveal why he incorporated a new company, Bendemeer Trustees Ltd, last week, but he said yesterday it was "obvious ... they [profits from the new venture] would firstly be applied to my wife and family, then Hurricane House investors, then me last".
"It has been a living hell for the last three years ... I got caught out like the rest of the country: Hubbard [of South Canterbury Finance], Strategic Finance and Hanover," Mr Nicholson said of finance companies in general that collapsed and lost more than $8 billion.
In the email, Mr Nicholson offered to pay investors "2% per month, ie 24% per annum" for their cash, to be borrowed over a six-month term.
Mr Nicholson wrote: "Hi close associate and habitual and informed investor".
He claimed to have "secured the remaining Bendemeer [subdivision] lots" from receivers PricewaterhouseCoopers for $12 million, with a "current valuation as at today, 20 April 2011, [of] $20 million".
"I am seeking $1.2 million, for the deposit as soon as possible, ideally tomorrow ... for a period of approximately six months ... until 31 October 2011."
Mr Nicholson said yesterday the $1.2 million deposit had been paid for Bendemeer.
"Yes. It's gone through."
Neither Mr Nicholson's Wellington lawyer, who was copied the April email, nor a PricewaterhouseCoopers spokesman selling the subdivision returned calls yesterday.
Mr Nicholson wrote: "As a sweetener, to my close associates, I will also offer the first $1.2 million of initial lenders, on a first-in, first-served basis, the right to participate in a JV [joint venture] with myself, which has an expectation, not promise, of return of 20% pa, accrued monthly, for a period of 5 years, or less time at the borrowers option, until full repayment."
Mr Nicholson went on to say: "Trust me this is a good one. If you are interested in participating, please deposit your funds today."
About 25 southern investors in Hurricane House, which is in receivership, have so far been repaid just $535,000 of the $4.2 million owed - or 12.75% of their original investment.
Hurricane came unstuck when Mr Nicholson lent Christchurch finance company Fendal Finance $4.5 million - which, in an extremely unusual financial transaction, was unsecured against any assets.
However, Fendal plunged into liquidation, with total claims of $17 million, of which $10 million was outstanding, and did not repay the Hurricane loan.
When asked why he lent the $4.5 million unsecured, Mr Nicholson said he had a "brain implosion" and admitted it was a "major mistake", but he had trusted Fendal's owner and "would learn from the mistake".
Fendal was owned by former Dunedin businessman Gray Ussher, who had given a personal guarantee on the loan from Hurricane, but there were no securities held against the $4.5 million loan.
Fendal went into liquidation on May 2009, about three months after Hurricane collapsed. Hurricane's liquidators then successfully petitioned for Mr Ussher to be declared bankrupt in September that year, owing a sum of $4.54 million.
