ASB bank picks up tab for employee's $17.8 mil highlife

After bnz and Westpac it is ASB's turn to be in the spotlight after one of its 'investment advisors' was revealed to be a Madoff-style ponzi schemer. Over a decade this person spent $17.8 million, among other things, on flash houses, wine, prostitutes and lawyers.

Will ASB's executives have their bonuses cut this year for failing to recognise that one of its employees had the same level of ethics as used car dealers, lawyers and politicans? Hmmm ... don't count on it.

Some of the lurid details from stuff.co.nz :-

A prostitute has walked away with $2.5 million spent by a banker stealing clients' money to fuel an extravagant lifestyle of sex, booze and luxury property.

Stephen Gerard Versalko, 52, married with three children, lived the high life for nine years after siphoning $17,763,110.19 off 30 wealthy clients from ASB Bank, where he worked.

Outside of buying property, his biggest spend was on sex – including $3.34 million on just two Auckland prostitutes with whom he had long-term relationships.

One received $2.5 million, the other $791,181. The Serious Fraud Office said both women also say they received further "large cash payments" estimated at $800,000.

Still more was spent at a variety of escort agencies around Auckland. The Serious Fraud Office could not track all the payments because they included cash taken out using seven credit cards that Versalko had.

Yesterday he was jailed for six years on three fraud charges by Judge Chris Field in Auckland District Court. He will be eligible for parole in four years.

His fraud was the biggest employee theft the SFO has dealt with in its 20-year history.

Versalko's lawyer, Stuart Grieve, QC, claimed that one of the prostitutes was blackmailing Versalko over a lengthy period for $1.2 million, but the SFO said it had no information to prove that.

One of the prostitutes bought property with the proceeds and the ASB is suing to try to recover it – her name and more details are suppressed by the courts while that case proceeds.

A clutch of other civil cases are also under way as ASB attempts to recover money, including $4.75 million held in trusts set up by Versalko.

His biggest splurge was $4 million on property, towards a $3.2 million mansion in Remuera's plush Seaview Rd and a $1.8 million beachfront holiday home at Whangapoua in Coromandel. Neither had mortgages, but not all the money used was stolen.

In addition, extensive renovations costing $558,000 were carried out and he owned a range of other properties through a series of family trusts or jointly with his wife.

He racked up $2.2 million on credit cards, including $313,000 for wine bought on an American Express card between 2002 and 2009, and personal travel.

Versalko, a slim, unremarkable man who suffers from Crohn's disease, an inflammation of the digestive tract, was an investment adviser with ASB. He started his fraud after he was made redundant from a $200,000 job – plus bonuses – and racked up $40,000 on credit cards. He was then hired by ASB in 1997, but on a far lesser salary.

He was an expert in futures, options trading and the money markets, but he tried to make extra money by dabbling in property investment. In 1999 he ran into difficulties, needing $70,000 to bail himself out.

He lined up an ASB client with $400,000 in a long-term deposit and carried out his first fraud, convincing her to invest in a scheme promising higher interest rates with no tax, no administration fees and the funds on call. In total, he looted $528,340 from that one client.

From there, 30 others were sucked into his fake investment schemes, largely targeting elderly women living overseas who were unsophisticated about money and did not monitor their accounts online, SFO prosecutor Patrick McCann said.

All their names, and details of how much he rorted from each, were permanently suppressed yesterday.

Mr McCann described Versalko as "clever and charming". He explained away his wealth as profits from personal trading on an online site that dealt with complex derivatives.

Mike Harper, the real estate agent who sold Versalko his Whangapoua house, said he was personable and came across as a man of substance. He used to give an expensive bottle of wine to local shop owners each year.

He was a master of using ASB's computer system to transfer money leaving no trace of the transactions. He also forged account statements which he signed and sent to the victims to fool them into believing their investments were safe.

Of the $18 million he stole, $4.6 million was used to repay fake interest and principal to clients, with $13.1 million raked off for himself. In 2008 alone, he took about $4 million for himself.

The gravy train finally came to a halt in August last year, when one of his elderly clients with $3 million invested with Versalko saw a documentary about US fraudster Bernie Madoff and spotted similarities in the schemes they both ran.

When she contacted ASB Bank Securities to check, she found no record of her $3 million. It triggered an urgent investigation and, on August 25, Versalko was confronted, admitted the fraud and was later sacked.

Putting his hand up so early shaved three years off his sentence, Judge Field said.

Mr Grieve said his client had shown "exceptional remorse". But Mr McCann said Versalko was not fully frank – he tried to hide his relationships with the prostitutes, describing the payments as handouts to two ASB clients down on their luck, on whom he took pity.

The SFO traced the prostitutes through Versalko's phone records. Given his long-term marriage, "I can understand Versalko was reluctant to admit it", Mr McCann said.

Mrs Versalko was not in court yesterday and is understood not to have attended any of his appearances.

The ASB said it had since introduced "additional processes and practices to further strengthen our security and protect our customers so that this situation does not happen again".

It had reimbursed $15.5 million to all the clients Versalko had defrauded and would honour a further $1 million in promised interest payments.

The fraud contributed to ASB's first loss in 20 years, for the first half of the current financial year.

Stephen Versalko's money would have been a great source of intrigue for the working girls he spent it on, Prostitutes Collective president Catherine Healy says.

Sex workers were "usually incredibly discreet" but there was sometimes "chat" about well-heeled regular clients.

"The chat around them is how is this happening? How are they sustaining this amount of spending? Usually when clients become regulars people get to know a bit about their circumstances. Sometimes people would think, `This doesn't feel right – is this guy embezzling?"'

It was very rare for prostitutes to become tangled up in legal cases, but she warned sex industry workers to be on their guard.

"Sometimes there are clients who may be doing something illegal. While it's not [prostitutes'] responsibility, it's something to be aware of because there could be repercussions."

She was taken aback by how much Versalko had spent, though it was not uncommon for prostitutes to have long-standing business relationships with clients.

"The sex workers very often don't regard it as being in a relationship ... but it's also true that some become very attached to their clients."

Kapiti Coast council told not to waste money on orthographical change

Following the ridiculous debate over the spelling of Wanganui last year, the Kapiti Coast District Council decided to waste $100,000 of ratepayers' money (we are one of the ratepayers) on adding a macron over the 'a' in Kapiti.

Now the Maori Language Commission has told the KCDC it doesn't need to change anything as Kapiti is okay without a macron.

The KCDC says it is making the change on the advice of local iwi consultants. In written Maori, macrons are used to indicate when pronunciation of the vowel is long.

"Political correctness gone mad," says one ratepayer whose views were made public.

As we observed in our post on the Wanganui issue last September, Maori as a written language was created by the British in the early 19th century, who for some unfathomable reason decided to spell the F sound as Wh. English has no accents, unlike other European languages, to show vowel pronunication. Dutch doesn't either, but uses a double vowel when the pronunciation is long - the option that the British could have used, but didn't. It all seems rather pointless anyway, when most Maori pronounce placenames the European way. We are all for correct pronunciation, but spelling reforms are an unnecessary means of achieving it.

Did you know...

...that if you have the wrong size tyres on your car wheels it will cause your speedometer to over- or under-read, because the wheels need to make more or less revolutions for the speed shown?

Neither did we, until a helpful man at Beaurepaires pointed out that one of our cars should have had different size tyres according to the car manufacturer. According to him, this will cause a difference of about 6 km/h between the speedometer speed and the actual speed.

So next time you get a speeding ticket, check that your car tyres are the correct size. If they are not, get a letter from the garage to that effect and show it to the cops, it might just cause them to relent.

Photoshopping the news

Altering photos for political purposes is nothing new: the communists were notorious, among other things, for removing people who had been purged from official photos, as if they never existed.

Today tens of thousands of people alter the truthfulness of photos by doctoring them with Photoshop, every day.

Reuters was accused of bias against Israel in 2006 when a doctored photo of the capital city of Lebanon was released by the wire service (bottom photo). The photo, submitted by Lebanese freelance photographer Adnan Hajj, shows (badly) cloned smoke and buildings and a darkened skyline onto the original (top photo). Reuters ultimately broke all ties with Hajj, who was accused of retouching other photos as well.

This issue arises, however, with book illustrations, too. Often people want to alter a photo for asthetic reasons, removing something they don't like, adding something they do, changing colours, and so on. Our original reluctance to engage in any form of tampering was, after some discussion, relaxed slightly and our policy nowadays is that it is acceptable provided:
1. It does not alter historical facts;
2. Any removal or addition is only something that would have occured anyway if the photographer had adopted a slightly different camera angle;
3. Any changes in tone or colour are only to restore accuracy.

Different rules apply to 'art' photography, of course. In a nutshell, we won't engage in anything that can be considered unethical; we can only speak for ourselves in this.

still in Auckland in 1971

For Aucklanders more nostaglic about what was on land than on the water, here is a photo taken about the same time as the previous one below: looking down Queen Street to the intersection with Wellesley Street (virtually every town in NZ was given a Queen Street, or a Victoria Street, and an Albert Street - and, as in the case of Auckland, sometimes all three).

Nearly all the vehicles visible are British too - the steady replacement with Japanese vehicles didn't begin until a couple of years later. The trolley buses are now history.

The Theatre Centre visible on the building further down is still there, but no longer run by Kerridge Odeon. The 246 sign further down has gone although the building is still there and the ground level was most recently occupied by the troubled Dymocks bookshop chain until last year.

Books on New Zealand transport history and general history are available in our online shop.

Auckland, 1971

Most Aucklanders will remember the ferries in this view (click for larger version) which have long been replaced. For historic colour scenes like this one inside New Zealand's harbours and around the coastline fom the 1950s, 1960s and 1970s, get the book New Zealand Maritime Images: The Golden Years by Emmanuel Makarios, available at our online shop and at better booksellers.

"Shock your parents...

...read a book"
City Library of Halle

There's plenty of money in being a telco monopolist

We all know about the Evil Empire a.k.a. Telecom NZ, but it ain't the only one in the world. In a country where $US 6 an hour is considered a good income, Carlos Slim of Mexico makes $US 1.25 million an hour. He has just knocked Bill Gates off his perch as the world's richest person.

His wealth has caused some resentment in a country where 40 percent live in poverty and thousands emigrate each year to seek opportunity in the USA. Both the U.S. and Mexican governments have complained that Mexico's economic growth is stunted because large conglomerates such as Slim's have too much control.

From the minute many Mexicans are born - perhaps in one of Slim's Star Médica Hospitals - they begin putting money in his pocket. They use electricity carried by Condumex brand cables, drive on roads paved by the CILSA construction company firm and burn fuels pumped from Swecomex drilling platforms. They communicate through Telmex phone lines, smoke Slim's tobacco, which is sold under the Marlboro brand, and shop at Sears Roebuck of Mexico, a subsidiary of his huge Carso Group.

"It's hard to live a day without buying one of his products," Sandra Morales, 31, said as she ate lunch in the Plaza Insurgentes shopping center - a property owned by Slim - in Mexico City. "He's so rich and powerful and in a country where there are so many poor."

In 1990, Slim made one of his most controversial purchases. The Mexican government was auctioning off several state-owned enterprises, including Teléfonos de México, the state-run telephone company, also known as Telmex. Slim and his partners, France Telecom and Southwestern Bell, beat two other groups of bidders. The consortium paid $1.76 billion for a 20 percent controlling stake.

Since then, the market value of Telmex stock has rocketed from $7.39 billion to $41.2 billion. The company owns about 90 percent of Mexico's phone lines.

After acquiring Telmex, Slim's net worth increased dramatically. He integrated his companies so they did as much business as possible with each other. At the Carso Group, the holding company for many of Slim's investments, Rule No. 6 on the list of 10 corporate principles is: "Money that leaves the company evaporates."

The domination of large Mexican conglomerates such as Slim's chokes off growth of smaller companies, says Celso Garrido, an economist at Mexico City's Autonomous Metropolitan University who studies Mexico's business dynasties.

The resulting shortage of good jobs drives many Mexicans to seek better lives in the United States, says Roderic Ai Camp, author of Mexico's Mandarins, a book about the country's power elite.

Along with Telmex, Slim controls América Móvil, the world's fifth-largest cellphone company with 124 million customers in 15 countries. In the United States, he controls Tracfone, a pre-paid cellphone company that claims 8 million customers.

Business groups regularly complain about Telmex's business phone rates, which are more than twice as high as in the United States. In April 2007, U.S. Treasury Secretary Henry Paulson said Mexico would benefit from more competition. Mexican President Felipe Calderón pledged in April to make it easier for companies to enter the telephone market.

Does it all sound rather familiar?

Canadian Booksellers Association doesn't want Amazon

In reaction to the news that Amazon is seeking government approval to expand operations in Canada by setting up its own warehousing and dispatch, instead of using a Canada Post subsidiary as it does now, the Canadian Booksellers Association released a statement demanding that the government reject the online retailer’s application. From the press release:

"CBA contends that allowing Amazon to operate a business within Canada would contravene the Investment Canada Act which requires that foreign investments in the book publishing and distribution sector be compatible with national cultural policies and be of net benefit to Canada and the Canadian-controlled sector.

"CBA President Stephen Cribar argues that Amazon’s entry into Canada would detrimentally affect the country’s independent businesses and cultural industries: 'Individual Canadian booksellers have traditionally played a key role in ensuring the promotion of Canadian authors and Canadian culture. These are values that no American dot.com retailer could ever purport to understand or promote.'

"CBA urges the Canadian government and the Department of Canadian Heritage to continue its support of our unique cultural perspective by placing reasonable limits on American domination of our book market and rejecting Amazon.com’s current application."

There isn't much to be surprised about this, the equivalent body in NZ would say the same thing. But isn't it simply an anti-competitive attitude? We can't comment about whether or not "Canadian booksellers have traditionally played a key role in ensuring the promotion of Canadian authors and Canadian culture", but that certainly can't be said about booksellers in NZ (see our post from 24 June last year).

One thing that we have noticed is that a large number of our own mainly older customers don't shop online either because they don't trust the internet or they just don't like using computers. These people shop the traditional way - from paper catalogues or by going down to their local bookshops. If they are looking for the types of books we specialise in, of course, they won't find them at their local bookstore (with a few notable exceptions), and they are just as unlikely to find people in those shops who have any knowledge of or interest in books. There is thus plenty of scope for the dedicated, knowledgeable, specialised independent bookseller in NZ and we daresay in Canada too. The only booksellers who need fear Amazon are those who don't meet this description.

New book on Frichs and Scandia railway products

Last year in a demonstration of how much you can rely on TV news to get facts right, TV3 said that Frichs was a German manufacturer. Well of course, it was Danish, based near Århus.

Scandia (not to be confused with Scania in Södertälje, Sweden, the second largest automotive concern in Scandinavia after Volvo) was a locomotive manufacturer based in Randers, Denmark, later purchased by Adtranz, which itself was subsequently acquired by Bombardier Transportation.

The reason for the mention of Frichs by TV3 last year is that NZR's 9 Vulcan class railcars, built just prior to WW2 and delivered while the war was in progress, had motors and some other componentry supplied by Frichs. Four of these 9 railcars have been preserved and one made a Labour Weekend trip up the old Otago Central Branch as far as Middlemarch, the reason for the news cameras. A colour photo and brief details of the Vulcans are contained in this comprehensive book which is a nicely produced catalogue of all the motorised railway vehicles produced by the two companies between 1932 and 1978, accompanied by plenty of photos and line drawings.