Official files on Queenstown bankrupt Rod Nielsen reveal how he went broke for $34m – and all of it borrowed.
Frank Marvin investigates
Notorious Queenstown bankrupt Rod Nielsen had a simple funding formula for each of his developments – he borrowed the lot plus a bit more on top.
Nielsen’s lawyer, Ken Whitney of Auckland, told the Official Assignee about his client’s modus operandi in a statement last August during an investigation into the bust developer’s affairs.
“Mr Nielsen’s mode of operation was to set up a development company owned by a separate trust for each project,” Whitney said.
“He did not inject any funds himself but was able to obtain 100 per cent-plus finance for each project.”
Development profits were destined for the relevant trusts, Whitney added – “Unfortunately, I don’t think any of these projects were profitable so the trusts never accumulated any assets.”
Several trusts being investigated were “defunct and have no assets”, Whitney advised.
The lawyer’s statement is among documents initially kept secret by the Official Assignee but subsequently released on the Ombudsman’s orders.
They show the sheer scale of the Nielsen corporate wreck, including companies involved in several Queenstown developments such as the 34-unit Heritage Villas on Fernhill Road.
After Nielsen was bankrupted by bust finance company Bridgecorp for $14.5 million in September 2009, other debts emerged and he now officially owes over $34m.
Other creditors include failed finance houses Strategic and Capital + Merchant, as well as Guardian Trust, and Nielsen’s brother and fellow bankrupt Greg – allegedly owed $1.8m – plus three credit-card companies owed $125,000.
Newly-released documents also reveal Nielsen and wife Sirene Millar hived off a $US2.6m Las Vegas mansion to the “Nielsen Nevada Trust” in 2006.
Their family home in exile had four bedrooms, six bathrooms and a pool.
By 2009, according to Nielsen’s own post-bankruptcy “statement of affairs”, “[the Nevada] house mortgage is in default. No payments are being made”.
However, the Nielsens have managed to retain their large home on Queenstown Hill – nicknamed ‘The Plasma Screen’.
The property is owned by Lakeview Trust Ltd, which Companies Office records show Rod Nielsen originally directed and co-owned. Millar has been sole shareholder and director since June 2010.
At the bankruptcy hearing – by which time Nielsen was living in Las Vegas – Bridgecorp’s lawyer implied there may be hidden assets.
“One cannot put aside the possibility a transfer of assets or otherwise has taken place through which Mr Nielsen has a store of wealth which is unknown,” he submitted.
Nielsen’s estranged brother Greg was even blunter.
“I do know that Rod Nielsen continues to own property in New Zealand,” Greg alleged.
Back in March, Mountain Scene asked Nielsen if he was sheltering any assets in trusts.
“Absolutely not,” he said adamantly.
“[The Insolvency & Trustee Service has] gone through them all. I pride myself on being straight up and above board.”
To avoid the stain of bankruptcy, Nielsen unsuccessfully tried to do a deal with Bridgecorp receivers over his $14.5m debt – offering to pay just $2m over 20 months from anticipated salary and bonuses from his then-Las Vegas job.
No thanks, Bridgecorp said.
Eventually bankrupting Nielsen, High Court judge Paul Heath put out a clarion call.
“Mr Nielsen must take responsibility for being at best imprudent or at worst commercially irresponsible,” Heath said, urging authorities to investigate Nielsen’s behaviour “on grounds of commercial morality … to determine whether post-bankruptcy restrictions are appropriate”.
Official Assignee David Harte says no assets have been uncovered to benefit Nielsen’s unsecured creditors – although “further accounting records” recently obtained are being examined.
As for Justice Heath’s call for post-bankruptcy restrictions, Harte says: “There is still more work to be done.”
Mountain Scene tried three times to contact Nielsen by cellphone and email for comment – there was no response.