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Smart Operators Sometimes Come A Cropper

Posted on: November 6th, 2007

It was deadline Halloween. So when is a deadline not a deadline? When it’s a dead duck. You have to hand it to Eddie Hobbs and his crew at Brendan Investments. Brass neck is their brand. All those adverts. All those media appearances.

Potential clients for the badly-timed European property fable were led to believe they were in the last chance saloon. After Halloween we would never again have the luxury of a lifetime, the option to lose our SSIA money with Eddie and the Brendan lads.

Did you miss the deadline? Well, good news. After all the hype about the closing date, the gates to Eddie’s property prison are still open. Hey presto. On Wednesday, the deadline was quietly extended. Eddie and the boys suddenly u-turned. We all have another month to swallow the bait. There is a new deadline: November 30.

This Brendan property product has a bad feel about it. So far – and I say so far – Brendan Investments has been obliged to issue not just one, but now two, supplementary prospectuses. It all sounds a little too careless.

Perhaps the moribund European property market will be given the kiss of life in the next 30 days. Or perhaps a few hitherto undiscovered innocents will surface to prop up the Brendan fund. The reason given for the volte-face by the Brendan boys was stunning. They casually explained away the surprise postponement; it was due to “high levels of demand” from pension investors, to cater for the November pension deadline for on-line filing.

And the delay was for other investors to “get organised… those who did not fully appreciate that they would not be able to invest after the deadline…” They do not sound too bright. Who cares? A sub is a sub. They all contribute the same one per cent to the promoters.

The roadshows produced disappointing turnouts. All the evidence suggests that attendance at the nationwide Hobbs presentations was pitiful. About 20 people turned up at each venue, according to surveys by the Sunday Independent.

So the sudden last-minute demand must be emerging from other, mysterious sources. Funnily enough, on Thursday, the Brendan boys went uncharacteristically coy about revealing how much money they had already raised- before the passing of the Halloween deadline. They insisted that it was above the minimum €10m mark. They refused to reveal how many members of the public had subscribed, claiming that they were precluded.

Strange that. Brendan investors are already being kept in the dark. And Eddie Hobbs is the world champion of transparency in financial dealings.

Ten million in the bag is not a big deal; especially as, at one of the roadshows, Eddie suggested that €10m could already have been raised from the promoters’ own clients. Sceptical competitors of Eddie’s were speculating that the deadline had been extended because the launch had disappointed; that the next month would be spent trying to take in pension money from the self-employed searching for a home to reduce their tax burden.

Smart thinking. Good targeting. Any port in a storm. The lads are smart operators. They covered all angles in the prospectus. Buried in the small print they had written themselves the right to extend the October 31 deadline. Forward thinking, but surprise news for investors, no doubt.

Smarter still, the third prospectus allows the canny promoters to repeat the exercise again if they are not happy at the end of November. Roll on December 31, January 31, February 29.

Be warned. You could languish in Eddie’s property prison for longer than 10 years. As each month is added to the deadline at the beginning, so your sentence may be extended at the end. A grim prospect with no remission.

But first, the good news. You can demand a free pass out of the prison if you are already an investor. Well, in theory anyway, provided you decided to do so within 48 hours of the publication of the second supplementary prospectus. Next, the bad news: the new deadline is already history!

The latest prospectus was published on Wednesday. The offer of an exit lasted until Friday. Deadlines for the investors are impractical. Deadlines for the promoters are waived. Under the law, Brendan is obliged to place notice of any supplementary prospectus in a national newspaper. Did it?

Indeed it did. These guys are smart operators. Guess which newspaper they chose? None other than the Irish Examiner, totally coincidentally, the organ with the smallest circulation. Once again, these Brendan boys are smart operators.

There it was on Thursday, hidden in the small ads on page 40 of the newspaper, which hardly sells outside Munster. An inconspicuous notice was lurking deep in the Examiner warning that the terms of the Brendan launch had been changed for the second time. Were Hobbs and his colleagues afraid of a stampede towards the door? They only allowed their investors the absolute legal minimum of 48 hours to escape.

Hardly enough time for the victims to post a letter, let alone for it to arrive via An Post. The promoters could surely have given investors at least a week to reconsider, in the light of the new circumstances. They chose not to. They wanted to keep their prisoners in custody. These lads are smart operators. The prisoners are facing 10 years of solitary. Hopefully they will be told their release date. And it will be honoured.

Extracting information from Brendan Investments is proving a frustrating exercise. On Thursday, I rang the boss, Vincent Regan. First he was too busy. On the second call he complained that he would be misrepresented, so any questions should be e-mailed. I was happy to oblige.

To be fair he sent me answers to all the questions. Plenty of answers, but not enough information. So I asked him the circumstances in which the colourful Rick Fitzgerald, Brendan Investments’ founder and property adviser, had been so unlucky as to land in hot water with the Revenue.

Two weeks ago one of his companies was on the wrong side of a tax judgment for €620,000. Prospective investors are entitled to an account of the financial adventures of a key figure in the company. They could be waiting. Vincent pointed to Rick’s lack of involvement in the day-to-day operations. He did not know anything about the tax affairs of shareholders. Nor would he tell me how much the company had raised.

If Brendan Investments had already reached the €50m mark, they would surely have told us? The cost-base would have been healthier. New investors would have been encouraged. The company’s refusal to divulge the amount of subscriptions at the time of the first deadline is ominous for those already in there. They could be paying a huge portion of the costs if the pot is too small.

So could any innocent contemplating putting some of his pension savings into custody with the Brendan crew. Remember, launch costs were pencilled in at a mammoth €750,000.

Smart operators sometimes come a cropper.