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10 August 2003

Henrys House of Cards

It’s all going to come crashing down.


A very simple mass marketing concept has ripped the heart out of countless ordinary Australians. It has turned their dreams of an easier future into chaos.

Henry Kaye is creating mass mayhem rather than the promised wealth.

Seduced by “visions of wealth” in Hawaii in 1999, after attending a Tony Robbins seminar, Henry made a decision that would cruelly change the financial security for thousands of innocent Aussies.

Here’s how Henry Kaye built his house of cards – and how it is all going to come tumbling down.

Across the nation, developers, planners and brokers needed clientele to feed into the dog-box investment market. There was scant reason why any sane corporation would consider additional projects. Demand lay at the lower end, amid fierce and uncontrolled development competition. And developers, using “other people’s” money continued to purchase land and flood the councils for new residential development approvals.

Henry saw an opportunity to channel clients into the welcome arms of these developers, as supply out-stripped demand.

According to ex employees, the prime motivation for Henry to make money was to sell off the surplus unwanted property to unsuspecting Mums and Dads. They could be coaxed into using the equity in their homes to enter the investment market, if they were assured that there was no risk in doing so. Henry knew he could achieve this if he educated the unsophisticated investors into believing that they too could own a great number of apartments – without risk. They trusted his every word.

Henry’s road to wealth (for Henry) was as easy as ONE- TWO-THREE.

Henry started holding seminars to entice unsuspecting couples to throw in their jobs and follow him to the Promised Land: “Earn $1000 per week for only one hour’s work per week.” He reportedly detailed to raw recruits his plan to encourage the sale of properties on which he had “options to purchase.” The complex commission structures with developers assured a steady flow of new investors, most of whom had never considered such dealings in the past. In studying the detail of these transactions – the basis of which appears to be “manipulation of valuations” – the hapless Mums and Dads, were doomed from the start.

Henry then used his pyramid structure of “employees,” most of whom complained they had not been paid correctly (if at all), to entice others to simply borrow $10,000 to pay his deceitfully named National Investment Institute for the “tuition” fee. He omitted to tell investors of his links with some of those companies. The ANZ Bank were the initial supplier of these funds. This monstrous fee was to be paid back over the next 4 years at roughly $400 per month. Many victims could ill afford a commitment of this size. It mattered not to Henry. He was on a self-fulfilling mission. His own wealth at the expense of others.

As application forms were being filled in, other questions were being asked such as: “what assets/equity have you in order to invest?” An estimated 90% did not have funds but had developed a “yearn to learn” about finance. This left the third category of people being approached to sign up for additional “tuition” on financial products. Without finance there was no possibility of buying property. The financial product was therefore the critical component of Henry’s grandiose plan. It was the third category where Henry intended to make the most funds for his own greedy ventures.

Henry lacked a license of any kind. The properties he “purchased” were merely “options.” Almost everything about Henry was a façade. Some of the building projects were far from completion (and remain so today), yet he boasted a self worth of over $100 million.

Amid this chaos, Henry convinced thousands of ordinary Mums and Dads to buy properties using the equity in their homes. He arranged hefty commission structures – to line his own pockets. Each unit could bring in tens of thousands of dollars in commissions.

For this to occur the valuations needed to be a great deal higher than any property market in Australia could sustain. An untenable situation, that attracted the attention of sleepy regulatory authorities. During 2000-2001, complaints flooded into the offices of Australian Securities and Investment Commission, yet the corporate regulator dozed on the job.

Henry’s buzz word –FLIP the units – should have immediately alerted Government officials that Henry needed to be given the corporate FLICK. He assured his victims that he would find even more buyers to purchase the units a second time etc, thereby increasing the price into suicidal orbit. He often told his audiences: “don’t worry, we simply FLIP the units and find another buyer”.

As easy as One-Two-Three, we now have three categories of victims:-

Category One: Clients became staff – threw in their jobs working for little or no pay for many months and ending up with huge debts.

Category Two: Clients became the students paying Henry up to $17,000 (some as much as $90,000!) for information, which ultimately proved to be useless.

Category Three: Clients were enticed into purchasing Deposit Bonds and could not settle OR settled and now are facing the fact they have paid far too much for units and risk losing their family homes.

Henry charged a further $6,000 fee to “source” units at 10 – 25% discount and a further $4,000 source fee on settlement. Of course the units were rarely, if ever, discounted – quite the opposite. According to ex-staff there were all sorts of kick-backs for every product sold to clients.

The ACCC has stepped into this ludicrous situation with the notion that they can stop Henry by taking out an injunction to stop the advertisements. Of course this doesn’t address the continuing problem of false and misleading statements to all those people who are yearning to learn the intricacies of financial products and advice.

Most honest Australians want to learn how to better themselves. It should be our duty to pursue success and excellence in business.

For the sake of consumer confidence in the market place, we should expect federal regulators to expose dishonest conduct when it is first known. We do not expect citizens to be given information, which could have protected their financial position, three years after the complaints flooded into the revolving door of the federal offices.

Unsophisticated people have been channeled into mezzanine finance – financial products – and the federal bureaucrats chose to deny that consumer protection on mezzanine products or deposit bonds fell into their back yard. The loss of millions of dollars of peoples’ savings will leave giant craters in innocent consumers’ bank accounts.

The effects of the harm done by ineffectual regulators using last resort policies rather than the vast powers they have been provided with, will be felt in suburbia for generations to come. Remember when ASIC passed on their obligations (and blame) to APRA in the HIH debacle? The losers were once again ordinary Aussies – the bloke next door and his missus.

It’s foolish to think that mere injunctions will stop Henry – well, perhaps for one week. That’s how long it takes Henry to dream up the next way to circumnavigate the sleepy regulators .

Henry and others on the Creating Wealth Seminar circuit have been manipulating property values to the point where the IMF and the Reserve Bank have been screaming for action.

Are we therefore saying that within the boundaries of the labyrinth of Australian Federalism, our public servants and elected MP’s across the nation, are unable to find a solution for placing Henry in permanent corporate confinement?

The eventual collapse of Henry Kaye’s House of Cards is coming. Indeed, it has already started.

Henry will be recorded in the history books, for all the wrong reasons. And so will the sleepiest regulators in history.

Denise Brailey
Real Estate Consumer Association (Inc)

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