Green Acres comments on SFO investigation

Green Acres comments on SFO investigation into sale of franchises by Keith Lapham

Auckland, 6 November 2008 – Green Acres Franchise Group welcomes the news that the SFO has completed its investigation into the sale of bogus ironing franchises by former master franchisee, Keith Lapham.

Mr Lapham was today charged on two counts of obtaining by deception and one charge of fraud.

The first two charges relate to the granting of sub franchises to 172 people. The SFO alleges that Mr Lapham obtained over $3.5 million by telling prospective sub-franchisees he would pay them a guaranteed income of $650 a week when he knew he would be unable to do so and that he misrepresented the number of sub-franchises in the Auckland region.

The third charge relates to the false representations that the SFO alleges Mr Lapham made to Green Acres about how many sub-franchisees he had granted, defrauding the company of $244,000.

“Today’s announcement vindicates the stance and actions we have taken since the matter first came to light,” says Green Acres Chief Executive, Andrew Chisholm. “The last eleven months have been extremely difficult for us, as we fought to recover from a situation any business would hate to find itself in. The Green Acres brand was immediately tarnished by this episode and the situation has remained difficult as we waited for this investigation to run its course and help clear our name.”

“Now that the investigation has concluded and we are able to comment without jeopardising its progress, it is important that we now set the record straight. Contrary to some reports, at no time was Green Acres or any of its Directors the subject of an SFO inquiry. In fact it was Green Acres who lodged the complaint that led to the SFO’s investigation; it was Green Acres who gathered together much of the initial evidence on which the investigation was based and prevented its destruction.”

Green Acres again clarified its relationship with Mr Lapham: “The relationship that existed between Green Acres and Keith Lapham is fully documented and is clearly compliant with franchise law,” said Chisholm. “Mr Lapham was an independent contractor who had purchased, under a franchise agreement, the right to use the Green Acres system. As part of the grant of the franchise rights, he was entitled to sell ironing sub-franchises. However, he breached the terms of his agreement when he told franchisees that they were entitled to depart or deviate from the Green Acres system. He was not associated in any formal way with Green Acres as an agent, employee or servant and, quite clearly, Green Acres received no benefit as a result of the unauthorised sales he made.

Green Acres expressed sympathy for those who had been duped by Mr Lapham.

“We recognise the hardship and suffering caused as a result of Mr Lapham’s actions and we sympathise with the victims,” says Chisholm. “The deal they signed looked too good to be true – and it was. It promised them the earth but it didn’t require them to meet many of the basic requirements of a Green Acres franchise. Nonetheless they have been placed in a terrible situation.

“While we may not have had a legal obligation to pick up the pieces, we acknowledged there was clearly a moral obligation for us to do something. To assist affected parties we offered them the opportunity to take up, at no fee, a genuine Green Acres franchise, putting them into the position that they would have been had they purchased one at the outset. We have now given a number of ironing businesses to people who indicated that they wished to take up this offer.”

Green Acres has committed considerable time and resource to recreating the ironing business. To assist those who did not own a suitable vehicle Green Acres set up and operated a courier service for two months, to allow them time to generate income and become confident that there would be sufficient real work available for them.

Green Acres has placed a further group of affected people into lawn-mowing, domestic cleaning or commercial cleaning franchise businesses, again charging no additional franchise fee.

“Every affected person who has been in contact with us and indicated that they wish to remain involved with Green Acres and who was prepared to meet our standard terms and conditions[1] has been accommodated,” says Chisholm.

ENDS

[1] Standard terms include complying with the Green Acres system, being available for work for 40 hours per week, undergoing security approval, wearing a Green Acres uniform, and conducting themselves as Green Acres franchisees.

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