SFO Complaint over English language school closure

Media Release 17 October 2003

SFO Complaint over English language school closure

The Association of Private Providers of English Language (APPEL) forwarded a complaint today to the Serious Fraud Office about potential fraud prior to the closure of Modern Age Institute of Learning Ltd (Modern Age). Modern Age went into voluntary liquidation on 9 September 2003, with the liquidator estimating the company's total deficiency of funds at $4.4m in their first report of 12 September 2003

"We want to send a signal to our industry, our markets and the wider community that any potential financial irregularities will be pursued. This initiative was fully discussed at a meeting of APPEL members on Wednesday, with no dissent expressed, and the Executive has since decided to make a complaint," said Patrick Ibbertson, APPEL chairperson.

APPEL's main concerns are detailed in the attached fax, sent today to the Serious Fraud office. They are based on potential misuse of funds that should have been in an independent trust account and potential enrolment of students in an unapproved course.

"Modern Age was a member of APPEL at the time of its collapse although like many other organisations, APPEL was a Modern Age creditor, as it had not paid is latest subscription. Regardless of whether any fraud is found, Modern Age's general lack of compliance with regulations and standard practice is condemned by APPEL. We want to send a clear message that their behaviour is not tolerated by the private English language industry," said Patrick Ibbertson

"The private English language industry employs thousands of New Zealanders and arranges many more homestay places. We generated more than $300m of export income last year, which needs to be protected from the negative impact of cheats."

All of the Modern Age students have been placed with other education providers and are continuing their studies at no extra cost to them. Most were back in class within 5 working days.

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The Association of Private Providers of English Language represents 74 private English language schools and is the voice of the private ELS industry. Our web site is at www.appel.org.nz.

Letter to SFO

17 October 2003

Complaints Officer

Serious Fraud Office

By facsimile: (09) 303 0142

Dear Complaints Officer

The Association of Private Providers of English Language would like to lay a complaint about potential fraud in the operations of Modern Age Institute of Learning Limited (Modern Age).

Modern Age went into voluntary liquidation on 9 September 2003, leaving debts that have been estimated by the liquidator at $4.4m. We are concerned about two aspects of Modern Age's closure that may have arisen due to fraud.

* Funds paid by students who had not yet completed the first eight days of their course had apparently not been paid into a trust account operated by an independent person (as required by s236A of the Education Act 1989) - this amount alone may be well over $500,000. The trust account had a negligible amount of money at the time of Modern Age's liquidation. * Students enrolled on a Cambridge A-level course were enrolling on a course not approved by the New Zealand Qualifications Authority (as required by s232 of the Education Act 1989) and therefore they could not have legally obtained student visas from the New Zealand Immigration Service, which checks NZQA's course approval database prior to issuing student visas. We are concerned that those students may have had another course entered onto their student visas by Modern Age. The fees involved may be over $1 million.

We are concerned that Modern Age's general actions, regardless of any potential fraud, have damaged the whole industry and we wish to dissociate ourselves from them. We believe that the impact of such closures on the reputation of our industry, which brought in over $300m of export earnings last year, means that any potential wrongdoing must be investigated by the relevant authorities to discourage others from pursuing a similar course.

The SFO website explains that the SFO may investigate potential frauds involving over $500,000, complex means or of major public interest and concern. We believe that this case potentially meets all of those criteria.

A clear message must be sent by the industry and the authorities that any such potential wrongdoing will be pursued. We urge the Serious Fraud Office to open an investigation into this issue.

While we can not provide detailed evidence at this stage, we are sure that the liquidators will uncover evidence on these matters during their work. Once that information is available, the SFO will be able to make a final decision. In the meantime, any queries should be forwarded to our executive officer, Dave Guerin at the addresses on this letterhead.

Yours sincerely,

Patrick Ibbertson

APPEL Chairperson

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