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Govt says broker email a 'coincidence'

Wednesday 06 Mar 2013 12:16p.m.

Govt says broker email a 'coincidence'

By 3 News online staff

Treasury says it is an "absolute coincidence" a sharebroking firm emailed a potential investor in Mighty River Power only minutes after she had registered her interest.

The woman – who called RadioLIVE talkback last night, and is only known as Elizabeth – pre-registered via the 0800 number, and says 15 minutes later received an email from Milestone Financial Services, asking to represent her.

Milestone initially declined to comment, then later issued a statement saying the timing of their email was "purely coincidental".

"We have had no contact with the Treasury, the call centre or any of its staff prior to sending the email," founder and chairman of the board Richard Holden wrote in an email to 3 News.

"The Christchurch Milestone office yesterday sent an email out to CLIENTS and only CLIENTS providing details on how to pre-register interest on the Mighty River Power shareoffer website. This email did not provide any advice on the offer and only advised on the process on how to pre-register and what to place in the relevant boxes.

"Milestone Financial Services is not receiving any leads or information for the Mighty River Power share offer from any third party and that includes the website."

In a separate email to 3 News, Treasury also denied there was anything suspicious going on.

"The reported contact from a broker shortly after an individual pre-registered via the call centre is an absolute coincidence," writes marketing and communications director Chris Major. 

"The pre-reg data collected through the call centre and website is protected and secure. New Zealanders have our assurance that their information is secure… It appears that, following pre-reg launch, brokers have independently emailed clients they have details of to note the offer and check if clients were interested."

Ms Major says no brokers have access to the data, which is protected by "bank-level security".

State-Owned Enterprises Minister Tony Ryall also said it was a coincidence.

“I am advised this is coincidence, and no data has been passed to any brokers.”

Mr Holden once served as Minister of Economic Development Gerry Brownlee's election campaign chairman. He describes himself on the Milestone website as "right of centre", and like Mr Brownlee, attended St Bede's College.

The pair's friendship goes back a long way – they once formed a musical duo, the Manetti Brothers, singing country and jazz songs in the early-to-mid 1980s.

RadioLIVE business editor Andrew Patterson says alarm bells should be ringing about how the company obtained the investor's details so it could go fishing for a commission.

“What happens is if you lodge your application through a broker then the Government will effectively pay a commission to the broker for that transaction.”

Business commentator Bernard Hickey says the incident reflects badly on the Government.

“It’s not a good look for the Government or the brokerage because there shouldn’t be someone inside that 0800 number feeding that information on to a broker,” says Mr Hickey.

On the official Mighty River Power share registration website, potential investors are asked if they have a broker, and if they do, they can choose one from a drop-down list. Milestone is not listed as one of the options.

Despite the incident, the Government is claiming success after the first day of Mighty River Power shares pre-registration, with 35,000 people expressing an interest in the first six hours.

Mr Ryall says many people experienced problems loading the website as it struggled with high traffic.

Labour leader David Shearer says although Kiwis overwhelmingly oppose asset sales, many are being pragmatic.

“If the assets are going to be sold I think there are a number of New Zealanders who will decide that, ‘Actually, I would like to have a share in this because I’d like to keep them in New Zealand – they’re going to be up for sale anyway and if I don’t buy them someone else will buy them.’”

He says that when Contact Energy was floated, 220,000 Kiwis bought in – but only a few years later, more than 75 percent of the company was owned by 20 large investors.

"So what's going to happen, we know, is the small investors ultimately will sell out to large investors, and many of those large investors will be owned off-shore and the proceeds will go off-shore."

He also criticised the promised loyalty scheme as "cynical".

"What they will do is run their loyalty scheme until after the election so they're able to say, 'Look, Kiwis have held on to them.' I think that's really cynical, and quite frankly, that loyalty scheme will be funded by tax payers – so if you give extra shares to somebody – you buy them, or whatever – they have to be paid for by somebody, and they're paid for by the tax payer –the profits that might come out of the sale."

New Zealanders have until March 22 to pre-register, and those who do may get 25 percent more shares if the offer is over-subscribed.

RadioLIVE / 3 News

 
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