There are too many questions for my liking surrounding Incentia Pay’s (ASX:INP) sale of Bartercard back to the very Smiles in Suits that flogged it off to a set-up public company for a huge personal profit. In this post I share some of those questions and come to the conclusion that there has been more skulduggery. As usual all the little people will be paying for these crooks to win time and again. Situation normal around this toxic ‘asset’ Bartercard you may say? Too true and I explain why, this time including a Christian perspective. Enjoy!

With the recently announced sale of the Bartercard business, ASX:INP is seen to have done a good thing by some. Maybe, but let’s not be too hasty to congratulate the guy who ‘sold’ it. Iain Dunstain was called in [supposedly] to get the ASX:BPS problem back on track. The story was peddled that Iain was a corporate ring-in to get things turned around for the public who had invested into the BPS Tragedy, . . . oops I mean BPS Technology.

The Smiles in Suits (my short code for the head ponchos of the Bartercard Beast, Trevor Dietz, Brian Hall & Tony Weise, and I suppose you could call a dozen more the same, such as Murray ‘Dahl-somebody’ and a bunch of others all in the rort) have supposedly ended up with the same asset back at a fire-sale price. The spin will probably be that ASX:INP (despite its horrendous head-long share price plummet) has other fish to fry and that Bartercard was a distraction. Let’s dig though a little deeper and put this sale into proper context, and then ask a few curly questions.

That individuals now own an ‘asset’ previously owned by a publicly listed company raises alarm bells for me. Who decided to sell and how did that process proceed? Where was the public notice or tender process? I know some people who would have been interested in buying it. I think I’m relatively informed but I didn’t know about this sale from the vendor. OK sure the buyers seemed to be touting their impending re-purchase for a very long time before though. There alone is probably good grounds for the ASX to intervene in the sale and conduct some form of inquiry – surely?

Then the fact that this business was sold back to the very people who were severed from the company Directorship previously for misconduct – one with known hand-in-the-till insider trading and the other two suspected of the same – ummmm? Hello? Does this not raise more alarm bells for observers?

I mentioned in a previous post that it was relatively widely known way back in 2017 that the Smiles in Suits planned to buy their baby back from an Administrator (read in here also, for a song). My take is that their actual plans were stymied in 2017 but that their intentions were well known. H*ll’s teeth I blogged about this more than four years ago, about how ASX:BPS was a rort to corporatise their cash debts from buying the Bartercard Beast off Founder Wayne Sharp for a little too much!

That these crooks now have their hands back on the Bartercard business really should grate with the ma’s and pa’s who have paid for these guys’ ill-gotten gain. OK So all’s fair in war you may say . . . buyer beware but when you have foxes in charge – hens don’t have a chance. I warned the ASX exchange before they listed and lodged a complaint at the time. Nothing. I wonder what it will take for these turkeys to actually act. Really I do – maybe now they might listen to the blogger . . .

So then what about Iain Dunstan’s role in all of this. Is he really so naive as to think that flicking Bartercard out the back door to the crooks (all of whom BTW have never been dobbed in for the crimes that he’s uncovered) for a sweet little number will not be noticed, or challenged or questioned? The big one is one in which I suggested recently as a possibility – that he was in on the whole thing from the start. In order for this to be reality, one would have to explain his personal investment into ASX:BPS last December 2017 at 28c and his more recent investment of what looks like family money after this sale when the shares were 18c. Is he really that gullible and got conned repeatedly, or this simply a smokescreen with deals done behind the scenes?

When one questions the sale process, we should look at the actions of ALL parties to get a true picture. We have a clear culture of greed and dishonesty from the Smiles in Suits going back decades. We have a history within the BPS story of the public getting conned. The actions of the new CEO on the surface look great – flicking the two remaining crooked Directors earlier this year and investing into the company he was out to clean-up. But this could all easily be a ruse. The crooks are highly skilled at doing deals remember and backhanders to crooked Directors who can bring in pension funds to set-up BPS are easy-peesy. Sweet-talking the regulators with BS seemed to work pretty well. What’s one CEO going to cost them? A mil? Half a million? It’s nothing in the whole scheme of things to these crooks – I tell you!

If there were other offers on the table for the Bartercard business, and I would think that there were as I’ve spoken to more than one person in the last few years who would have paid handsomely for the business, then Ian’s role in this sale really has to be explored more – that’s if anyone cares. I do believe that the Smiles in Suits have always wanted the thing back. Iain must have known this – he’s no fool, even if he is clean. That he refuses to talk to me, when previously he used to also raises concerns for me. If there was a backroom deal done like I’m presenting here, and a bit of ‘encouragement’ for the seller, I don’t think I’d be wanting to talk to me either!

I started by saying that there are too many questions for me to see how this sale stacks up. I’ve chatted about the structure of the deal and the people involved. I haven’t even touched on the numbers, which are also a little bit dubious to my way of thinking.

So where to now?

I’d like some answers to the following questions. If you know them, please slip me a note via the Tipline (anonymously if you wish) and I’ll update this post in due course.

1. How did the sale come about and when was it first offered for sale?
2. To whom was it offered and on what terms?
3. Who determined the selling price and on what basis was this price established?
4. If the company ASX:BPS notified the ASX exchange that fraudulent information had been ‘discovered’ what action was taken against the crooks?
5. What involvement did the Board have in the sale and what discussions occurred regarding the potential negative press of selling a public companies asset back into private ownership of the very people terminated and thanked for their services only months earlier?
6. What analysis was completed and by whom prior to the sale in relation to potential claims of insider trading on all the events I’ve discussed above?
7. Who is out there who cares enough for the little people (who appear to be being ripped off yet again) and who can or will seek a stay of the sale pending answers?

My gut feel is that the crooks are laughing (again) all the way to the bank and that crime seems to pay for these Smiles in Suits fellas. Additionally it seems to me that Iain Dunstan may have put a huge big splodge on his otherwise squeaky clean resume. If I was an ASX:INP shareholder I’d be asking serious questions, and if I’d had any involvement with installing the new CEO, I’d be looking for leaks in the boat and asking some more very hard questions.

I always blog from a Christian perspective, but I rarely speak of Christian matters when discussing Bartercard matters. I will though, here, and now. The concept of living under a blessing or living under a curse is particularly a biblical one. Equal with this principle is the concept of reaping and sowing – we reap what we sow. Bartercard was established (sown) with an act of theft – the core software was ‘negotiated’ off another rightful owner through greed and deception. It seems to me to be like the Midas thing – all who touch it turn to gold and die. Put simply, the Bartercard brand and business seems to me to be accursed – literally a form of generational curse.

One of the things I find really interesting is that evil still exists. If there is a God who cares and loves, surely He would zap all these crooks and send them off to the hot-house? I’ve mentioned this in other posts a lot, but I think it is far more important to speak the truth and to get the message out there than trying to do God’s work. The idea of fixing all the ills of the world and expecting Nirvana as a result doesn’t appeal to me, especially when I take my cue from the Master. Sure, if we can bring these turkeys to justice let’s do that and with all the energy we have but more importantly I think it is more effective to share the truth.

On that note, I was speaking to a Bartercard informant today who has been following me for years and I asked them what they thought about my blogging in relation to Bartercard. I specifically asked them what they thought I’d gotten wrong over the years. Their reply? “Nothing! Absolutely nothing! You’ve been bang on the nail every time in everything,” they said.

Good. First part of the job done. Now it’s your turn – get the message out yourself, now and do what you can to make the world a better place.

Thanks for swinging by again today. It’s been a hoot – as always!

This post summarises the advice I give to people fighting Bartercard, a highly litigious company and somewhat lacking in ethics, to put it mildly. In essence people tend to expect others to think and operate in the same way and to the same standard as they do. As most people play fair, are reasonable and believe in honesty, integrity and so on, most therefore misjudge any fight they may have with these crooks. I also give an update and small commentary on the recent sale of Bartercard back to the crook[s]. Enjoy a good strong dose of reality right here.

Background

Bartercard is an Australian creation, founded some 30 years ago. It has had a tumultuous history, particularly in the last decade. Following two failed efforts to ‘go global’ and one short spell as an Australian public company, it now exists as an Australian and New Zealand barter organisation now back in private ownership. It and any entity that has owned it has suffered in the last decade as it has stridently downsized year upon year in all metrics – turnover, membership size, satisfaction and profitability (although drastic action by it’s last owners culling deadwood may have turned it around slightly.

In summary one investor found out in 2017 that they were dealing with crooks, so there was a huge scrap for power between the foxes and one major investor which the remaining crooks won. The loser of that power struggle bailed, crashing the share price. Trevor Dietz got caught with his hand in the till and was walked (the plank);, then the rest of the investors hauled in a new CEO who gave the rest of the crooks on the Board their marching orders (“Thank you for your service!” sort of thing).

Iain was billed as a ‘good guy’ – a top operator called in to sort the sh*t out and get this company back on track after the corporate investors’ realisation that they were being fleeced by the Smiles in Suits. His approach flushed a few cockroaches out as he muscled his way around the house spring-cleaning. With the crooks at the top gone, he tried to sort things out – layoffs and ‘other’ exits (did they jump or were they pushed, sort-of-thing), culling the USA and the UK operations as they were dead wood and a distraction and a drain, and then sorting out a million problems from years of nonsense from pretend-leaders.

Iain told me that he gave the Bartercard team until the end of June 2018 to tell him how they would sort out their problems. “Look at the difference between your currency holders in debit and credit, Iain, to see the real situation there mate!” was my kinda advice.

That he sold the Bartercard Beast shortly after tells all doesn’t it? Why would a guy specifically called in to turn things around want to sell something if it is making money and is supposedly back on track? Forget any marketing spiel around this sale, folks – I’ll tell you exactly why this ‘top’ CEO sold it . . . he’s been reading this blog; talking to me; worked it all out; and he’s found out that Bartercard is NOT what it claims! Oh sure, it may be a cash cow now, but it’s an utter con at its core.

As an aside, the sale of Bartercard back to one of the Smiles in Suits should get the thinkers asking questions. “Why?” The crooks got their money and yet they want to get back into something for sale that has supposedly been cleaned up and made profitable. On the surface this doesn’t make sense. If Iain had sorted the problems out then why would he want to sell it, and back to the same crooks that he had previously removed. Smell a rat? Was this even a setup from the outset? After all, we knew way back before Iain was appointed that the Smiles in Suits were angling to buy Bartercard back from Administration, so perhaps Iain was indeed in on it all and this was no accident? That’s exactly the things that tricky dudes do at Boardroom level all the time.

The reason that barter appeals to people like the Smiles in Suits is not actually bottom-line profit of the company. It is that when you own/run a currency you have leverage opportunities in excess of those that the cash economy provides. Because there is no accountability in the barter industry, the crooks at the top use the credit of their members as leverage for personal benefit. This is not just straight theft of members’ value within the trade organisation, this increases opportunity exponentially and the Bartercard Boys are highly skilled at this leverage. If Iain played it straight he would have seen a massive trade deficit – something that could never been paid off in a million years – and wanted to dump it ASAP. He wouldn’t be ABLE to sell it on the open market without due diligence showing its Achilles Heel, thus the only potential buyer would have been the ones that knew about the trade deficit [but who didn’t care, because they know how to conceal debt from decades of doing exactly that!]. I don’t know yet whether this was an actual setup by all the parties or whether it was an unfolding situation for the new guy. I suspect the latter but cannot be sure at this stage.

One clue is that the new CEO bought in to ASX:BPS big-time personally with the shares at 28c when he first took the job. That’s a serious commitment on his part, but he too appears to have misjudged things, or has been conned because they fell – again badly as per my predictions. Then again he took another whack at it, personally buying more shares at 18c after quitting the Bartercard Beast** (probably thinking that the worst was over) but they’re now 12c!! Red faces all round, methinks, unless of course this was all planned.

Actually, with cash in the bank and Bartercard now gone from their stable, ASX:INP would be on my ‘buy now’ list at 12c if I was an investor, but I’m not. I’d also probably be a target for claims of insider trading too if I bought!

I think Iain’s got a lot on his mind at the moment but a lot of the miserable performance of ASX:INP probably has as much to do with his poor communication with the markets, than anything else to do with running ASX:INP. You can never know the full story from the outside, but all the clues as I see it point to a truckload of PROBLEMS – one after the other.

Typical Conflict

In other news, back at the coalface, the conflict between this Bartercard Beasty thing and disenfranchised members has kicked along quite nicely. The typical conflict is this . . .

1. A Bartercard member will join, usually under false pretenses from a Bartercard sales person;
2. They will sign the standard forms and agree to Clause 3.1 which states that one Trade Dollar equates to one – forcing acceptance of a high valuation (by fiat);
3. Trouble will occur – usually when a new member gets themselves into debt and/or cannot spend the funny money on things they want/need;
4. A conflict situation develops as both parties feel aggrieved;
5. Bartercard will either close their account and attempt to cash-convert their trade debt into real cash (another gotcha neatly tucked into the BC Rules);
6. Bartercard will list the debt with the CRA and undertake court action to collect the cash owing.

There are minor variants on this scenario but it is a typical one.

Typical Advice

I’ve shared previously about fighting Bartercard in court.

Most Bartercard members will stay in the system well after they realise that they have been ripped off. This is human nature for none of us like admitting that we’ve gotten conned or made a mistake. We’ll ignore the legal warnings and then do research after the event. It’s never too late when you have truth on your side but even when faced with reality many do not choose to push through – often the pain is too great and they simply want their decks cleared, so to speak!

I’ve generally found that Bartercard will readily settle disputes, but they use the legal system to enforce their Rules very, very well. Remember these things as you develop your own response to litigation:

1. Bartercard pay their lawyers with ‘funny money’. People often do not realise this – that they use the very credit that comes from their members to benefit/protect themselves! Nice eh?
2. A Trade Debt is still a debt. Morally it is a debt to the other members of the system, although knowing that Bartercard converts anything it can get its hands onto into cash for its own purposes means that when the cash comes in from a successful cash-conversion from your bank account, it’s very unlikely to go back into the trading system to balance the trading books – think about it – really?!
3. I’ve shared how the true value of a Trade Credit has reduced over the years previously many times. I’ve also blogged extensively about the legal countering of an onerous contract, and how to use Fair Market Value in establishing the true value of a claim to clear a trade debt;
4. Bartercard is all about cash. It’s nothing to do with barter per se. Barter is simply the mechanism for real [cash] wealth generation for the people within the company. As I alluded to above, this is the real reason that the Smiles in Suits wanted it back after they had taken it public. If you know how to conceal debt and you have no compunction to lie or steal, then any Trade Exchange is an easy way to generate personal benefit, including cash;
5. Bartercard people will assess your case from the perspective of cash – how much they will have to spend vs the likelihood of getting more out of you than it will cost them – simple! You will need to think this through carefully looking at it from BC’s perspective. Forget about using PR or reputation things in your formulas – their reputation sucks anyway. And forget about ethics such as fairness, right or wrong as well. You are dealing with one of the more litigious companies on the planet and they will play hardball right up to a court hearing if they think it’s worth their while;
6. Most people are not up for a fight. BC know this and if they can screw around with you by lodging a CRA default; threatening you; making your life difficult and so on, they will. If they think that they will get a few bucks out of you by using the court system, they will. They know how to do this from decades of practice. On the other hand, if you are a fighter and are smart, and like to push through no matter the costs like I do/am, it can be a real ‘hoot’ engaging with them. They are fun to fight.
7. Most people fighting the Bartercard Beast are hugely wound-up about it all. But think of it all as a game, and not a life-and-death issue, if you can, for after all they do! After a day at work they can easily go home and make babies without a care in the world. It’s their job – they get paid to do what they do after all. Always remember this.
8. Engaging in a legal sense, especially when defending against what appears to be a strong case against you can be demoralising. Remember though that many little people HAVE won against the Bartercard Beast. David won against Goliath against all apparent odds because he knew something that the rest didn’t. Knowing that the Bartercard Rules are onerous and that if FMV differs from on par, then legislating the value of a trade dollar by fiat creates an [illegal] penalty situation and therefore this breach of contract on Bartercard’s part can give you (or your lawyer) the upper hand.
9. Conflict situations contain two sides. Just because they are suing you doesn’t prevent you counterclaiming what they owe you for their indiscretions. Very often I have found that clients’ spirits lift enormously when we collate their losses as a result of Bartercard’s misconduct and they can see that a counterclaim is viable. Particularly important in this exercise is to realise that a verbal agreement is legally binding, so that if you have done something on the basis of what the Beast said, and then the situation changed to your disadvantage, then this is totally actionable legally. Of course this must be proved in the balance of probabilities in court, but he said/she said arguments are what the court deals with all the time. Judges are skilled in working out facts from within the murk of conflict.

I’ve found Bartercard to be very obliging when they have their backs to the wall. They just want their pound of flesh, and as much as they can get. I’ve fought them more than once, both by way of blogging, in the industry and in court – myself and with others. I’ve yet to lose. When they actually have to do something, they generally do, but it takes a lot of energy to stand and fight them and they are slippery dudes at the best of times.

It remains to be seen what the shape of their operations will be now that it is back out of public company ownership. I have every intention of exposing them for better or for worse, every inch of their corrupt way.

Thanks for listening. I hope this has helped you either understand the Beast or your fight against them. Chin up. You are not alone.

* Bartercard was bundled into ASX:BPS with a failed wholesale barter software Tess (endorsed as the best in the business by a dodgy IRTA deal) and another failed Bucqi loyalty programme and taken public. Pre-subscribed by another dodgy deal done to divert pension funds into the ‘Smiles in Suits’ pockets, ASX:BPS shares (as I predicted) dropped to [currently] 12c!

** ASX:INP sold the Bartercard Beast back to a company associated with Tony Weise which is interesting – the significance of this is profound – He was one of the crooks evicted from the Board for cooking the books revealed in the Q1, 2018 ASX:BPS confession! He was also one of the Smiles in Suits that I had been blogging about for years. So it seems that Tony Weise got that which he wanted – cash from the BPS sale and he got back the Bartercard Beast as well. It’s perfectly possible that the other crooks are also in the wings as it was always their intention to get it back after a fire-sale. Time will tell and I’ll update as the news trickles in to the Tipline.

This post discusses the valuation of a Trade Dollar (or Trade Pound or whatever) using the concept of ‘Fair Market Value’. It follows my 2017 revelations of a 6.9 million NZD fraud within the BBX currency; years of mentioning the massive [off-balance] Bartercard trade deficit and a recent court case I was involved in where an ex-Bartercard member defended repayment of his trade debt (in cash on par) on the basis of Fair Market Value and more. I quote from three Australian court judgments and discuss the issue.

Trade Dollars are the unit of measure within a commercial trading network, typically using the name barter or variants. An alternative currency, they are generally ‘pegged’ to the local currency for convenience so that in NZ for example one Trade Dollar is deemed equal to the NZD by the currency issuer, and in Australia one Trade Dollar would be deemed to equal the AUD. This trade-off exposes the alternative currency badly as I explain in my book Mistakes of the Monetary Reformers but that is a side issue for today.

Fraud occurs regularly in the alternative currency scene as issuers of a currency will undermine the backing of their currency, an immoral (IMHO) practice that is [incredibly] even endorsed by the International Reciprocal Trade Association (IRTA) to a certain level, for currency management reasons. “Only cook the books by a little bit and this is good for the currency,” they say. Yeah right!

Undermining or debasement of a currency can be achieved easily when the members trust the currency provider to manage their debits and credits without any transparency or independent oversight. The basis of any Mutual Credit trading currency (the purest and natural form of money) is that the Debits will always equal the Credits within any currency. A balanced system with equal credits and debits is the theoretical and essential basis of any honest monetary system.

When a currency (any one – trade or Legal Tender) is perceived as less valuable than its face value, it should be devalued, however in practice this act is rare, for it acknowledges failure within the currency management. The constant battle that any currency issuer fights against is to protect the perceived value of their currency. That’s why all wars relate to not only power, BUT MONEY as well.

Backing, supposedly like gold, land, other physical assets or debts to the system from other traders (essentially someone’s word that they are ‘good for it’) needs to either exist, or at least be believed to exist in order for people to continue to want to use the currency. Technically though, backing is only ever trust – a human phenomenon – trust that somebody somewhere sometime will be ‘good for it’.

When the issuers of a currency (usually also the managers) help themselves to the real value in the system, you end up with many members in credit, less in debt to the system and debasement of the currency is natural. We also call this more technically, inflation. Obviously the crooks who have the real value by way of misappropriated (i.e. ‘stolen’) goods and services will attempt to perpetuate their profitable con-game as long as possible, usually collecting monthly fees along the way, not only their [reducing] fees on turnover.

Such is the case with the two biggest frauds in the Australasian region – BBX and Bartercard. Members with credits (sometimes very substantial ones) are loathe to either close the systems down or assist in their closing even though they know the currency is devalued because this will of course deny them any chance to recover their losses from unwise past business decisions that have exposed them. Even a remote possibility of finding a ‘bigger sucker’ to offload their credits onto is generally enough to keep their comparatively small monthly fees heading into the con-artists’ pockets.

Central to any argument with shonky operators who attempt to deceive their members is the value of a currency. Issuers of trade currencies such as BBX and Bartercard legislate the value of their currency in a signed agreement prior to opening up the trading network to a new member. This declaration of value is best seen in Bartercard’s Clause 3.1 of their Rules of the Trading Program December 2014, an agreement that has been widely recognised (and used) as a blueprint for other trade exchanges in the West. It legislates by fiat, (i.e. by declaration) that their currency unit the Trade Dollar equals one local dollar:

3.1 Nature. A “Trade Dollar” is an accounting unit (notionally equivalent to one Australian Dollar) used to record the value of goods and services traded. Trade Dollars are not legal tender, securities, debentures or commodities. In these Rules, one Trade Dollar is the equivalent of one Australian Dollar and vice versa.

All of us however know that with the passing years most currencies devalue thus we operate on Market Value when trading. We will inflate the selling price or pay more in Trade Dollars than we would in cash (or local currency) dollars.

Thirty years ago the Bartercard Trade Dollar had a Market Value of close to on par with the NZD, for example. Twenty years ago the Market Value would have been between 50c and 80c in the NZD. A decade ago it would have fallen to 20c to 30c in the NZD and there is good grounds to believe that the true Market Value is currently a lot less than that now.

Courts use the phrase Fair Market Value (FMV) and there has been more than one case where judges have acknowledged the reality of a given currencies debasement.

I quote now from three judgments presenting this issue, all from Australia, two relating to Bartercard’s currency although the brand or jurisdiction matters less in a court environment that the legal issues being discussed.

Bartercard Trade Dollar (1997) = 60c

The Queensland Court of Appeal in 2000, in QCA00-445 Bartercard Ltd v Myallhurst P/L & Anor QCA00-445 noted:

14. The use of transaction vouchers other than between members is discouraged by cl 15 of the rules. The evidence suggests however that some money value attaches to credit entitlements, and that a credit entitlement of $130,000 might be sold for up to $78,000 in real currency.

While this fact was never used by the lawyers effectively in that case, it was an early acknowledgement that there was indeed such a thing as Market Value, and this came from a very high legal authority.

The conclusion is that the Bartercard Trade Dollar in Australia had a Market Value of 60c – in 1997! Whether this was FAIR MV or not is another and an untried issue but it was clearly not valued on par.

Contrabart Trade Dollar (2103) = 26c-50c

The Supreme Court of Queensland in 2013, MacFarlane v Heritage Corporation (Aust) Pty Ltd & Ors QSC03-350 had this to say about the value of a Contrabart Trade Dollar:

69. A trade dollar is not equal in value to a dollar. There are in the evidence two clear examples of the comparative value of trade dollars to dollars. The first is [example 1]. The arithmetic suggests that the defendant’s thought a trade dollar was worth about 26c. The other evidence is [example 2]. On this occasion the comparison shows a trade dollar to be worth about 50c.

It will be seen in reading the entire judgment that the judge clearly favoured the evidence of the aggrieved party and that the currency issuers were labelled more than once as crooks, “[They] are shrewd and sharp witted traders who have made good use of trade exchanges and trade dollars to profit”, direct-quoting one specific judicial analysis.

I have found this to be the same with the principals of many trade exchanges – in particular those that I have exposed.

The conclusion from this case is that the Contrabart principals were crooks and there is evidence before the courts that their currency was not worth on par, actually worth ‘somewhere in the order of’ 38c. Subsequent events though have shown that in fact it was worthless . . .

Bartercard Trade Dollar (2014) = 17.5c

In this third more recent case (Kay v Habermann [2014] QCAT 17) QCAT14-017  I quote the Judge’s assessment extensively as it details the issues of Fair Market Value quite thoroughly. First though to the actual valuation:

50. This evidence shows that to these parties, the value of the BarterCard dollar at the time of the transaction was in the range 10% to 25% of the Australian dollar, depending on how the BarterCard dollar was to be used. In the circumstances I think a fair value to assess the value of the BarterCard dollar to these parties would be 17.5%.

Of note here is that this case represented an employee of Bartercard (at the time) who was attempting to sue a member with a combined cash conversion. Incredibly, in 2014 or probably long before the Bartercard Trade co-ordinator stated that he purchased the Bartercard Trade Dollars for 10c [cash] in the [trade] dollar, and then attempted to sell them at 15c in the dollar.

Tell the world about this please! There’s your proof of the message from this blog for years!

Little wonder then that the judge acknowledged the existence of FMV, even outside of any valuation activity! Note also that this is the same currency that the issuers of the currency claim is actually worth on par!

The value of the BarterCard dollars in the circumstances of this case

[36] It would appear that the main impediment to settling this dispute has been the difference of opinion as to the value of 30,000 BarterCard dollars in Australian dollar terms.
[37] The Applicant’s position at its highest is that each BarterCard dollar is worth one Australian dollar and that judgment should be entered in the sum of $25,000 (Being QCAT’s jurisdictional limit in such cases) plus costs.
[38] Renegade contends that each BarterCard dollar is worth much less than one Australian dollar and that if it is liable on the loan, it should have to pay a lot less than $25,000.
[39] The Applicant relies on the Australian Taxation Office’s document “Bartering and barter exchanges”. This explains that for the purposes of GST the ATO will accept a parity rate where that represents a fair market value of the goods and services provided.
[40] However, the ATO also states in this document:-
As a general rule, when valuing the payment arising from barter or countertrade transactions, we will accept a fair market value as adequately reflecting the money value or arm’s length value, as applicable. In most cases we will accept as a fair market value, the cash price which the taxpayer would normally have charged a stranger for the services or for the sale of the goods or property.
[41] An assessment of the fair market value of goods and services purchased with barter dollars is a rather different assessment of the value of barter dollars themselves, not attached to any particular transaction.
[42] It seems to me that the value of the barter dollars needs to be assessed based on their trading potential and value to the parties themselves. This value is likely to vary between participants in the scheme. For example, the value of barter dollars to a business with little desire or reason to purchase any goods or services available for purchase with those barter dollars, would be limited. To a business with greater barter dollar activity they would be worth more. Equally a debt of barter dollars owed by a business whose scope to obtain them was limited, would be a greater liability than a debt of barter dollars owed by a business to whom they were freely available.
[43] Potentially, barter dollars could be worthless if no use could be made of them at all. For example, if the account had been suspended as in this case.
[44] Valuing the 30,000 barter dollars as at the date of the hearing produces an unfair result as a result of the account suspension and I propose to value them as at the date of the loan transaction.
[45] There is evidence that the value of the motor cycle was thought at the time of purchase to be about $15,000, and it is said actually to be worth $8,000 because of compliance problems which have emerged. Yet 60,000 BarterCard dollars were paid for it.
[46] On or about 2 July 2012 the Applicant visited Renegade’s premises and discussed how Renegade could repay to him the 30,000 BarterCard dollars. He explained to Mr Habermann that he had provided 50,000 BarterCard dollars to the seller of the motorcycle, so that the seller of the motorcycle now had enough BarterCard dollars to purchase some land.
[47] The Applicant told Mr Habermann that he had purchased those 50,000 BarterCard dollars “at 10 cents in the dollar”. In other words he had paid $5,000 for them. He also told Mr Habermann that he had sold the 50,000 BarterCard dollars to the seller of the motorcycle at “15 cents in the dollar”, in other words he had sold them for $7,500.
[48] The Applicant then said that the loan of 30,000 BarterCard dollars could be paid off by a payment to him of 25 cents in the dollar, a sum of $7,500. Mr Habermann declined this offer, bearing in mind what the Applicant had just said about purchasing BarterCard dollars at 10 cents to the dollar.
[49] On 7 December 2012 the Applicant spoke directly to Mr Nugent and said he would accept $10,000 in cash or 30,000 in trade dollars. This was followed up by a text on 27 February 2013 sent by the Applicant in which he said he was willing to accept repayment of $10,000 otherwise he would be suing for $30,000.
[50] This evidence shows that to these parties, the value of the BarterCard dollar at the time of the transaction was in the range 10% to 25% of the Australian dollar, depending on how the BarterCard dollar was to be used. In the circumstances I think a fair value to assess the value of the BarterCard dollar to these parties would be 17.5%.
[51] Had I been permitted to make an order therefore, I would have ordered the Respondent Renegade to pay the sum of $5,250 to the Applicant.

[Emphasis added]

I would note that the judge has noted a difference in value of the currency at different times, to different people in different circumstances. This is simple logic that belies the story pedelled by the Barter industry and most monetary reformers that the valuation of a currency can be set by fiat. It can’t be – ever. Traders are the only ones who can ever establish FMV and they do so at the point of a trade. This is another fundamental error that alternative currency experts should consider long and hard. Again this issue is documented in my free online book Mistakes of the Monetary Reformers.

Proving the Point

Contrary then to the declaration of value to be on par by fiat, is the simple, legally common and accepted concept of Fair Market Value.

This acceptance that there is a concept of FMV does not though automatically mean that a court needs to or will override a contract entered into between the issuer of a currency and the user (Member) of that currency. If you, as a user of a currency have signed a contract that you have, do and will (forever) agree that a (for example) Bartercard Trade Dollar is equal to a unit of local currency before you can use it formally, you will need to explain how the currency issuer has breached contract. You will also need to show how their breach of contract affects your position adversely and prove that in court.

The issue to consider with your legal team is how a currency that is clearly debased can be held to have a value on par. The currency issuer will say, “The contract you signed, says this!” even though FMV may say otherwise.

So then who wins?

In the recent case in Wellington I’ve previously mentioned, we claimed that Bartercard had an implied responsibility to maintain the value of the Bartercard Trade Dollar on par through their management of the currency. When they entered into the original contract, it was reasonable to expect that if they required their member to accept that their currency was to be used on par that it would be – kept on par.

It wasn’t, thus we have a breach of contract by Bartercard.

An interesting admission came from one of Bartercard’s key witnesses under examination in open court for which transcripts are available – he admitted that a core part of his job was to ensure that the currency did not devalue, and that was why the company did a range of various things to prevent currency devaluation.

With proof that their currency has a FMV less than on par, this is proof positive then of failure to honour their part of the original contract. It’s not rocket science – it just requires proof that the currency has a FMV less than that declared and initially agreed to and the currency issuer has serious questions to answer. You have three examples of this above, let alone a plethora of members and ex-members all surely prepared to give anecdotal evidence of inflation.

Logic and fairness though is not always enough in court . . . the legal concept that addresses this when it comes to defending any claim from a currency issuer is called “The Doctrine of Penalties”. Essentially, in the English based legal systems – UK, CA, AU, NZ etc, any contract that attempts to enforce a penalty is rendered invalid, for the issuing of penalties is reserved for the courts.

If a currency issuer claims that you owe them say, $X,XXX.XX as per a contract but the actual FMV is only $X.XX then the difference can arguably be viewed as a penalty, thus is legally unenforceable.

There are other issues that dodgy operators can be taken to court for – deception is the biggest – when principals like BBX’s Touma Girls or the Smiles in Suits at BPS Technology know full well that the currency is devalued, especially if they were the thieves themselves, this is actionable and usable.

When trade coordinators confess to buying trade dollars at 10c in the dollar, and they cherry-pick the best physical items for their own cash-conversion; or when they perpetuate the lifecycle of a dying exchange at their member’s expense, it can be a huge can of worms – no a hornet’s nest – of opportunity.

Fighting in Court

Most people will do anything to avoid lawyers and legal bunfights. They may be seen by many as wise or prudent, but this plays into the hands of those who bully others using the legal systems.

I love a good fight, yes, really I do! I will work as hard as I can to speak reason and to do things the smart way but when crims, crooks & crazies want it, I’ll be there in court scrapping as hard as I can to bring common sense, justice and reason through the court systems.

Remember that bullies use the legal system to their advantage, and especially if they have their own legal teams or (as in may barter situations) they don’t have to pay cash for their legal services.

I was only 16 years old when I took a 70+ year old dentist to court after two out of three fillings fell out within the next week. “Mr Smith, you have the evidence!” the judge said and the old man had to pay me back.

Yes, admittedly it is a rare and happy day when the law and justice coincide but it is possible.

I have met Bartercard in court more than once. I have yet to lose. In the High Court of Auckland I defended a claim from these crooks that I was breaching their rules by trading outside of their system. In a scheduled three day case, the judge ‘got it’ inside two hours and told them in no uncertain terms that they didn’t have a case. Good job!

I’ll never forget the advice my lawyer gave me at the time . . . “Dennis, he said, you don’t need a lawyer. Go and do it yourself. Tell the court the facts; give them all your evidence and they’ll get it sooner or later!”

I stood there in court with my knees knocking and stumbled my way through the first hour trying to ask questions the proper way until the judge got sick of interruptions from the other lawyer saying, “Objection, your Honour! That’s not a question!” before he himself started asking the Bartercard Manager at the time how things really worked in their shonky operation.

Oh it was a sweet day when that lawyer got his butt kicked out of court and Bartercard had little choice but to settle.

I hope that this post has given you good reason to have hope, especially if you are facing injustice at the hands of say, a barter company that is out to squeeze you over the value of their devalued currency. Thank you for swinging by today.

Bartercard’s civil litigation against ex-member Nicholas Down has issues specific to Down and his terminated account, but it has also raised issues of consequence for the global Commercial Barter industry. My attempt to be accurate, fair & balanced in analysing a trial I have been intimately involved with follows. Enjoy.

I’ve introduced and reported on the trial previously. There are two parts to this analysis, the first are factors specific to Down’s case, secondly there are issues that have wider significance.

Issues Specific to Down

Account Termination
Essentially Bartercard cut off Down’s capacity to trade, then closed his account and required his trade overdraft to be repaid in cash according to the Rules. It’s quite a narrow claim, but Down has broadened it by saying “Not fair! You caused the situation that created the loss! Now you owe me! Oh, and BTW, don’t even think of trying to get more than Fair Market Value off me in cash!”

Central to judging Down’s predicament is understanding the circumstances surrounding his account termination. A huge legal brouhaha is occurring over this very matter. This has started to come out in court and when the trial resumes it will continue to evolve as the truth gradually comes out. I suspect foul play. I have based this assessment on key evidence that shows frustration building with Down’s account performance; evidence of malintent in his File Notes (such as a lawyer clarifying that his instructions are to bankrupt despite knowing that Down was essentially impecunious), and circumstantial evidence that shows dishonesty in the given reason for account closure. Additional to all of this, and yet to come out in trial is a very good motive from one person to “take Nicholas out!”

Trial documents show a massive shift in the story of why the trial even exists. The original Statement of Claim stated that Bartercard closed Down’s account because he was auctioning goods and that this was against their Rules. Down’s response in defence relied on the principle of estoppel – basically you can’t stop something from happening when it has always happened. Down said, quite naturally & I think legitimately, “Hey, I joined as an auctioneer; I have always been an auctioneer; you wanted me as an auctioneer; you used me as an auctioneer; we even worked together many times on auctions . . . you can’t just cut off my account because you don’t want me to auction anymore. How the h*ll can I trade if you stop me doing what I do for a living, let alone pay off any overdraft?”

When the trial judge sought clarification of this reason for account closure, he specifically asked Bartercard to link this claimed reason for account closure back to the Bartercard Rules. I’m certain that he did this because he wanted to see something he couldn’t find – a direct causal link between the claimed breach of rules and the Rules. If Rule 26.13.1.4 sub-clause a) when read with a finger up your [you get it] says that you can’t auction goods on trade, and Down did, then Bartercard wins. Otherwise the judge would find that there was no case to answer.

What Bartercard did though was a little naughty because they used that request for clarification as an opportunity to change their entire case, and told the court that this was just a minor change, a tweak to clarify a simple little “mistake” in their first attempt at the case. They also used the legal process to trick Down into agreeing to the change of claim, pop in interest as well (which they forgot to do in the original claim), thus the case currently before the courts is actually the second attempt at going after Down! The evidence though is still there in the files – “mistakes” in the Affidavits. These “mistakes” will actually be shown at the end of the day for what they are – outright fabrications – if the trial lawyer does his job properly. I pity those boys who called them mistakes and have to explain how the mistakes occurred when people complete Affidavits, submit them to the court as the truth, the whole truth and nothing but the truth!

There’s a lot more to this case than just a poor guy with a trade account in debt, forced to cough up cash because he didn’t do what Bartercard told him to. I’m not sure how much will come out in court on these topics because legal representation issues may interfere but if it all comes out, I think Down has a reasonable chance of winning. It all turns on what the judge thinks really happened when they killed his account. If the wider issues are entertained Bartercard will be in the pooh. If it’s kept quite narrow and the circumstances surrounding don’t come into it then I think Bartercard will probably win – their documentation is strong, as Bulldog Barrister put it in court, “We can do whatever we like and you’ve got no redress!”

That in itself (an ‘unfair contract’) is a defence in a B2C situation. In the commercial environment though it’s not quite so clear.

Tension within Bartercard
An issue that is becoming clearer in this case is the tension within a divided Bartercard. It is a tension that makes sense when you think about it but is not seen or talked about much. This is the natural tension between the two divisions – sales and credit control. Sales wants to see turnover (trade volume in barter terminology) – Credit control wants to minimise risk. In Down’s case with a hugely fluctuating trade overdraft, from zero to $T160,000.00 and back again and fee payments all over the place, as he traded up and down, he was the quintessential ‘Alphabet Account’ – zero-to-hero and back again. For a guy with autism and a natural ability to crunch a deal anywhere on the planet, this seems to have put a huge pussy amongst the Plaintiff’s pigeons. Those struggling with what seem like crazy credit decisions from the big ‘bad’ B, need to understand that Bartercard like any organisation attempting to maximise profits through sales has an internal tension – sales vs an increased credit risk.

Broader Issues

In a previous post I mentioned a little snippet of gold that came out in court, likely not fully understood by the parties at the time, but likely to play a huge part in future proceedings. Dale Chetty acknowledged that Bartercard was (in terminating Down’s account), “managing a currency”. They had a responsibility to make sure that they Bartercard currency didn’t devalue.* That was his job, to control credit so that a trade dollar wouldn’t devalue through inflation. He wanted to stop Down from auctioning so that the prices didn’t inflate. He wanted to avoid bad debt because . . . wait for it . . . this would devalue the currency. When the national credit controller for Bartercard New Zealand stands in open court and explains that his job is to stop happening what Down (and me in my blogging) says HAS ALREADY happened then this is the thin end of the wedge that will bring the industry to its knees. It doesn’t matter what the actual FMV (Fair Market Valuation) is – 25c in the dollar or 95c in the dollar – the point is that now, a District Court judge is being asked to rule on a situation that has always been kept in check. Not so, any more.

Let’s back up for a moment and get the full picture here. Bartercard (and most other commercial barter companies) create a currency which they declare (by fiat) to be on par with the local currency. BCNZ for example rates their currency on par with the NZD. This is accepted for tax reasons and it is ‘managed’ by the issuer so that it is perceived to be worth on par. In all Bartercard’s documentation – the Rules, website and all marketing materials – as well as in practice in person by every Bartercard representative and so on, this is the claim – One $T = one NZD. This is fine when it IS worth on par, but what happens if it ISN’T? Disaster.

Dale Chetty in telling the court that it’s his job is to make sure that the currency doesn’t devalue, has admitted (by the application of simple logic) that there could be a situation where the Trade Dollar is not worth a NZD. Oh sh*t!!! This is NOT what the industry needs . . . the next logical question then is, “Well if a declaration by fiat isn’t kosher, legal or valid legally, what is FMV?”

Down’s second line of defence following the estoppel arguments above is that the Bartercard Trade Dollar is indeed devalued; that it is only worth 20c in the dollar and that even if found to have had his account terminated legally, he should only have to pay FMV, which is according to him in uncontested evidence only 20c! Ouch – that will hurt Bartercard and especially when the power of legal precedent kicks in around the globe and all the other IRTA members find their members getting wise to the concept of using FMV for tax, general trading and settlements with their crooked currencies!

Down’s actual application of FMV though is not assured. He is relying on the legal doctrine of penalties which is basically that any commercial agreement (in the English legal systems) cannot include a penalty. This right to penalise is reserved for the courts alone to administer. If you’ve been a bad boy and somebody wants to punish you, you have to go to a judge to sort it – you can’t penalise someone by contract. There are rules and case law surrounding the application of this legal principle which the lawyers can scrap over, but my take is that anything above FMV is indeed a penalty and that the doctrine of penalties does apply in this case.

Whatever the case, I think that IRTA and any commercial barter company that maintains their own currency should be watching this case very, very carefully. Bartercard are already poorly regarded in the industry but they will certainly not be seen as the prettiest face on the block if or when the ruling goes against them and there are ripple effects.

Personal

I’ve enjoyed helping Nicholas in some ways. He’s not always easy to work with as a result of his autism and his unique ways of doing things but getting him out of certain bankruptcy and sticking it to some people who were trying to stick it to him has been a pleasure.

I’ve learned a lot during the process . . . seeing the different personalities, styles and ethics in the legal profession has been enormously entertaining and educational. Watching a Bulldog Barrister in action was a real hoot. Seeing the pieces come together legally, how different judges rule different ways, and then how the lawyers work around the law, and of course lie professionally supposedly in their client’s interest was fun – especially when you can drill down into it and expose it all. Seeing also how the legal profession look after their own was also educational. We all know that birds of a feather flock together, but to see it manifested so obviously was good for me.

Moving forward, I cannot predict the way I will continue to engage with any party – Bartercard or Nicholas because my job is done, getting the core defences established and saving the man from almost certain bankruptcy. I may push on and go deeper. I may back off from a hands-on role somewhat. I think Nicholas has got value for money to date – I normally only charge a flat rate $10.00USD for strategic advice – and there’s a good 800 hours buried in it all so far, but that’s my choice.

If the legal people for Nicholas take the right track, I think they’ll win their case, unless of course there is something that I’ve missed. If he can bring his counterclaim into the equation, I think he will be doing well . . . if he sees any money out of it is anyone’s guess. On the other side, I can’t really see anything good for Bartercard to get out of this. It’s hugely negative press at a time when BPS Technology has new leadership, swept the crooks Smiles in Suits off the deck and into the tide and is clearly looking to the future. The risk for Down is that he could go bankrupt. The risk for BCNZ is that they drag the Bartercard brand further into the ‘bad’ bin and p*ss off the whole industry with an adverse ruling, especially if the judge finds that the doctrine of penalties applies to their precious Rules document. And then you’ve got the ASX:BPS factor.

While I wouldn’t say that Down is the model trader by any means he was a valuable and capable trader who has got on the thin end of some pretty nasty stuff. It all shapes up in my books, to be a hugely expensive and probably foodhardly personal vendetta by some nasty people (or person) at Bartercard New Zealand.

* It’s also specifically written into the Rules too BTW. In plain view all these years – a logical fallacy when connecting the dots! If you on the one hand say that a currency IS worth the same as the local currency, then later on in the same agreement say that it’s your job to make sure that it DOES remain on par then, hang on a minute . . . which is it? How can they both be true? Surely either it IS or it can change? We all know the answer of course, that they may claim that it IS, but the reality is that it DOESN’T. You can say it is worth on par for tax reasons but then if FMV is less then you are defrauding the taxman! And if FMV is less than on par then you are defrauding your members. It’s a huge problem for Bartercard either way.

I report here on a two day trial, Bartercard vs Down – CIV 2014-096-428, currently adjourned, probably until September 2018 when it will continue to generate heat in the courtroom. I share the factual here [paraphrased in parts for efficiency] and give my detailed commentary in a further post. It’s a trial that could be hugely significant to the International Commercial Barter industry, for Bartercard is a big name in the business, and the issues raised in it have widespread & general significance.

“Everybody ready?” the pretty young thing Court Taker checks with both parties. Smiles all round, a thumbs up and she’s off to get the Judge. He arrives and notes that this is the longest running court case on the Lower Hutt books and that it was good to finally be having the hearing. “Whatever happens from here,” he says confidently, “This court will be dealing with it!”

“However did it get to this?” more than one person has pondered . . . four years of conflict; a top trader p*ssed off with Bartercard for closing his account . . . “All I want to do is trade!” he repeats time after time . . . a huge bill for a man supposedly made impecunious by the big ‘Bad’ Bartercard . . . threats of bankruptcy . . . claims of lies and hidden motives . . . crooked lawyers . . . legal tricks . . . a HIgh Court counterclaim struck out . . . judicial frustration (even anger) . . . a [claimed] biased judge . . . and now . . . the trial begins.

New Zealand legal processes are adversarial* and are divided into two streams, Commercial and Criminal. This is a commercial dispute, and the Plaintiff (Bartercard) has first whack at things – they present their case by way of their Barrister (Jonathon Haig). They then present their witnesses whom have usually prepared an Affidavit beforehand stating their version of the story and then the Defendant (Nicholas Down) has his Barrister (Chris Nicholls) attack cross-examine those witnesses. The Plaintiff wraps up with a closing statement. The Defendant wraps up with his closing statement. The Judge judges. Everybody goes home happy. [Yeah right!]

This trial was set down for a Simplified Trial without counterclaim, meaning that the whole thing was scheduled to be heard over two days. Every component of the trial had guidelines for completion within certain court appointed time frames, all subject to the judge’s discretion. Witnesses for example were limited to one hour each. [Yeah right!] After two days Bartercard’s witnesses were not completely cross-examined and Down hadn’t even taken the stand!

Jonathon Haig presented Bartercard’s case. It really was quite simple, he explained. Mr Down had joined Bartercard, signed a personal guarantee, and agreed to the Bartercard Rules. Bartercard had complied with all due processes and terminated Down’s account properly and so the trade overdraft balance was due, in cash, some $87,000.00 thank you very much! Oh, and also interest too, please . . . make that $120k and rising as the multiple delays kick in. Dreary but efficiently and accurately, Haig wrapped up his initial summation and called his first witness, (Anthony Vryenhoek).

‘Ants’ as he is called by those within Bartercard circles got a roasting from the outset. Chris Nicholls is a criminal lawyer, specialising in Family Law & Criminal. Imagine parking tickets on steroids and he-said-she-said scraps over the kids and the family home on steroids. I call him the Bulldog Barrister because he launched into a tirade on this poor dude and wouldn’t let up. First the Bulldog Barrister established that Ants represented the company in an affidavit and had no clues what the case was all about. Secondly he wasn’t personally involved in any of the events that were being examined at the trial. Clearly uncomfortable on the witness stand, he squirmed for a couple of hours until things lightened quite a bit. “You didn’t expect to be here as a witness did you?” – “Nope!” and then the one that made a smile . . . “You don’t want to be here do you?” – and a very quick reply this time – “Nope!” to which the Bulldog Barrister’s chuckle combined with body language and a muttering, “I bet you don’t” brings a smile to my dial.

Finally, putting us all out of our misery, well Ants’ only really, Hiag chips in . . . “Objection your honour! Repeating the questions. We’re not getting anywhere and we have limited time available!” The judge: ” I think from your questions I’ve got the picture Mr Nicholls! Enough!” . . . smart judge! Bye Bye Ants . . . until next time you’re off the hook. The only thing that you’ve contributed to the case is that you just did what you were told, but that’s enough!

Now it’s the credit controller’s turn, and another roasting, but this time it’s a little more than two and a bit hours. Dale Chetty comes across as a nice-guy . . . he stood up quite well with his answers and presented quite professionally – he answered the Bulldog Barrister’s questions fully and frankly and again, like Ants, he wasn’t involved in any of the critical events relating to the trial, but yes indeed he did write his Affidavit in association with the Rotorua lawyers and yes he did stand behind it. His job was to ensure that the currency didn’t devalue through bad debts and no, he didn’t make the decision to terminate Down’s account but there were many reasons why he would have terminated it . . . Like the fact that Downs was an auctioneer and that they didn’t want him in the system because it lifted the prices of goods. “Yes!” shouts Down and turns to me beaming! “Now we’ve got ’em!”

I’m incredulous too, and afford Nicholas a smile. “EXCUSE ME Dale? Ummm, I don’t think you should have said that Mr Chetty!” The cross-examination of Chetty continues, most parties totally unaware of the significance of what has just occurred, in open court in New Zealand.

The first day is done to the words of Chris Nicholls ringing in my ears, “This whole thing is just a joke!” His beefs are multiple . . . “Your witnesses aren’t witnesses; they weren’t even there at the time; they are just repeating the same tired old story dished up by somebody (who isn’t even here in court) from up in Head Office somewhere. There is no case to answer your honour!”

“I know they’re lying! I know from fighting [for a million years] in courtrooms that these dudes are not spilling the beans, but I’ll get ’em! I’ll get ’em!” he says, storming out of the courtroom.

Day Two starts with a two hour fight over a two page document between two Barristers who probably both don’t give two hoots about whether a guy gets to go bankrupt or not as a result of their scheduled two day courtroom antics. Boston Legal eat your heart out . . . for first-up Haig plonks down a signed Affidavit from the mystery man in Head Office who DID issue the instructions to terminate Down’s account!

Haig: This, your honour is an Affidavit from the man central to the case. We got it late last night to answer the Bulldog’s questions about why the Plaintiff terminated the Defendant’s account! It is critical to the case and must be tabled in the interests of justice, Your Great Honour!

Bulldog Barrister: But, but, but [Your Even Greater Honour] I showed yesterday that these turkeys didn’t have a case – they sent down one guy who admitted that he joined the company after these events transpired and another one I called – both who weren’t even proper witnesses and look, look, look here, see, I even have an Application to strike out this whole sorry procedure right here in my hands. [Seems like all Barristers burn the midnight oil!] How can these fools guys even contemplate introducing the key evidence after four years of jerking Mr Down around? [Well something like that, anyway if you read body language and tone of voice with the actual words used].

Judge: It’s important to the case, so I’ll allow it, which will mean that Mr Nicholls you will want to cross-examine the witness, I presume? “You betcha I do!” Bulldog Barrister retorts. Judge smiles, and you can see him thinking, “How ever did I know that?” but politely states that this will surely delay the trial until June? July? August? September? OMG! But it continues for the rest of the day nonetheless. “Call Dale Chetty please!” and the roasting continues.

Boston Legal got its airing again when one of the people involved did something they shouldn’t have and this was all resolved behind closed doors . . . oops! Yet another skeleton to come out in due course if/when appropriate. Best behaviour now boys, please!

This trial is an atypical trial as far as I can ascertain. It started in early 2014 and reached the courtroom in April 2018 close to four years later. Judge Tuohy, the Wellington judge who handled it until Hastings J took it over called the case “crap” in early 2017 for good reason. It’s had a lot of twists and delays, mostly as a result of Bartercard’s actions, certainly totally for the first three years and mostly by way of objections to Down’s attempted actions in the last year. The procedural story and pretty much agreed facts is that sometime before they closed Down’s’ account, Bartercard terminated Down’s ability to trade. An auctioneer for a couple of decades, and some 15 years in the Bartercard system, Down could not do what he wanted to do, and thus couldn’t and didn’t reduce his trade overdraft, one that fluctuated wildly as he traded big and small. At $85k on account closure, this was about half of what he maxed out at – $160k. Not fair he claimed, and when sued for cash, he said effectively “f*** off!” Bartercard on the other hand presented a narrow case – the documents; the procedure; the debt. We can do it. We did do it. Now you will pay!

The original claim stated that Down’s account was terminated because he was auctioneering and Nicholas’ defence in early 2017 related to this first claim. It was a strong defence because autioneering is not prevented in the Rules. Bartercard however altered their claim four days prior to a scheduled hearing in two meaningful ways – first, under prompting from Tuohy J to detail the actual reason why they closed his account and to relate that back to their Rules they changed the reason that they terminated his account; secondly they also slipped in interest charges, something they forgot to do in the original claim.

Down attempted to introduce a counterclaim but was refused by Hastings J in early 2017 (“This case is the oldest on our files, and I don’t want any more delays!” sort of thing) and Down’s High Court attempt at counterclaiming was knocked back on technicality, without prejudice, which means that he is free to commence his own counterclaim case against Bartercard at any stage in the future – before, during or even after this case is finalised.

A settlement conference in December 2016 was a disaster – Bartercard’s representative wasn’t able to negotiate. Down has claimed that his File Notes make it clear that he is a target to be deliberately bankrupted. He believes that it is entirely a personal vendetta. Even if Bartercard win, they’ll never get anything. One has to question why they haven’t walked or settled long ago, which does tend to support Down’s claim that there is something sinister afoot.

I have performed a support role for Nicholas Down from 19/3/2017 and have been his McKenzie Friend at court until the court appointed Chris Nicholls took over using Legal Aid two weeks before trial. I have also attempted to assist both parties resolve their differences [yes, I can talk to those whom I blog about!] but unsuccessfully.

I mentioned that something sinister is likely afoot and that I will provide my commentary in a following post. Next I dive into what I see as the motivation behind this case; I extract the key issues for Nicholas Down from information already brought out in open court and I comment on the significance of two of the critical admissions by witnesses to date. I’m sure there will be more too, when the trial resumes.

* Two opposing parties presenting their cases to a judge, as opposed to the inquisitional system where a judge will enquire of all parties in order to establish truth/justice.

This is the first in a series reporting on CIV 2014-096-428, Bartercard NZ Ltd vs Nicholas Down, being heard in Lower Hutt District Court, Wednesday 11th & Thursday 12th April 2018. I will be updating posts in as close to real-time posting as I can, and keeping commentary to a minimum due to court reporting rules. Once the case is presented though, the gloves will come off. This post is a brief introduction to the case. I explain how the two parties got into conflict and what their respective arguments are. A lot could be at stake with this case and both parties clearly want their day in court. I use surnames only with a legend for details.

Down joined BC in 2003. He is an auctioneer and general trader. Autistic, he has supreme deal-making skills and is the consummate horse-trader-from-hell, probably the only dude who rivals me in terms of slipperiness & native capacity to crunch a deal that I know. They call me the “The Crazymaker”. Down and I appear to be peas in a pod.

BC headhunted Down, Hamilton & Hebbink the guilty party that signed him up. Over the years Down and BC fought like cats and dogs, but always kissed and made up. Down did auctions aplenty, wheeled and dealed and had an incredible fee structure, 1+1, when the going rate was 6.5+6.5 and Gold Card members had 6.5+0. The reason for this is that he was a top trader, not so much in volume (he only did a few million in his time) but because of the quality of the benefit to the BC system. He would bring in hard goods that sold very well.

In 2013 BC advised Down that he was no longer permitted to auction. Essentially: relationship over. No longer able to trade Down couldn’t repay his overdraft. BC slapped him with the usual story – pay up or we’ll close your account. Down told them to stick it. They did and sued for $80k.

Four years later and it finally hits the courtrooms.

BC the Plaintiff says the usual:

• You joined
• You obtained an overdraft, goods & services
• You signed a PG
• We followed due process according to the BC rules
• You didn’t [breach of contract]
• You owe – cash
• Oh and BTW we can do anything we like and you’ve been a bad boy (for years)

Half way through the preliminary legal argy-bargy BC slipped in interest to the claim, which will send any judgment if they win well over $100k. If successful, this will all mean bankruptcy for Down, something BC is very keen to see as animosity exists in no small measure!

Down, the Defendant, says quite a bit actually:

• You head-hunted me
• You gave the overdraft
• If I was allowed to trade I could repay it, in trade
• You can’t in all fairness do what you have done [estoppel]
• Even if you are, I should only pay you what is Fair Market Value [doctrine of penalties]
• FMV is only 20c in the dollar

He also says that they’ve cost him heaps and have a bad attitude towards him blah, blah, blah.

The breaches of contract relate to this specific case . . . the “doctrine of penalties” however has wider ramifications for all Bartercard members and indeed all commercial trade exchanges globally. The first issue is whether the Bartercard currency is devalued. The second issue is what is FMV. The third issue is whether or not BC can require repayment in cash at full cash value when FMV is less, and this is due to the legal concept of “doctrine of penalties”. If the doctrine of penalties can be applied in this case, then Down is only “up for” FMV and BC will have a huge dent to a rather lucrative cash conversion income stream from closed accounts in debit. It will also potentially bring unwelcome attention to the subject I have been blogging about for years – the Bartercard Trade Currency has a huge trade deficit and is grossly overvalued when viewed on par with the local currency.

There you have it. There’s a truckload more such as procedural BS, and side issues such as perjury, crookedness within the legal fraternity and court processes and decisions that on the surface put favouritsm towards those who pay lawyers and against those who do it themselves, but hey, that’s life. It’s not always fair is it, especially in a court environment?

So let the games begin. When they select a new Pope the smoke arises to indicate agreement. When smoke arises from the courtroom it won’t mean that everybody has agreed, it will mean that the lions are getting their comeuppance and the fight is getting underway proper. For the record, it should be noted that I am Down’s McKenzie Friend in this case and that I have provided strategic advice to Down since 19/3/2017 on a commercial basis. He is also a minor shareholder in one of my companies, Bounty Hunters NZ Ltd.

Legend

BC = Bartercard Exchange Ltd (formerly Bartercard NZ Ltd).
Down = Nicholas Down.
FMV = Fair Market Value.
Hamilton = Ross Hamilton, ex Hamilton Rep.
Hebbink = Paul Hebbink, current National Sales Manager.

In a seemingly never ending story, I share more bad news about Bartercard and its parent company ASX:BPS, BPS Technology. I thank those from a variety of locations who have engaged with me in the last week to help me understand the huge, ungodly mess that this ‘pig’ has become – investors & investment analysis, senior staff, others in the industry and of course disgruntled members. May you all be wiser as a result of finding and reading this blog. Enjoy . . .

BPS Technology (ASX:BPS) is the latest iteration of Bartercard, established as a public company by the “Smiles in Suits” (co-founders and Directors of Bartercard) as a means to extract their ill-gotten gain off Bartercard, their fast-sinking flagship. I have shared at length over the years at how these crooks successfully ripped others off, then pumped and dumped, until finally they were booted out of their own company when others got wind of reality. Insider trading by the head crook led to his hasty exit (also known as “walking the plank”). Another couple were thanked for their services (also known as “getting fired”) so that ASX:BPS has, theoretically under new directorship and leadership got some chance of sailing clean. That’s the theory. My theory though is that it will go the way of the Titanic. Bartercard’s demise is as certain as the sunrise, now currently down to the second-to-last phase in the life-cycle of a typical commercial trade exchange. More on this in a minute.

Feedback Received

Here’s a sample of the sort of thing I get all the time from upset punters – generally Bartercard members who are in a pickle with their ‘funny money’ account in disarray – either in credit and unable to spend, or in debit and facing a cash loss as they are forced to cough up cash with their account getting closed for various reasons.

First, from an industry insider:

Hi Dennis,

I have been reading your posts, you seem to be making you[r] mark. Well done on exposing them for what they are.

I understand that BPS just sold off the UK operation for a song.

It would be good if the mainstream media (Fin Review) or something picked up the sacking of the directors and the $30mil write off. Exposure in the Gold Coast Bullitin [sic] isn’t enough.

Thake [sic] care,

Well done

It’s thanks to people like this that I can write effectively. A shame his keyboard can’t spell what he tries to type though!. A big thank you to this industry insider for the tip-off, advice and good wishes.

The sale of Bartercard UK is interesting because it was actually ‘sold’ previously, well it was supposed to be! I blogged about this at the time that it was all BS – a paper transaction designed to defraud ASX:BPS investors, showing a multi-million dollar profit when in fact it was a huge loss. I knew and blogged in real-time that Bartercard UK was broke, going backwards at a great rate of knots, and that the announcement of a sale was a falsehood. Huge cash losses where month by month middle and upper management milked it for all it was worth. At the time also these Smiles in Suits were talking about Bartercard UAE when it was also closed – totally. Watch the USA go the same way if it hasn’t already – bankruptcy the first time around with a partial bailout by Ron Whitney & Co. from IRTA to save face for the industry. As regular readers from 4-5 years ago will know, Universal Currency has a VERY large exposure to this currently failing trade exchange (and for a second time around too!) Expect a total loss, Ron, a total loss as I have warned you and informed you of privately.

The word is actually getting out about ASX:BPS in the investment world. I’m happy to share my opinions and knowledge with Fin Review should they call but while I will stand up for the underdog against these nasty, aggressive, greedy and immoral predators, if I wanted to really take them out, I would have released the book Bartercard Secrets by now to their members and taken them on in court to close them down. I’m not an activist per se – more a truth-seeker and truth-speaker – sure, I am helping to push what is already falling but there are sharks by the millions in business.

Talking of sharks, I recently received a cute email from a Bartercard member who is in trouble with these crooks. I helped her of course but she tells it like it is with the phrase, “I feel like a goldfish in a sea of sharks!”. Nice descriptive words!

I also spent more than an hour chatting with a pretty switched on young man who was researching BBX and Bartercard – I was waiting for a plane and had the time to chat. He was getting to grips with commercial barter as a business concept and said this:

I’m 29 years old. I look at Bartercard’s business model and it seems old and quaint [slightly paraphrased]. It’s the sort of thing that people of my generation would never use.

Yup! He’s onto it . . . the phrase he used in regards to the commercial barter industry was an industry in “structural decline”. Speak to Ron Whitney of IRTA and he’ll agree – all the oldies, watching their business for the last decade go down, down, down – just like Bartercard! Reminds me of the watchmaking industry when my father (an ex-watchmaker himself) watched all his colleagues have to retrain when people could buy digital watches that didn’t need repairing every 3 years, and people who sold typewriter ribbon, or fax paper, or double-sided invoice paper for dot-matrix printers.

The structural decline in the commercial barter industry is because the world has moved on from paying pricks like . . . [oops where did that come from?] I mean . . . from paying people like Bartercard commissions of 13% (6.5% buy and 6.5% sell) to bring them new business when the world actually uses Google and Facebook now. Duh!

Our conversation was interesting because for some reason he wanted to speak to Carolin McDonald from BBX and Ron Whitney from IRTA as well as me. It’s 100% clear what his report will contain, I can tell you, and it will NOT be talking up BBX as an ethical operation . . . NOR IRTA! I can also tell you that his understanding of ASX:BPS was pretty jolly good before he spoke to me and his concerns have been fleshed out BIG TIME with a 75 minute call to yours truly.

He had worked out already that Bucqi was a dead-duck. It will die for sure. He knew this because, wait for it, Bartercard told him that. Hmmmm the board presents it as an asset, yet the management know that its a liability! Typical of these guys! With Tess not having sold a thing meaningful in the four years that it has had to fly, it’s clearly a duck, without life, or a turtle or something like the Bartercard ‘pig’. Oh dear, yet again the blogger from Hell is right and the BS from the Smiles in Suits endorsed by IRTA of course, has all been found out!

I found this man’s questioning perceptive overall but in essence he wanted to know if there was anything untoward under-the-hood in regards to Bartercard – illegal activity or ‘naughty’ things that future investors would want to know. Specifics. So, bull, meet the red-rag! This is how I summarised the situation.

The primary ‘crime’ of Bartercard’s owners/management is the concealing of their trade deficit. A huge, massive, humongous trade shortfall exists within the Bartercard currency. I’ve shared this before online, but they use the GAPP accounting rules to avoid having to disclose this, thus it is off-balance sheet liabilities. In the many hundreds of millions, this represents systemic pilfering (“theft” in regular parlance) over the entire life-span of the Bartercard operations. This theft has enriched those who have had fun at the expense of Joe-Blow – Bartercard members and investors. The result is that the Bartercard Trade Dollar is devalued considerably. The other way of putting it is that inflation has caused the currency to be less valuable than it is claimed – theoretically on par with the local cash currency.

Members can see this when they have to pay a higher price for a product using their Trade Dollars than they do in the cash economy, or more commonly now when it is impossible to buy anything meaningful “on trade”. People don’t want to receive ‘funny money’ that is not worth much for real goods & services that has tangible value. Again, more on this death spiral that Bartercard is going through in a minute. Concealing debt, as Paul Bolte of Bartercard USA has explained so succinctly, is Bartercard’s strength. It is also a prerequisite to fraudulent behaviour. Connect the dots!

The second ‘naughty’ that Bartercard gets up to is tax carousel conduct where the local tax system is actively defrauded. Concealing debt gives a shonky operator the means to game the system. There are many ways to do this, but one of the prime cash producers for Bartercard is to sponsor sports clubs. When Bartercard gives credit to (for example) a soccer club in return for signage, exposure or whatever, they get the sales tax back in cash – VAT/GST is NOT paid back, ever when the Bartercard losses are written off. Do this systemically and you have long-term cash income from Her Majesty’s Taxation Service. While she/he will chase Ewen Me for a $10.00 tax fraud even to jail, she finds it too hard and too messy to investigate any barter fraud. I know this not because I am negative but because senior people both in the industry and in government have told this to me more than once. It’s too hard to investigate and to chase is the essence of this situation, and this situation is inter-jurisdictional too, not just a NZ phenomenon.

The third ‘naughty’ is actual conduct by their staff, management and owners. This is a broad, multi-faceted attitude to rip-offs typical of any large organisation hell-bent on making a buck with a lack of moral ethics. Dishonesty, greed and self-interest abound within Bartercard and can be broken down into cherrypicking; theft and lies/misrepresentation. Cherrypicking is simple to understand and see. It is both casual and systemic. Casual is staff and insiders getting the good stuff before the members have a chance. Systemic is where a certain category of member gets the good stuff through systems – special or elite offerings based on categories are justified commercially but are still a form of cherrypicking. Theft is rampant but this depends upon how deep you want to go in your analysis. The easiest way to understand this from an ethical perspective is to understand that a deception is always associated with a theft. The core reason FOR deceiving is to obtain something that is not genuine. Logical? You bet. So when the fact that a Trade Dollar cannot actually buy what a cash dollar can, yet the company says it can (or should) then theft is occurring. Then this theft goes right back through to the owners who leverage the members’ credit to lie and steal in the millions. When you can create money out of thin air off the backs of the brand and system, who wouldn’t? Except those of us operating on principle not opportunism. Rest very assured that substantial credits are generated for the elite and the associated debt is ‘lost’ through a myriad of techniques used to conceal the debt.

I mentioned before that Bartercard is in the second to last phase in the death of an exchange. If ZERO equals death, when trading ceases and ONE is when trading ceases but the exchange is still technically operating (BBX New Zealand is in this position), then Bartercard is currently sitting at TWO on the scale. Widespread recognition that “the Trade Dollar cannot buy anything [useful]” exists throughout the membership. Most members are in credit (and can’t spend). Management is being laid off; downsizing is occurring; members are leaving; turnover has dropped considerably and profitability doesn’t exist. Everybody knows the score but is too scared to say anything in case they miss out on getting something back for their [worthless] credits. The organisation is desperately milking all members who owe something to the system – goods made available to the system are sold secretly on eBay (Bartercard does this consistently – even a dedicated fulltime girl selling it all!); cash conversions furiously arranged with members in debit balance sued increasingly at any excuse as a cash grab; whistleblowers start leaking and victims gain confidence to speak out; less and less doing less and less with less new business (it is new members who are the lifeblood of a dying exchange) until only suckers are left – those who continue to feed the monster their monthly cash fees because they don’t want to lose out and write off their losses . . . it’s a sad downwards spiral from the heady days when everybody trusted the system.

Because the system is bankrupt through decades of misconduct, there is no way out. Nobody is going to insert the equivalent value of the losses sufficient to return the trading system to balance. The value has gone. The fraud must work to its final conclusion – ONE – it all ceases trading and ZERO – Bye Bye Bartercard.

I can’t see how, but BPS Technology may survive and live to fight another day. Its share price at 30c is still probably too high. I wouldn’t take it is you gave it to me because if I even sell at 10c in the dollar I know that I’d be ripping off the poor sucker who paid even that, and I treasure my capacity to sleep at night. One thing is for certain though, Bartercard is in demise with an eventual death imminent. Who knows when but the die has been cast.

Whew!! Get a load of THAT post will ya? Kinda depressing stuff eh?

In this post I share the conclusions of a seasoned investor who has recently done more research into the pig that I’ve called BPS Technology – Bartercard. What interests me is not that he has chosen to sell, but the reasons. He’s lost 40% of his investment, “The worst investment decision I’ve ever made!” he says of it, and thinks that even if the new Smiles in Suits are rocket scientists, if they’re riding a donkey, it’s not going to go anywhere. I also revisit some of his key questions and share my thoughts.

His Conclusions

Hi Dennis,
Thank you for your reply.  After some more research I decided to sell all shares in BPS, essentially due to reasons below:

1) It is a difficult business in a highly competitive industry with low barrier to entry, the fact that BPS is starting to invest in R&D further confirms this.
2) There is higher than average chance further write-downs would be announced, in times like this there is usually more than one cockroach in the kitchen
3) The new acquisition might prove to be a good buy, but certainly not from a CF point of view in the short to medium term. I value companies based on FCF (Free Cash Flow), not on EBITDA.
4) And most importantly, even if the management is truly talented, it doesn’t alter the fact that a talented jockey cannot win on a broken-down nag.

Recapping

This investor is one cool customer. He made a bad decision to buy ASX:BPS. He lost 40% when the shares dropped from 50c to 30c. He acknowledged his error (I guess he had little choice in that) blamed only himself (that’s a cool move); spoke to me when doing his due diligence (smart man!); did more research (this guy is a professional) and has decided to cut his losses (a brave move) and sell up entirely (probably a wise move).

Who knows whether or not this is the best decision but it definitely a ‘sound’ decision.

In previous communications he shows a great understanding of the games the BS artists in the corporate world by asking the same questions as me . . . are the new guys working in cahoots with the crooks? What could they actually do when the whole thing is crooked ‘from a*-hole to breakfast time’.

Summarising

ASX:BPS shares have take a serious pounding in the last year. Established by the founders of Bartercard as an exit strategy for themselves after they realised they’d been ‘had’ when buying Bartercard for too much off the founder Wayne Sharp, they took a dying trade exchange with a huge brand name (Bartercard), lumped it in with a then partially completed software system (Tess); leveraged their cosy relationship with Ron Witney, of IRTA to endorse it as “the best thing in the industry”; added in a fledgling loyalty system (Bucqi) and presented it with a dodgy prospectus and a multi-million dollar public offering. Their IPO was presubscribed with a hidden backdoor deal with a double-dipping director who brought in Ma & Pa investor’s funds by way of Pension Funds. “Business as usual in the shady corporate boardrooms!” do I hear you say?

For the next two or three years they kept up appearances, stripping assets, using capital to pay themselves in the quintessential Pump & Dump. Along the way they also needed a little more cash, of course and got it! One Director got his funds out with a golden parachute after the two-year moratorium . . . and then the wheels fell off for the Smiles in Suits as first the Chairman Trevor Dietz got caught with his hand in the till (insider trading, of course) and was ‘walked the plank‘, then the new boy fessed up that, “Oops! Ummm . . . we may have misrepresented things a little!” – that means “lied” to regular people – and the other Directors were ‘thanked for their services’ and shown the door. Ouch!

The share price is now down to 28c in a sliding trend over the last year that shows no sign of altering. All this totally predictable of course – I did, in writing, and have done so for years, despite being threatened with legal action and actually initiated “in multiple jurisdictions” no less, according to the head crook at the time! I called it BS at the time and it is. I called the core Bartercard currency devalued. It is. I called the IPO a con job and BS, which has been proven. I predicted a downwards trend on the share price. It has fallen and keeps falling. There’s good reason for that. I’ve called the Smiles in Suits crooks running a Ponzi Scheme amateurs in the Public company game and now they’re gone as others have found out reality!

Analysis

I’ve been intrigued to see the clinical thinking by this investor. He’s not emotionally driven as much as I am. I’m passionate and give it all I’ve got. He’s simply in there to invest, to make (or keep) a buck.

Let’s return to his previous questions for a moment:

– Can bartercard, Tess and bucqui perform even worse than already announced leading to more write offs? Are they more likely doomed to inevitable failure like you suggested or turnaround is the more likely alternative given the new management in place?

Tess is simple. It’s a no-go and always will be. I’ve said this from the outset, many times in many ways. Nobody in the industry trusts Bartercard, for good reason, and they are suspicious of anything to do with IRTA, and doubly so since I took them on and exposed them as duplicitous, a back scratching old-men’s club, to put it politely. Ron is tolerated and respected in some quarters because they need him but he’s not trusted. Tess is targeted at Bartercard’s competitors. Entrusting your core information systems to your opposition, and one widely recognised in the industry as aggressive and untrustworthy will never fly, especially when it has the kiss of death from IRTA. Tess hasn’t sold a thing, certainly nothing meaningful and the Prospectus and marketing BS ever since is just that – BS.

Bucqi has to be judged on its performance. It’s more than three years now. If ever a loyalty program had opportunity to fly it was Bucqi – a captured market of [supposedly] tens of thousands of Bartercard members all itching to take their businesses forward. Ummm . . . silence? Minor takeup, slow rollout, low usage . . . There are lots of reasons why this is not the rip-roaring success that BPS Smiles in Suits presented it as – timing issues, whether the market wants or needs it, competition and more. Some of the reasons that it would never achieve what they said it would is the core message of my blogging. First, Bartercard changed their measurement of members to cardholders. I wonder why? Numbers are fudged totally against IRTA’s rules BTW. The core membership is reducing. Not only that, the currency is devaluing badly as a result of decades of raping and pillaging from all – the Smiles in Suits down. Satisfaction with Bartercard as a currency AND their commercial offering is at an all-time low and still heading downward. I can’t see how Bucqi has a different future than Bartercard itself.

Bartercard is a dying trade exchange. Sure, as I said, I get passionate and emotional about crooks lying and ripping off the little people like these guys do, but in the life-cycle of a trade exchange Bartercard is very near the end. A decade of heading downhill, it is impossible now to reverse the process. It is technically, mathematically and humanly inevitable that it will die. How long it can be sustained is anyone’s guess. One adverse court ruling; one creditor success; one adverse Tax Office engagement; one Commerce Commission ruling and they could be gone, literally overnight. People who have experienced the closing of a bank (the Greeks most recently) know the feeling – one minute a bank is there; the next, the doors are closed and never reopen. Bartercard members won’t push it over for they have too much invested – most are in credit and keep paying their cash fees in the forlorn hope that they will get something out of it one day. Shareholders too will try to keep it alive as long as possible, but die it surely will.

The role of a new CEO even if (as this investor alludes to) he’s a genius jockey cannot change the core facts, ASX:BPS is a pig, or a dog, or a donkey – take your metaphor as you wish.

– Does Entertainment have some kind of long term competitive advantage to other similar firms or is recent growth just temporary due to transformation to digital? In the future surely its niche market in selling physical books for fund-raising will diminish.

Surely for sure! My take exactly.

– How likely is Alipay offering become successful? For me it appears this depends essentially on whether Chinese tourists will purchase entertainment book, which I honestly have no idea as the fact stands right now Entertainment book and app is not well known in Chinese communities. So it appears the probability of success is not above average as Entertainment needs to become popular amongst Chinese tourists first.

This is an unknown. A few things though from my experience. First, Chinese people look after their own and rip off their own but they always prefer (quite naturally) to deal with Chinese people. BPS is not a chinese operation in any way shape or form. Secondly, the principle that Bartercard and now BPS has always worked under (and let’s face it has been hugely successful for them) is to buy something, present it as something it is not, conceal debt and strip the asset. Using the Bartercard members’ credit for their own benefit is simply another form of this kind of immorality. Why would this successful business model change all of a sudden and they become interested in running a genuine profitable business that creates value? I can’t see this happening.

– Is the new acquisition a good deal? It seems the new firm is losing cashflow from recent financials, so from a cashflow point of view it definitely is not a good thing.

So does this not tell us something? Of course it does. In the context that these are crooks through and through – running short on cash year after year yet paying themselves out of new capital. Huge debt means huge losses – in the future – without positive cashflow.

To this investor’s conclusions now:

1) It is a difficult business in a highly competitive industry with low barrier to entry, the fact that BPS is starting to invest in R&D further confirms this.

The ASX:BPS Prospectus showed the observant and those who read this blog that there is a high level of BS, call it excessive optimism if you want to be generous, emanating from Bartercard’s leadership. This is their MO going back decades. In my books it’s a deliberate con at the upper levels which filters down through the entire operations, thus their extreme difficulties now when the chickens are coming home to roost. Moving themselves into a publicly listed company brought in the millions they needed, but I think they underestimated the attention they would be getting in terms of what they said and did. Criticisms from those in the know identified this in the Directors’ conduct. I really don’t think I’d trust anything that came from these guys – R&D simply means more BS to me.

2) There is higher than average chance further write-downs would be announced, in times like this there is usually more than one cockroach in the kitchen

Or cockroach factory to be a little more precise. I’ve said this through and through. Sure there may be one or two genuine, good people involved but all the good ones get out when they realise what they are playing with.

3) The new acquisition might prove to be a good buy, but certainly not from a CF point of view in the short to medium term. I value companies based on FCF (Free Cash Flow), not on EBITDA.

When you see the sorts of cash these guys burned through, not only month by month but also year by year you would NEVER invest in ASX:BPS if FCF was one of your yardsticks. Simply look back at the number of cash raisings and now head office layoffs etc, etc. Cash expenditure in the UK alone was totally horrendous to mainy middle-management. Australia is/was a mess. It’s a repeating story. Desperate for cash.

4) And most importantly, even if the management is truly talented, it doesn’t alter the fact that a talented jockey cannot win on a broken-down nag.

Yup!

Thanks to this brave soul for sharing his situation, and his thinking. Nice to have a second angle on this ‘nag’ as he suggests it may be.

In this post I analyse a disastrous investment made into the principal of Bartercard, BPS Technology, ASX:BPS. The writer asks me questions about where to from here, with the share price falling by 70% in the last year and recently from 50c to 30c in the last month. He appreciates my analytical skills (which is nice, thank you) but I am direct and brutally honest – he’s made a hugely bad decision and is probably poised to make more. It’s a sobering lesson for all.

The feedback received

The writer says:

Hi Dennis,

My name’s [redacted], nice to meet you. Recently I came across your blog, I read your analysis of bartercard and is I extremely expressed [impressed] by your analytical abilities and independent insight, and also your entrepreneurial background. If you are not a full time stock analyst you definitely should be. I only wish I came across your blog before, and I’m sure the same can be said for countless others.

A few months ago, I bought shares in BPS Technology around 45cents with minimal analysis, I mistakenly thought the worst of the company has been reflected in the share price, combined with management reiterating earnings guide and implementing structural changes the stock was oversold and tide has begun to turn.

How wrong I was, as you are aware after the recent earnings revision and write off the stock promptly fell to 30 cents. I’m down 40% and this is worst investment I’ve ever made in my life. Now I start to do some serious research into whether to sell all the shares or participate in the capital raising at 28 cents.

As I don’t know this company, what is your opinion regarding the company going forward? For me, it all comes down to two things: whether existing businesses will underperform even further, and whether new equity raised can generate superior return:

– Can bartercard, Tess and bucqui perform even worse than already announced leading to more write offs? Are they more likely doomed to inevitable failure like you suggested or turnaround is the more likely alternative given the new management in place?

– Does Entertainment have some kind of long term competitive advantage to other similar firms or is recent growth just temporary due to transformation to digital? In the future surely its niche market in selling physical books for fund-raising will diminish.

– How likely is Alipay offering become successful? For me it appears this depends essentially on whether Chinese tourists will purchase entertainment book, which I honestly have no idea as the fact stands right now Entertainment book and app is not well known in Chinese communities. So it appears the probability of success is not above average as Entertainment needs to become popular amongst Chinese tourists first.

– Is the new acquisition a good deal? It seems the new firm is losing cashflow from recent financials, so from a cashflow point of view it definitely is not a good thing.

The only [thing] I like about this company is the new management, they have excellent strong track record and seem to be clearing the closet from inside out, absolutely essential in a company with previous unethical management. Anyway, I would really appreciate your opinion. As an ordinary individual investor with limited knowledge, it is very painful to have your wealth wiped out 40% and now facing the choice between a rock and hard place.

Thank you for your effort to educate others regarding bartercard.

Cheers

[name redacted]

Summarised

If you take this communication as a whole, it could be summarised thus:

• I listened to BPS’s sales & marketing BS without doing any due diligence;
• I invested at 45c and watched as promptly 40% of my investment went down the gurgler (shares to 30c); and
• I want to know what the future holds.

Notable also is that the writer:

• Identifies the cause of failure bring “unethical management” [a GOOD assessment];
• Has commenced his research and found my blog AFTER his loss [POOR conduct but sadly typical of most who approach me];
• Has actually turned to the source of common sense, and accuracy and has bothered to ask for advice [a good dose of humility with a dollop of WISDOM and therefore worthy of a decent response].

My Response

This man won’t like a lot of what I say, but hopefully he is big enough to take it all.

1. I appreciate his kind words. No I am not a professional stock analyst but I am a natural truthseeker and I am a professional Private Investigative Blogger. I ask questions, apply logic onto fact (suss things out) and blog about them. I hate greedy crooks, crims & crazies who feed off the little people with a passion. Bartercard (BPS Technology) is top of my hitlist at the moment in this regard.
2. The future of ASX:BPS is not a binary matter. You are dealing with a changing situation legally, changing personnel in key positions and conflicting interests internally with a business operating in a rapidly changing market. Additionally there are multiple income streams (well, actually streams of loss!) and an unproven product mix.
3. The core brands of the ASX:BPS offering are not cash generators. Bartercard has been hemorrhaging cash for years and recent staff layoffs in Head Office and changes at the Board level will reduce losses but could easily also affect sales and income negatively. The core currency (as I have preached for yonks) is devalued beyond redemption and satisfaction levels within the Bartercard system are at an all-time low following a year by year pattern. No one in their right mind would look at it as anything other than a dying business. Tess is an utter joke. Bucqi from what I hear is anything but a success. Paper business is old hat & hope is for something unproven – it may prolong the agony, but I don’t see strong cash generators certainly not sustained or long-term.
4. The whole business model as established by Wayne Sharp the Founder  and as maintained by the evicted Directors Trevor Dietz, Brian Hall and Tony Weise is to leverage the Bartercard members’ credit for personal gain. Outright theft was also a component. No small investor in Bartercard has EVER got a return, EVER in 30 years that I know of. Strip assets and write off debt is the name of the game and always has been. Remember this, that BPS Technology was set up primarily as an exit strategy for the three founders to escape their poor investment. They paid too much for it, didn’t have the wherewithal to take it forward; bought it at the point that it was dying and continued to treat it as their own plaything when it was a public company. The value of a trade exchange is not the barter, it is the leverage that the owner has using the credit and goodwill of the members in a myriad of ways – particularly property and franchising but also cherry-picking and more really ugly stuff.
5. Two of the three Smiles in Suits still have substantial funds to withdraw and their options are now drastically reduced now that they cannot conduct business as their greedy whims permit. Their juicy multi-million dollar cash cow has dried up for them with new management and Board; their share price has taken a huge dive, but they will be working desperately to recover what they can. Do not discount the possibility that deals have been done in the background and that more fundraising will inject desperately needed cash on the back of more BS. There was talk of an administrator being appointed and the key asset (the Bartercard membership) getting back into their hands through a backdoor deal with a friendly insider. This was the way they managed the initial IPO cash injection with a pre-launch deal from a traitorish two-faced silent director who jacked it all up. The point is that skullduggery is in this company’s genes from the top down and it has been for decades. Leopards . . . spots.
6. A company’s share price does not necessarily represent its true value, in real terms. It is more the result of an accounting, marketing and deal-driven environment and with insider trading in ASX:BPS virtually proven in the public arena and with lies, lies, and more lies told by these boys clearly admitted by the new Board the share price could easily be manipulated upwards based on their previous Pump & Dump & Insider Trading activity. They’d have to do it from outside Directorships but as I have said, you know when these guys lie and deceive – it’s when their lips move! The true value of this company with serious issues is in the order of Pennies. How much longer will people believe this outfit before the price takes a dive even further? I simply do not know. Understand also that the new Board (if they are not as crooked as the Founders) will be acutely aware of these guys’ wishes and intentions – to milk the system and cash-up – bugger the rest of the small investors. That’s one hell of a conflict of interests inside the team. Don’t expect that stress to all disappear nicely, even if they do all Smile in their Suits together for the public.
7. I cannot predict the future in terms of share price. If they pull yet another fast one, they will get another cash injection which is desperately needed to pay the bills, pay the investors so that they don’t ALL give up and go, and to keep the fires burning as long as possible. It will dilute the shares – too bad!
8. I can state that the entire business strategy is a new one, fraught with huge challenges, and to me it doesn’t really look that sound. This writer’s referencing to all the key points as issued by the Smiles in Suits concerns me – it means that he believes the BS talk, or to some degree anyway. I don’t. I don’t want to knock the new guy at the top unduly and wish him well in his task but what would you do if you inherited a pig, tell the world or keep smiling and try to box on? Remember that the Bartercard currency has a HUGE undeclared trade deficit from 30 years of misconduct. This off-the-books hidden debt is in the order of hundreds of millions!
9. I expect that there will be serious bad legal news for Bartercard in the New Zealand jurisdiction developing sometime in 2018. Paul Hebbink (NZ national sales manager) will likely be visiting the courtrooms and he along with others may find life a little more ‘restricted’ in future. It may not be the end of BPS through one event but with USA and the UK looking flakey, I really can’t see good things for these turkeys in 2018.

I’m essentially negative over the BPS Technology thing. I simply can’t see where or how they are or will be creating value, which is the primary driver of any business success – certainly not real, creative, sustainable, mid to long-term value.

Recapping

ASX:BPS is a broken company in disarray with very serious problems. They have fired their Founding Chairman for ‘suspected’ insider trading (Bye, Bye, Trev) and they have flicked the other two Founders who were milking them all merrily with huge Director & Consultant fees. They escaped the chop in 2017 in one attempt to flick them but were ‘moved on’ by their victims eventually in late 2017 and early 2018. They were outed lying about the company affairs. None of this is a good look AT ALL, let alone for a public company. One guy got away with the loot following a successful Pump & Dump but there are others still pining for their payday. With a twice-devastated share price they could do anything [stupid, immoral or illegal] to get their ill-gotten loot. Their core business units are not profitable (some in serious decline and others were always a bunch of BS) and their strategy lacks depth and quality from what I see. It’s not a pretty picture from where I sit.

The writer here has made a disastrous investment decision but he invested believing their marketing BS and without doing basic due diligence. Quite honestly he doesn’t deserve to make a profit. I hope he’s going to get wiser. If he had just Googled “Bartercard” or “ASX:BPS” then he would have found years of posts from me telling it like it is with these crooks. A dodgy Prospectus; an IRTA deal that never stood a minute of scrutiny; clear warnings of a Pump & Dump revealed in realtime and then proven; huge analysis of the Bartercard undisclosed trade deficit and a massive industry fraud . . . what more can he expect when it is all out there?

To the writer, “Thank you for asking sir, sorry that I cannot help you further.”

For years I have taught, explained and revealed the Smiles in Suits who ran Bartercard following Wayne Sharp to be nothing less than greedy crooks. Their recent unpleasant eviction from ASX:BPS the company that they established as their exit strategy says it all. First Trevor Dietz was given the ar*-card after getting caught with his hand in the till. Now the others have all gotten the chop. Good effing job too I say. I told you so, many times.

Some say that a Christian shouldn’t gloat over others’ downfall, even if they deserve it. BS. I told the world day after day, week after week, month after month for years what was happening, often in real-time and at huge personal cost. It gives me HUGE pleasure to see that the corporate investors that these boys duped have eventually caught up with them, given them the boot and are moving on, trying to make a go of what is left of things.

Gloat, I will, just for a moment . . . after raping and pillaging the Bartercard business for decades (that means the little people ‘paid’) Trevor Dietz, Brian Hall and Tony Wiese bled, milked and destroyed a public company for personal and attempted personal gain for years but eventually were thanked for their services and sidelined. Trevor was found to be insider trading in 2017 and did a quick deal to get out before they took it public (sword:fall); the other two sidelined in February 2018. Word on the street is that the new CEO has cleared the decks, taken a dive ready to steady the ship and set sail for a new future. The company may get rid of Bartercard US and the UK – that would be a good move, except for Paul Bolte and those trying to make things happen in the northern hemisphere. Too bad. That’s the second time Bartercard would have failed in the USA and the UK – leopards anyone? Ron Whitney, are you there? Hello Ron? Are you listening Ron? Tess, the best software in the business Ron, recommended by you personally remember? BS revealed and confirmed now, once and forever!

Oh how sweet life is when you’ve called it right in the face of a barrage of BS from IRTA and Bartercard when the chickens eventually all come home to roost!

Ian Dunstain is the new guy at the helm. He’s got a hell of a job before him with a huge credibility knock (their share price is down to less than 30c in the dollar, even more capital raising will dilute the shares even more, and he’s had to confess to lies told to the market by his predecessors) but the biggest problem is that under the hood, Bartercard, presented to the market as a cash cow, is anything but. A massive trade deficit, hidden from the public means that the core Bartercard currency, and that means the exchange and cashflow will continue to create problems. The bottom line – less profit moving forward.

Cutting costs will also hurt operations, however it will stem the cash operating losses. As with all or any trade exchange that butchers their own currency though, Bartercard can never recover. It can only get worse and will, like Empire, BBX, Ormita and Qoin, go down. Comparison of membership numbers, member satisfaction levels, trade volume and profitability for the last decade all show decline year after year.

This pattern will repeat.

I will repeat myself too:

The Bartercard Trade Dollar is grossly devalued through deliberate butchering of their currency by the owners, managers and staff from the top down. Their ethics are ‘flexible’. Universal Currencies exposure to Bartercard is hidden by IRTA and is in the stratosphere. UC will one day need to take a huge loss. IRTA members will have subsidised these crooks’ lifestyle and personal gain under the shonky nepotistic management of Ron Whitney of IRTA working closely with Paul Bolte of Bartercard. The Bartercard members have been duped out of hundreds of millions of real goods & services by Bartercard over many years. The company is aggressive, litigious and an outright danger to the international business community and now the [primarily] Australian investment market.

The sooner it is shut down the better off the world will be.

With the departure of the last two Smiles in Suits, I gloat. My role in their downfall wasn’t a direct one, but I did have a huge influence in many quarters helping many to understand reality, and how to interpret the gloss. Like with the devil, you always knew when they lied – when their lips moved.