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Kiwi bus maker, director Allott embroiled in US fraud case

Thursday 30th June 2016

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Kiwi bus maker Global Bus Ventures (NZ), which is supplying buses to the winner of public transport contracts in South Auckland, and director Murray Allott are entangled in a wide-ranging US lawsuit that alleges fraud, bribery, violations of racketeering statutes, and breaches of fiduciary duty.

The bankruptcy trustee overseeing the liquidation of North Carolina-based bus maker DesignLine Corp – a company spun out of New Zealand, filed the lawsuit last year against company officials including former chairman Buster Glosson, a decorated US hero of the first Gulf War, and his son Brad Glosson, the former chief executive.  Allott, a Christchurch accountant and former director of disgraced kiwi company Plus SMS, has rubbished the legal action.

The lawsuit against the Glossons alleges they siphoned off company funds for their personal uses and diverted “millions of dollars” of the company’s business opportunities to their other businesses. The suit, which names 16 co-defendants including Allott, seeks to recover, without specifying an amount, the value of the money, property, and business opportunities that “rightfully belonged” to the debtors and their creditors.

A defendants’ motion to strike out the suit heard two months ago is still awaiting a decision.  Bankruptcy trustee Elaine Rudisill told BusinessDesk she’s expecting a ruling in the next few weeks.

US media have quoted former US General Buster Glosson rebutting the allegations, saying the suit was filed “on the eve of the statute of limitations without the trustee asking any of the defendants a single question on the issues raised”.

The suit also names Rolleston-based DesignLine Bus Pacific, which has since changed its name to Global Bus Ventures (NZ), as a defendent. The local company's directors are Glosson, Allott and Glosson's son-in-law Garrien Floyd, another of the 16 co-defendants. 

Global Bus Ventures (NZ) is supplying 32 of 89 new buses iwi-owned Go Bus has ordered since winning four South Auckland public transport contracts. 

Go Bus chief executive Calum Haslop told BusinessDesk that the local company had a different ownership structure from the US one and he thought it was “owned by Malaysians”. He wasn’t concerned about the lawsuit although he is closely monitoring all four of the companies in New Zealand, Malaysia and Egypt to ensure they are on track to deliver the new vehicles in time for when the contracts start in October.

New Zealand Companies Office records show Global Bus Ventures (NZ) is owned by Global Bus Ventures LLC but don’t specify the ultimate owners. The lawsuit alleges ownership and control of the company sheets home to the Glossons and other defendants.

Global Bus Ventures (NZ)'s most recent accounts, for the 2013 financial year, show the company was operating on a going concern basis after posting a loss of $1.5 million on revenue of $9.3 million. It had negative working capital of $4.5 million, negative equity of $2.1 million, and an outstanding shareholder loan of $4.6 million repayable on demand.

The company was originally founded as DesignLine in 1985 making diesel buses for the local market before developing hybrid buses in the late 1990s.

A group led by the Glossons bought the company’s assets in 2006 from founder John Turton to expand the hybrid and electric bus technologies into the US and the Middle East. The New Zealand manufacturing operation was retained and new factories built in North Carolina and the Middle East.

The New Zealand subsidiary of the enlarged group, DesignLine International Holdings (NZ), went into receivership in 2011 and has ended up as a key focus of the legal action.

On the same day as the receivership, Buster Glosson assured US shareholders that the Canterbury-based business wasn’t in liquidation. He also claimed a half share of the kiwi business was being sold to a “very large Asian company”, an assertion the lawsuit disputes.

The failed DesignLine NZ was sold by the receiver in early 2012 for $3 million, leaving creditors owed millions of dollars. The lawsuit alleges the company’s assets were bought by newly-established DesignLine Bus Pacific, whose listed shareholder Barry Jones was said a “strawman” for other investors including Buster Glosson, making the acquisition a sham.

The suit alleges the Glossons arranged to “improperly purchase” the assets of the New Zealand company without any of its liabilities through a maze of complex transactions. They created a new shell entity, DL Pacific Ventures, in the state of Delaware which was said to have its place of business in Malaysia.  DL Pacific Ventures changed its name to Global Bus Ventures in 2013.

Two months after the receivership sale, DL Pacific Ventures became a shareholder alongside Jones in the new kiwi company and just days later Jones was removed as a shareholder. Buster Glosson told shareholders in the US company that it had been sold to a Malaysian entity.

DesignLine Corp signed an exclusive licensing deal with DL Pacific Ventures before it was even formed for all the intellectual property relating to the design and manufacture of hybrid and electric vehicles without any money changing hands, the lawsuit alleges.

It also claims Allott, who was also the investigative accountant for the DesignLine NZ receivership, sent a letter to Buster Glosson opining that New Zealand law would allow its creditors to hold its directors and US-based Design Corp liable for DesignLine NZ’s debts but that “under the circumstances” he concluded the likelihood of any action was minimal.

A 2014 final report from DesignLine NZ’s liquidator said it was an unlimited liability company which meant shareholders were jointly and severally liable to contribute to the company’s debts although this provision had never been tested in court in New Zealand. Creditors approached by the liquidator declined to fund any litigation.

Allott is accused in the trustee's claim of accepting a US$50,000 bribe to help get approval for the receivership sale of DesignLine NZ. When contacted by BusinessDesk he declined to comment on the US lawsuit other than to say a hearing date hadn't been set and that “a load of rubbish goes through that process”.

US investors backing DesignLine Corp were attracted to its green technology and Buster Glosson’s Desert Storm war hero status. He was chairman from 2006 to 2012 and during the same period his son, Brad, was CEO. It filed for Chapter 11 bankruptcy in 2013 with US$53 million owed to investors and creditors.

In the lawsuit, Rudisill alleged DesignLine never turned a profit and constantly “suffered from a lack of capitalisation, burdensome debt obligations, constant insolvency, and severe corporate mismanagement.”

It alleges when DesignLine Corp’s debt became too great, the Glossons and some other defendants started manufacturing identical buses through Global Bus Ventures LLC.

“Worse yet, these same defendants are selling these buses through distribution and sales channels that the debtors had established to customers and through contacts that once belonged to the debtors,” the trustee claimed.

BusinessDesk.co.nz



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