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Review of Passive Investments Ltd
Andy Shaw, Greg Ballard
Promoted by Gill Fielding,
Nicola Cairncross, Judith Morgan, Simon Coulson
is one of a few examples of Business Opportunity Watch Reviews which are freely available for everyone
to read on the public section of the website. The reason for making a small sample of the reviews freely
available is to help you to decide if you want to join, and also to communicate some matters of general
interest arising in the case of some of the reviews. All the other reviews are available only to
A zero score or a low score means that in our opinion the business
model or the investment model has flaws and/or that we have found inadequate evidence to back up claims
about earnings, sales, profits etc. It doesn't mean this evidence does not exist and it doesn't mean that
the opportunity is a scam and it doesn't mean that the promoters
are unprofessional or dishonest. Questions arising are normally contained within the body of the review,
and readers who are interested should contact the company with these questions and/or questions of their
Extract from Business Opportunity
Watch Rating Reviews
September 2007 Issue 7:
Passive Investments Ltd
Andy Shaw and Greg Ballard
Tel: 01903 891100
Historically, BOW hasn't reviewed opportunities costing more than £10,000.
BOW is reviewing this one because a reader has asked for it several times and because there are a number
of glowing testimonials on the Internet for the prime mover of the company, Andy Shaw, and his book Money
For Nothing And Your Property For Free. The sources of the glowing testimonials include the following:
Nicola Cairncross at www.asknicolacairncross.com
Fielding at www.passiveinvestments.co.uk and www.certainshops.com
Morgan of www.judithmorgan.com; and
Simon Coulson at www.businessopportunityreview.co.uk).
Shaw's Passive Investments offers a service which is very attractive to many property investors or would-be
property investors, who have neither the time nor the knowledge to build or manage a property portfolio
What Passive Investments offers is to build you a portfolio of 5 small
properties over a 6 year period. They take care of all the management issues such as locating a
suitable property, financing it, buying it, refurbishing it, finding a tenant and managing the property.
Here's how Passive Investments describes its system:
initial fee is paid upfront to cover some of our costs in building a portfolio of 5 small properties over
a 6 year period. We then put the Clients through a 'cycle' that takes around 12 months and we complete
this cycle 5 times over the 6-year contract. The cycle consists of a property being sourced under value,
currently at about 80k, with the knowledge it will revalue at considerably more, currently around 110k.
The maths is the important part. We check the costs of purchase, refurbishment, refinancing, the
mortgage to purchase, the refinancing mortgage and the rentals, now and later - everything is covered
as well as possible to ensure the process will work.
The Client provides a 'purchasing fund',
which is essentially the cash flow, for the whole project and provides this money to their 'portfolio
bank account' as and when necessary to complete the 'cycle'. The Client provides the deposit, refurbishment
and other purchase costs at the time the purchase is agreed. The process takes 4 to 6 months to complete
on average. The initial goal is that the Client ends up with a refurbished property, with 15%+ equity
and all their costs back from the remortgage to the higher valuation, meaning that this property is now
free - apart from their initial fee. At the end of the 6 years they have 5 properties with equity, none
of their own money in them, and the total out of pocket cost to them is the initial fee."
like a great idea. Let's look at it in more detail.
One of the kingpins needed for Andy
Shaw's Passive Investments scheme to work as hoped is the company's claim to be able to buy properties
in their area at "significantly under market value". In the FAQ page of their website
they explain their ability to do this as follows:
"As a large
company operating in our area, the supply of under market value properties is self perpetuating; the more
we purchase, the more we are offered. We've built a sound reputation with our large network of agents
and property introducers over time, and these people know if they have a property needing to be sold quickly,
whatever the reason, we're the people to talk to. Properties can be purchased under market value for a
number of reasons: probate, divorce, sellers moving or emigrating, and upsizing or downsizing are just
some of the many reasons we get offered property at less than it's worth. We try to help people wherever
we can by offering a prompt exchange/completion or by repairing a chain."
the Property Projections page, AndyShaw explains that Passive Investments use a figure of 8.5% for the
projected growth in the capital value of the property which they say is mid-way between the 5.5% predicted
by the government and the 11.74% which is the actual average for the past 30 years or so. This figure
seems a prudent estimate based on previous experience, but whether the property market will perform nicely
to order in the coming years remains to be seen.
The second important assumption included in
Andy Shaw's figures, but not specified this time, is the assumed undervalue achieved on purchase.
For the five properties shown in the Passive Investments projections, this undervalue amounts to 25% for
the first property, 25% for the second property, 22% for the third, 21% for the fourth and 20% for the
fifth. Why the projected undervalue decreases in this manner is not explained.
results of these projections is that at the end of Year 10 you have 5 properties worth a total of £1
million, and worth £1.5 million at the end of Year 15. And all you have had to pay out
is your initial fee.
Although it all sounds so wonderful and the two people running the company
- Andy Shaw and Greg Ballard - are experienced property investors and no doubt take great pains to offer
their clients a good service, there are several worrying aspects to this offer as follows:
No mention of risk
Perhaps because Andy Shaw and Greg Ballard's
experience of the property market has only been in this century's boom years, they appear to discount
any risk. Or, at least, I could not find any mention of risk anywhere on the Passive Investmentsweb
site. I expected Andy Shaw and Greg Ballard to mention risk on the Terms and Conditions page, even
if not mentioned elsewhere. Sadly, the Terms and Conditions page does not mention risk, and neither
does it give any Terms and Conditions. All it says is that you will receive a legally-binding contract
and a brief list of the issues that this contract cover.
Andy Shaw and Greg Ballard make the incredible proposition that you pay their
company an initial fee of £35,000 to "cover the 6 year management and construction of your
portfolio". It is astounding to ask for a fee for services so far in advance, and no explanation
is given of why this is necessary.
It would be much more usual to pay such fees on a quarterly
or annual basis. Otherwise, what incentive do Andy Shaw, Greg Ballard and Passive Investments have
to continue to offer a top-notch service to its "tied" clients?
Anyone thinking of signing up
with Andy Shaw and Greg Ballard's company should, in line with standard recommended practice, have their
solicitor look over the agreement before they sign it. And one of the things the solicitor would
be looking for would be some indication of the security of this £35,000 fee. For example,
one would expect to see arrangements for it to be deposited in a solicitor's account to which the client
had title, with annual drawings being made from it, or perhaps some insurance bonding arrangement.
Shaw is still saying the same thing on the interest rate page of the company web site that he was saying
several months ago in April 2007, i.e. "Since 1988, interest rates have been on a downward trend.
In October 1989, the rate stood at 15%. In 1996 mortgage rates were at a 30-year low".
This is followed by a base graph which stops at 2005 with 4.5%.
Andy Shaw makes no mention
on the company's website that since 2005 there have been 5 quarter point increases, resulting in a total
increase of 28% and the base rate now stands at 5.75%.
Moreover, Andy Shaw doesn't seem
to have put any figures on the site relating to rental yield and whether this now typically covers the
repayments on a mortgage for one of their properties.
do it all
It sounds great that AQndy Shaw and Greg Ballard and their company do everything
for you, but there is a risk in this if you dispense with any assurances and safeguards.
The two most common complaints we have heard from novice property investors who allowed a property
investment company to advise them are that the promised discount on purchase was more myth than reality;
and the valuation of the rent that the property could be expected to achieve was overstated.
These problems have sometimes arisen with seminar companies, who not only find properties (often flats
in apartment blocks yet to be built) for clients, but also find them a mortgage and find them a valuer.
And there's nothing to stop the seminar companies from receiving a commission on the properties sold and
on the mortgage, too. All very incestuous.
Whilst I am not making any suggestion that Andy
Shaw and Greg Ballard's company operates in a similar vein to some of the property investment companies/property
seminar companies who have been criticised, it is nevertheless true to say that you can't really
call them independent. After all, if you've given Andy Shaw and Greg Ballard £35,000 to find
5 properties for you to buy over the next 6 years, then presumably they are going to work hard to find
these 5 properties for you, whether or not it is a good time to buy and whether or not they are able to
find the very best deals.
At the end of the day, it is foolish to place a very substantial sum
like £35,000 as an advance service fee on the acquisition of an unregulated investment like property
in the hands of a "do-it-all" company, however well-experienced and well-intentioned they may be, without
having a second opinion on valuations from your own qualified professional valuer and without having safeguarding
arrangements to ensure that you have the right to get the money back if there were to be problems in future
delivery of the service.
This is particularly so because Andy Shaw and Greg Ballard themselves
say that their ability to acquire properties at a discount is the lynch pin of their scheme.
The UK's biggest property investment seminar company Inside Track themselves admit that "valuation
is not an exact science", and indeed there seemed to be some quite large variations in valuations
for properties purchased by their clients.
So if you sign up with Andy Shaw and Greg Ballard's
company, then get yourself peace of mind by obtaining your own valuation from a fully-qualified valuer
who is someone of your own choosing who has no links of any kind with the company, and who is not on any
"Recommended List of Valuers" which the vendor may offer. That way, you know that your valuer is
looking at your property with a fresh mind and has only had contact with yourself . The valuation
you get should be for both the capital value and the rental value of the property. Indeed, Andy
Shaw and Greg Ballard themselves may well recommend that you obtain your own independent valuation from
your own choice of valuer in any event, in line with best practice, albeit that there is no mention of
this on the website.
In summary regarding Andy Shaw and Greg Ballard's
scheme, it is very finely-balanced and appears to have no margin for error either on the capital side
or the income side so that if any of the variables do not perform to order - as is likely in real life
- the scheme won't work, or won't work as expected.
advance fee - assuming that it is paid without appropriate security - removes any confidence I may have
had in it.
However, anyone wishing to pursue it should, in addition to taking independent
legal advice on the contract and independent valuation advice on capital and rental valuations of any
proposed acquisitions, ensure that they have sufficient resources to tide them through hard times.
It's unfortunate that there are gushing reviews on the
Internet about Andy Shaw and Greg Ballard's scheme from several life coach ladies, such as Nicola Cairncross,
Gill Fielding, Judith Morgan and Maria Davies. All these ladies are professional people
in their own sphere, and it's worrying that they don't mention the need to have independent advice from
a qualified professional person on an investment which, for many people, will probably be one of the largest
Neither do any of Nicola Cairncross, Gill Fielding, Judith Morgan and Maria
Davies mention the need to have sufficient resources to tide you over hard times.
do Nicola Cairncross, Gill Fielding, Judith Morgan and Maria Davies mention any caveats about Andy Shaw
and Greg Ballard's mind-boggling £35,000 6-year advance fee. Instead, they just seem to say,
"Andy's wonderful, so just pay him and let him get on with it".
Here's what Nicola
Cairncross says on her website at http://www.asknicolacairncross.com/recommends/
where she recommends that people go to a Passive Investments Property "Portfolio Builder" Open Day
on 21st September 2007:
"Andy Shaw ... is probably the biggest
property investing genius in the UK at the moment ... This is a personal note from Nicola Cairncross,
introducing you to some very dear friends of mine. ... I first met Andy Shaw and Greg Ballard back in
2003 ... ! was stunned, and immediately said "my clients and mailing list would be SO interested in this!"
... I put on some Open Days at my hotel for them, and people beat my doors down ... We are all having
property portfolios build for us by Passive ... It's really important to me to know that we can relax,
knowing it's definitely happening, we are DEFINITELY going to be secure, financially free, even very rich,
at some point in the future. I can't tell you what that feels like after years of worrying about
money (as anyone who knows my story knows). And so I recommend them to everyone who wants to make
money from property, but is too busy, or too hesitant to take those first steps themselves.
recommend Passive because I know, like and trust them. I invest with them and recommend them to people
I love and care about.
Take a look at what Andy has to say below. Secure one of the 5 VIP slots,
they have given me for this free Open Day (you pay a deposit to secure your place, which you get back
on the day).
Check them out, take some action and make it definitely happen. Join our gang.
On his websites at www.andyshaw.com
and www.propertyinvestmentsecrets.co.uk Andy Shaw promotes an affiliate scheme about which he says, "Earn
Serious Commissions By Promoting My Very High Converting Property Investment Book... And Share Some Very
Easy, And Very Significant Recurring Income". In evidence of this claim, he states in a PS that
"A JV partner of mine, Nicola, made over £60,000 just by recommending our service to her
Maybe the £60,000 Nicola is not Nicola Cairncross,
but in a testimonial on the same website Nicola Cairncross says:"Andy has helped me transform
my businesses and my life. It's not just about money ... I would do anything for Andy, and anyone he holds
dear. Ignore him at your peril as your financial and personal life will be very different if you move
into Andy's orbit."
This is what the Passive Investments web
site says about Gill Fielding:
"We were persuaded
by an acquaintance Gill Fielding, who has now become a very good friend, that our product IS superb but
that we were not explaining it very well at all. We were not showing people the enormous benefits
to them which we knew were there. We were not making clear to people what a big deal this really was.
Gill offered to explain it to people for us at some Open Day Presentations, and didn't want to be paid
to do this for us, she saw our product as a way of helping her on her mission; which is to 'light the
spark of financial intelligence' in people. She then paid us the compliment of becoming our Client, going
on to present us as she saw us from both the view of a Client and a friend."
Fielding is a Chartered Accountant, a qualified teacher and coach. She manages "The Wealth Club"
through a company called The Wealth Company Ltd and "Very soon! Gill is in a well-known TV documentary
on Channel 4." Nicola Cairncross's website reveals that this documentary is called
The Secret Millionaire.
This is what Gill Fielding says on the website at www.certainshops.com:
"I became a Passive Client in early 2005. I bought my first property
through them in July 2005 at £82,000, they spent just £2,000 doing it up and it was re-valued
6 months later at £110,000. At that time I drew out £23K and there has always been a tenant
in the property. I am now eagerly awaiting property number two. I really like what Passive Investments
do for two reasons, firstly, I know from my own experience as a Chartered Accountant and as a presenter
of financial information, that the basic type of properties they buy - i.e. the 1 and 2 bedroom flats
and houses, over time produce the best return on my money both in terms of income yield and capital growth.
Secondly, I don't have to do anything!
This is brilliant for me as I am a busy person with my
own business and a hectic family life, with a husband and 3 kids and I just don't have the time to build
my property portfolio very quickly. So I am delighted to say that I've never even seen the property I've
bought from Passive but of course I have seen the profit, so I can't wait for the next property to arrive!
Normally, Chartered Accountants are very
hot on advising their clients to do due diligence, on advising them to obtain independent professional
advice, and on doing due diligence themselves. Indeed, these are basic elements of the "financial
intelligence" which Gill says is her mission. On this occasion, it seems to have been somewhat
overlooked: Gill Fielding's due diligence did not extend to seeing the property before she bought it.
Another "Personal Wealth Coach" effusing over Andy Shaw is Judith Morgan of www.judithmorgan.com
"Andy Shaw is The Man, the brains behind the UK
Wealth Creation Community to whom all the Movers & Shakers go for advice about any investment opportunity
we don't understand, are not sure about, or over which we would like him to cast his analytical eye. And
he is abundance personified. He reviews our propositions and offers up a complete review, frequently with
some sharp directional advice thrown in - which we sometimes don't like, but always know is for our own
Like Gill Fielding, Judith Morgan seems to have
left her brains and all professional procedures behind when it came to Andy Shaw's offers. (According
to her website at www.judithmorgan.com, Judith Morgan - like Gill Fielding - is or was an accountant.
"At the age of 22 I started my own accountancy firm which I sold twenty years later for an undisclosed
six-figure sum.") With all that business experience, how can it be that she failed
to caution people against paying an advance fee of £35,000 without a rock-solid guarantee backed
up either by insurance or a certified cash deposit?
Previous business activities of Andy
Shaw and Greg Ballard
I thought I had just about finished with what I had to say about
Andy Shaw and Greg Ballard's offer, save for my own usual due diligence check of the records at Companies
House, and I was going to rate it 2 out of 10. However, I had been intrigued to read the references on
the web site at www.passiveinvestments.co.uk about the "traditional business employing over 100 people"
which Greg Ballard and Andy Shaw used to run together. I found it curious that they did not say
what kind of business it was and this suggested that it could be worthwhile to find out.
I noticed from the photograph of the "Ashington Office" on the website that, behind the big Bentley,
the big Mercedes and the expensive-looking sports car, the office seemed to be a posh bungalow with two
enormous conservatories built on the side. "Double-glazing" sprang to mind.
the references on the web site to "Home visits" where "you'll have the delight of Greg coming
to visit you and discussing all the options open to you" made me wonder whether he used to be a double-glazing
salesman, since home visits are methods used by some double-glazing companies.
I was right -
a lot more right than I had bargained for.
A visit to Companies House revealed
that Andy Shaw and Greg Ballard have operated not one double-glazing company but a string of them.
5 current directorships are shown for Gregory John Ballard, all in companies which appear
to be in the property field. Also shown are 14 previous directorships in companies which have now
been dissolved. Some of these companies never traded, others traded and were dissolved in a normal
fashion with no creditors, but three of the companies were dissolved following creditors' voluntary liquidations.
Andrew Malcolm Shaw has 7 current directorships, a number of which are in the same
companies as Greg Ballard, and which also all seem to be in the property field. Like Greg Ballard,
Andy Shaw has a long list of 13 previous directorships in companies which have now been dissolved, many
of these being the same companies as those shown for Greg Ballard.
The three companies wound
up by creditors' voluntary liquidation are as follows:
a company which manufactured and installed double-glazed windows, went into creditors' voluntary liquidation
on 4th March 1999 owing £191,236. Andy Shaw was a director from 1st April 1998 and Greg Ballard
was a director from 5th February 1999.
Shortly before B.M.E.
went into liquidation, a new company, Mainmex, was set up to carry on the business of double glazing
manufacturer on 3rd February 1999. Andy Shaw was appointed a director on 5th February 1999 and Greg
Ballard was appointed on 1st August 2000. Sadly, Mainmex itself went into creditors' voluntary liquidation
on 27th May 2003 owing £857,221.
a company which had been dormant until 31 May 2003, was then activated to carry on the business of glazing
installation. On 8th July 2002 Greg Ballard had been appointed director and Andy Shaw secretary.
Woefully, this too went into creditors' voluntary liquidation on 8th March 2005 owing £55,092.
A fourth company, another manufacturing company called Brytex
which had been set up on 18th November 1998, was put into compulsory liquidation by the Official Receiver
on 2nd June 2003 upon the petition of a creditor. It's still in the process of liquidation.
Andy Shaw was a director of this company from 26th July 1999 and Greg Ballard was a director from 1st
Both Andy Shaw and Greg Ballard were previously directors in three other companies
involved in building installation and trades construction and these companies are still active.
Happily, Andy Shaw and Greg Ballard's property companies seem to be faring better than some of the double
glazing ones: they're all still active. Past and present directors of Passive Investments
Companies House records did, however, reveal unexpected directorship arrangements with Passive Investments
Ltd itself. Andy Shaw and Greg Ballard hold themselves out as running the company ... or, at least,
this is what I thought because they are featured on most pages on the company's website; and they say
that that are the people who invented the "Property Buying Machine
"; and they are the people who
do the seminars; and one of the offices is at Andy Shaw's home; and they are the people who are the authors
of the "Passive Investments - Looking Forward
" page and the "Mission Statement
" page; and,
finally, they repeatedly refer to themselves as "the partners of Passive
I was wrong.
Companies House records show that they have never been statutory directors of the company.
other person they describe on the web site as their "partner
" is Adrian Daniels
the overall finances of the company ensuring that all financial matters are accounted for
Whether he still does so is unclear, since he recently resigned as director on 27th August 2007, after
being the sole director of the company for a year, following the resignations of two other directors.
The current director is Philip William Doolan
, who was appointed
at the end of August 2007 on the day Adrian Daniels resigned.
This seems to be the same
Phil Doolan whose profile is shown on Andy Shaw's website at www.ourgifttotheworld.com
set up by Andy Shaw for making donations to charity by means of keeping a free item on your desktop but
which cannot be explained further because "right now we have to keep the details of exactly how it
will work secret because someone else could grab this idea
"). On this website Phil Doolan says
that he used to work for a local building company as their depot manager and, "I quit my "normal" job
back in July last year and I have been working on building my own web based businesses
On his website at www.phildoolan.com he says, "Hi, Thank you for visiting my site Last
year I quit full time employment and decided I was going to make money online and have a better life!
I started without even the knowledge of how to build a website. Now I make money from various different
sources such as Affiliate Marketing, Adsense, Consultancy, Joint Ventures as well as my own products
On Andy Shaw's website at www.andyshaw.com
, Phil Doolan gives a testimonial headed "I
totally trust Andy with everything
It would seem, then, that Phil Doolan was appointed
as the sole director of Passive Investments on the strength of his internet skills rather than due to
his experience of the property market or financial management. Hopefully, however, he will be able
to buy-in the appropriate expertise, and with the time-unexpired portions of customers' initial £35,000
fees still sitting securely in the company's bank account or a fiduciary account - as is surely the case
- he won't have been suddenly landed with too difficult a task.
The first and only accounts which
Passive Investments Ltd has so far lodged at Companies House (for the period from 18 May 2005 to 31 March
2006) show that the turnover was £1,130,148, out of which the profit was £121,178. The
accounts don't throw any light on any fiduciary or bonding arrangements which there may be in respect
of clients' £35,000 initial fees.
It is worrying that the two men whose names are associated
with this company have never had any statutory responsibility for it, and more worrying that the third
man who was involved in the company from the outset has recently resigned. And there's no explanation
on the web site.
I'd intended to rate this offer at two out of ten before I looked at the Companies
House records: now, it gets zero. Rating
A zero score or a low score means that in our opinion the business model or the
investment model has flaws and/or that we have found inadequate evidence to back up claims about earnings,
sales, profits etc. It doesn't mean this evidence does not exist and it doesn't mean that the opportunity
is a scam and it doesn't mean that the promoters are unprofessional or dishonest. Questions arising are
normally contained within the body of the review, and readers who are interested should contact the company
with these questions and/or questions of their own.
Subsequent events since this review are as follows:
- Increase in the six-year advance fee
The company's six-year advance fee of
£35,000 has now gone up to £37,500.
- 2007 accounts show no liability for
the unexpired parts of six-year advance fees received
Passive Investments Ltd has filed its
accounts for the year ended 31 March 2007. Although the turnover is healthy at nearly £2 million,
the administrative expenses are high so that the profit for the year is only £161,365.
Curiously, in the balance sheet, it seems that nothing has been carried forward for the time-unexpired
portion of the payments of £35,000 for the 6-year service fees which presumably make up most of
The accounts are unaudited so that, according to the Directors' Report, "The
directors are responsible for maintaining proper accounting records which disclose with reasonable accuracy
at any time the financial position of the company and to enable them to ensure that the financial statements
comply with the Companies Act 1985."
How can the company's position be accurately recorded
if its liability to provide services for 6 years is not shown? After all, the company is going to incur
costs over the six years - such as salaries for the people providing the services - and one would have
thought that some of the up-front fees should have been carried forward to cover these costs.
Indeed, the company itself says that this fee "covers some of our costs in building a portfolio
of 5 small properties (namely 1 and 2 bedroom flats) over a 6 year period... The up front fee we charge
is merely a cost covering exercise for the company and this covers the actual costs associated with the
construction and management of your portfolio".
BOW wrote to the company about this,
and you can see their response below.
- Change of directors
has been a change of directors. Philip Doolan resigned on 11th February 2008 and on the same day Gregory
John Ballard and Andrew Malcolm Shaw were appointed. It's good to see that Greg Ballard and Andy Shaw
now have statutory responsibility for the company that they have run from the outset.
assistance of "up to £342,962.50"
Two weeks after Andy Shaw and Greg
Ballard became directors, Passive Investments Ltd gave financial assistance to another company to acquire
22 of its shares.
This financial assistance took the form of a loan agreement for "a
sum of up to £342,962.50".
The company which bought the shares is Aberon Limited,
which has 100 issued shares of which Greg Ballard and his wife jointly own 50 and Andy Shaw and his wife
jointly own the other 50. The two directors of Aberon Limited are Greg Ballard and Andy Shaw.
Aberon Limited is quite a new company - it was only incorporated on 30th July 2007 and it has not yet
filed any accounts.
Quite how Passive Investments Ltd can afford to give such a loan is not clear
from its latest filed accounts - those for the year ended 31 March 2007 - because its total shareholders'
funds only amount to £260,143.
Amazingly, Andy Shaw and Greg Ballard still give the
same projections for growth in property values on the Passive website and they say (as at 6th October
"There are several figures used for calculating growth on property. At Passive
we like to be as realistic as possible so we use a figure of 8.5%."
Here's BOW's correspondence
with the company asking for their explanations:
3. BOW Letter to Andy Shaw
and Greg Ballard Passive Investments 8th October 2008
Watch is an online magazine which analyses and assesses all manner of earnings opportunities which are
advertised to the public, such as business opportunities, non-FSA-regulated investment opportunities,
and opportunities for betting on the financial markets, on the horses etc.
A reader asked for
BOW's opinion on Passive Investments last year and the review was published in the September 2007 issue
of BOW, rating it zero out of ten.
One of the reasons for this low rating was the six-year advance
fee charged by the company. At the time of the review, this was £35,000 and I see that it has now
increased to £37,500.
This is what you say on your website about the advance fee:
"This is the fee that covers the 6 year management and construction of your portfolio. This
fee is currently £37,500. The fee covers some of our costs in building a portfolio of 5 small properties
(namely 1 and 2 bedroom flats) over a 6 year period."
I'm writing to you now
because, from the company's accounts, it seems that these advance fees have been taken entirely as income
for the year of receipt, rather than being carried forward and only brought in as income on a year-by-year
basis over the six-year period to which they apply.
Is my interpretation of the accounts correct,
and if so how can it be said that the accounts meet the directors' obligations to "disclose with
reasonable accuracy at any time the financial position of the company"?
This is clearly
a matter of concern because your customers have a right to six years of services from your company and
their fees are intended to cover your costs over a 6-year period, as you say yourselves.
the company has now given financial assistance of "up to £342,962.50" to a new
company Aberon Limited owned by the directors of Passive to enable Aberon to buy 22 shares in Passive
Investments. Since Passive's accounts for the year ended 31 March 2007 show total shareholders' funds
of only £260,143, how can Passive have afforded to give this financial assistance when it already
has - apparently undisclosed - financial obligations for the next six years to its customers?
The auditors for the 155(6)a Declaration [who were not the company's normal accountants] were obviously
happy on this point, because they are required to take into account "contingent and prospective
liabilities of the company".
Because the company is several months late with filing
its latest annual return, I haven't been able to confirm the current shareholding position.
look forward to hearing from you.
You can see the review at www.businessopportunitywatch.com/BOW
Review of Passive Investments.htm
Letter to Andy Shaw and Greg Ballard Passive Investments 19th October 2008
I didn't receive any reply to my letter of 8th October.
The review has now been published
and you can access it at http://www.businessopportunitywatch.com/BOW Review of Passive Investments.htm
In accordance with Business Opportunity Watch's Terms and Conditions and particularly those for Right
to Reply, if there is anything you believe is incorrect then let me know and it will be changed. And/or
if you wish to make any statement for publication, then this will be added to the published review.
Response dated 22nd October 2008 from Passive
Dear Ms. Owen,
Further to your recent fax regarding the review of
Passive Investments that currently sits on your website www.businessopportunitywatch.com, I am pleased
to answer all of your questions and those of the singular reader who has provoked your investigation.
I am further reassured that this response will be printed in full on the website so that any misunderstandings
you, or your readers, might have can be clarified. I am also pleased that you will up-date your report
and remove references to old addresses, and photographs which may have led to misleading interpretations
of our business.
It is always a shame that so often well-meaning 'public service' websites and
television programmes, such as your own, publish the results of their research without speaking to the
companies in question. Inevitably, because of this, their opinion tends to be a little one sided. But
you are running a business and I fully understand that you need to be "sensationalist" to sell
membership to your site and to your reports, after all, we all know that dry and dispassionate reporting
is less likely to attract attention.
I am responding because it is important that we get the
facts straight, not least because our valued clients, and their professional advisers, might come across
your site and could possibly feel unsettled by your allegations and tone.
Our professional advisers,
who you refer to in your letter, might choose to take issue with some of your interpretations, so I would
like to reassure anyone who might read this, that Passive Investments operates with full transparency
under the knowledgeable and legal advice of respected firms of accountants and solicitors at all times.
The most important point to make is that Passive Investments is NOT a business opportunity, it is
NOT a home-working project, it is NOT a way to make extra cash fast, and should never be categorised as
such under any circumstances. You say yourself that you do not normally review 'business opportunities
costing more than £10,000' so it is rather misleading of you to go ahead and review our business
under the same criteria that you normally apply to these other opportunities.
Let me be clear,
Passive Investments is an investment management business and property is purely the investment vehicle
that we have chosen because of its historically proven return over the long term.
is important that I stress that our investors are part of a small number of individuals who 'buy' a place
within our limited number of investment slots. These individuals are frequently astute professionals (accountants,
dentists, doctors and so on) who recognise that they want to invest their money in a scheme that delivers
a far higher potential return than traditional methods. They understand this is an investment strategy
- not a business opportunity - and they can afford to pay the £35,500 six year advance fee for us
to manage the programme for them, because they do not have the time, or the expertise, to do it for themselves.
They do not need to see the properties (unless they wish to of course) because they will never live in
them. The only factor they care about is the long-term asset value.
This is why we are called
Passive Investments - we manage everything for our clients on a full time, on-going basis across their
growing property portfolios. This includes: researching suitable areas and sources of good investment
properties; identifying suitable partners to locate under-valued properties and managing those relationships
for the benefit of our investors; selecting suitable properties at the right time in each client's investment
cycle within their six year plan; handling all of the legal aspects of purchasing each property; co-ordinating
the refurbishment; arranging the remortgaging at higher values to release funds back into the client's
bank account; managing the letting process; providing regular portfolio reviews; maintaining close relationships
with our clients that can enable financial flexibility to suit their needs .... and so on.
is this on-going professional and experienced management of individual property investment portfolios
that they buy with their advance fee. Indeed, we have some clients who have purchased more than one place
on our scheme, and others who have 'attached' a second portfolio as they see their first one progressing
Now let me deal with the individual points of relevance that you highlight on
your site and in your letter:
a) Website Statistics. I admit that our website Property
Projections page is out of date and our team are examining how we can best manage that information. I
am sure however that you will understand recent fluctuations have made it difficult to be accurate at
all times. We have based the figures on underlying historical trends that can be proven, even allowing
for property booms and crashes, but we will find a way to improve and clarify this area to the benefit
of site visitors. We will also look at improving our explanation of interest rates and rental yield.
b) Risk. The risk associated with this investment is clearly explained to our clients who, as I have
already stated are professional and savvy individuals that can afford our services. We always advise our
clients to take independent legal advice and our contracts are checked by their solicitors.
Passive Investments' business model: We cannot be compared to Inside Track or other property investment
companies that sell 'off plan'; this is not our business model.
d) Client advocacy: The comments
from clients that are on our website are genuine and unsolicited. We invite all new clients to read these
case studies in more detail to learn how our investment programme works. These are professional business
people who thoroughly checked our services before committing to a portfolio with us. They will be dismissive
of your observations regarding their due diligence.
e) Directors' Background: All of the businesses
with which the key directors Andy Shaw and Greg Ballard have been involved, past and present, have been
managed legally with appropriate professional advisers. Other changes in directorship have been for private
reasons - these may be personal ones, or due to other commitments.
f) Security of £37,500
for the six year management fees. It is clearly stated that this is paid up front and is non-refundable.
It is our choice, within legal accounting principles, to allocate and use these funds in whatever period
we deem appropriate.
I hope this clarifies the issues you have raised. If the particular
reader who raised some of these questions needs further clarification on any specific point perhaps they
would like to get in touch with me on firstname.lastname@example.org.
Head of Client Services
Letter to Steve Howson Passive Investments 24th October 2008
Dear Mr. Howson,
reply has now been published in full on the BOW site.
However, a few loose ends remain.
Could you please confirm whether the company borrowed money from Barclays Bank against the new debenture
of 14th November 2007 which gave the bank a fixed and floating charge over all of the company's assets?
If so, was this money used for normal trading purposes or was it used to lend to the new company,
Aberon Ltd (whose business is stated as that of "Holding companies including head offices" and
which is owned 100% by Andy Shaw and Greg Ballard) so that Aberon could buy shares in Passive Investments
Could you please also confirm who owned the 22 shares in Passive Investments which were
purchased by Aberon in February 2008 with the loan from Passive Investments for "a sum of up to
£342,962.50"? The reason why I need to ask you this question is because the company's Annual
Return for the period ended 18th May 2008 should have been filed at Companies House on 15th June 2008,
but it is 4 months overdue.
Presumably, the directors have a positive view of the trading outlook
for Passive Investments despite the big problems faced by the property market, because a price of £342,962.50
for a minority shareholding (22%) implies that the company is worth substantially more than £1.5
million. Would you like to make any comments on the current trading outlook for Passive Investments? If
there has been new finance, then will this help?
dated 22nd October 2008 from Passive Investments
Dear Ms. Owen
Thank you for
publishing our reply on the BOW site.
As we have already clarified, Passive Investments provides
an investment strategy for a relatively small number of individual clients all of whom fully understand
the nature of our products and services. It is not a "business opportunity to be run from home"
nor a mass market product and it is misleading of you to include us in your comparison website.
May I politely point out to you that how we choose to run our company is our own affair - we take our
financial and legal obligations very seriously indeed, and our responsibilities towards our clients, employees
and suppliers are foremost at all times. I am not prepared to enter into any kind of protracted correspondence
about private company matters - so our correspondence is herewith concluded.
Any private investor,
or visitor to your website who wants more information about Passive Investments, is welcome to contact
Head Of Client Services
BOW Conclusions on correspondence with Passive Investments,
Andy Shaw, Greg Ballard, Steve Howson
1. As Steve Howson says, the reference to "business
opportunities" in the first line of the BOW review of Passive Investments is confusing. It was a
mistake, and the word "business" has now been removed so that the opening sentence now simply
reads as follows:
"Historically, BOW hasn't reviewed opportunities
costing more than £10,000."
2. As is clearly explained on this website,
BOW reviews the whole range of opportunities to make money which are marketed to the public, and this
includes business opportunities (e.g. home business opportunities, Internet business opportunities, network
marketing, franchises etc.), gambling opportunities and non-regulated investment opportunities. Passive
Investments falls into the category of non-regulated investment opportunities.
Steve Howson says,
" ... it is rather misleading of you to go ahead and review our business under the same criteria
that you normally apply to these other opportunities".
But it isn't misleading at all
because the criteria which BOW uses to analyse all opportunities are clearly explained on the About page
of this website - and these criteria are equally valid for non-regulated investment opportunities as they
are for home business opportunities or gambling opportunities.The key criteria which BOW uses for analysis
is whether there is any evidence to support the promises and claims which the promoter makes for his opportunity.
3. Steve Howson says that, "It is always a shame that so often well-meaning 'public service'
websites and television programmes, such as your own, publish the results of their research without speaking
to the companies in question".
BOW doesn't generally speak to companies prior to publication
for the simple reason that its research is based on information which has come from them in the first
place in the form of their own marketing material and/or on information which is otherwise indisputable
because it comes from an official source such as Companies House.
It's also notable that, despite
Steve Howson's complaint on this point, in his letter he has not provided much information which was not
already given in the review.
4. Steve Howson says that " ...our investors are part of
a small number of individuals who 'buy' a place within our limited number of investment slots ... a relatively
small number of individual clients all of whom fully understand the nature of our products and services.
It is not a "business opportunity to be run from home" nor a mass market product".
In fact, however, this investment opportunity was quite widely marketed through the web sites of
the life coaches referred to at the beginning of the review, and it was also marketed to the business
opportunity market through Simon Coulson's website at www.business-opportunity-review.co.uk. The marketing
generally took the form of sales of Andy Shaw's book Money For Nothing And Your Property For Free,
which promotes his company's services. Also, the company was running regular open days at a hotel near
It is, however, true that the company has a relatively small number of investors.
Although the turnover in the 2007 accounts was nearly £2,000,000 this only equates to 57 new investors
paying £35,000 each - and, in fact, the number of new investors would have been smaller than this
because part of the £2,000,000 would have come from additional fees charged by the company for managing
Perhaps a lot of people attending the seminars blanched, like BOW, at the
idea of paying a six-year advance fee?
5. Readers can judge for themselves whether BOW's reporting
is "sensationalist" as Steve Howson claims. What is sensational, though, is the six year
advance fee. And the string of double-glazing companies is rather eyebrow-raising, too.
of whether you are going to live in it or not, buying a house without even going to see it first seems
a cavalier way to treat such an important investment.
7. It's good to know that Passive advises
its clients to take independent legal advice. However, the kingpin of the Passive scheme is the company's
claim to be able to buy properties at "significantly under market value" and the projections they
quote are based on acquisitions at major undervalues of between 25% and 20%. Steve Howson's letters are
silent about whether Passive also advises its clients to take independent valuation advice on the capital
and rental values of the properties.
8. Regarding the £37,500 six year management fees,
Steve Howson says that, " It is clearly stated that this is paid up front and is non-refundable.
It is our choice, within legal accounting principles, to allocate and use these funds in whatever period
we deem appropriate."
He seems to have missed the point that Passive Investments itself
says that it has liabilities (i.e. not just contingent liabilities, but actual liabilities) in the form
of the costs required to meet its obligations under the contracts to the ends of their six-year terms.
(Naturally, Passive clients are still likely to want to exert their rights to use the company's services
to acquire five properties over the 6 year contract term because - even in a falling market - you could
always make a good profit by purchase and resale since the company says that they have a special ability
to acquire properties for a substantial undervalue of between 20% and 25%.)
It appears that these
liabilities are not shown in the company's accounts. Moreover, it appears that they are substantial, because
the company's website says that the advance fee covers only "some" of them, as follows:
"This is the fee that covers the 6 year management and construction of your
portfolio. This fee is currently £37,500. The fee covers some of our costs in building a portfolio
of 5 small properties (namely 1 and 2 bedroom flats) over a 6 year period."
then, if these liabilities were shown in the company's accounts, the effect would be substantial. Of course,
the company would have made sure that the bank offering the new loan and the auditors for the share repurchase
were fully aware of them.
9. Steve Howson says, "I am not prepared to enter into any
kind of protracted correspondence about private company matters" and "we take our financial
and legal obligations very seriously indeed".
Fair enough, except that BOW's main question
was whose shares the loan of "of up to £342,962.50" had been used to buy. At the
moment, this does indeed remain a "private company matter" because the company is committing
a criminal offence by still not having submitted its Annual Return, which is now five months overdue and
which would have answered this question. Directors can be fined up to £5,000 for late submission.
Because the company has not provided the information either to BOW or to Companies House, readers
may be left wondering about the possibility that the new bank loan which the company took out was then
used at least partially to fund the loan "of up to £342,962.50" to the new company
Aberon to purchase shares owned personally by Andy Shaw and Greg Ballard at a price which looks rather
If so, then some of this money could have gone straight into their pockets.
9. Response from Passive Investments 25th November 2008 to BOW Conclusions
Dear Ms. Owen,
In response to your 'Conclusions on Passive correspondence' I would like
to comment further on three matters:
Firstly, we feel rather ambushed by your latest letter having
only received your fax on Friday morning and being expected to respond by 6pm the same day or you will
publish regardless. If I had been out of the office we would have been unable to respond within your imposed
deadline and that would have been regrettable. We cannot understand why you would want to put such a short
deadline on our response and why you could not give us a reasonable amount of time to respond is a mystery.
There are two specific points that I wish to comment upon before bringing
this matter to a close.
In point '7' you raise the issue of valuations and seem to imply
that our valuations are not independent. May I state quite emphatically that every single property valuation
is undertaken by a professional surveyor who is approved by the lender and appears on the lender's approved
list; Passive Investments does not employ or pay the surveyor. It is totally independent and the surveyors
are the people who value the properties for mortgage purposes. Your somewhat suggestive statement regarding
the properties (sic) capital and rental valuations suggest that you have a poor understanding of the property
and mortgage markets and therefore perhaps you are not in a position to be questing (sic) our methodologies.
As regards point '9' - you seem determined to give everyone the impression that in some way what
we are doing is underhand and you clearly believe the worst. I will reiterate once again that we do run
our business affairs property, and take legal and financial advice from respected professional experts
under whose guidance we comply with all obligations. Has it occurred to you that we may just be going
about business properly and that we may not be answering all of your questions because they relate to
private business matters and we may not want everything we do broadcast to the world?
I invite any of your readers to contact me directly if they would like information about Passive Investments
and our investment strategy.
Head of Client Services
Points to note are as follows:
1. In fact BOW's letter to Passive did not ask for a full reply by 6pm of the same day "or
you will publish regardless". In view of Passive's last letter implying that they did not want
to enter into any further correspondence, BOW's letter asked them to advise by 6pm of the same day whether
or not they wished to reply and it stated that, if so, and if they would like more time to do so, the
Conclusions contained in paragraph 8 above would not be published until their reply was received.
2. Valuation is not an exact science, and obviously it's going to depend on the instructions given
to the valuer by whoever it is is who has ordered the valuation. In the case of a mortgage valuation,
the valuation has of course been ordered by the lender. In recent years it has become clear that some
lenders have been prepared to go to unusual lengths to increase their sales, taking on extra risks in
the process. In some cases, these risks have now come home to roost. For example, Lord Higgins said in
The Lords on 6th October 2008, " ... Northern Rock ... was in trouble because it gave excessive
No doubt Passive Investments "directed" its clients
towards a prudent lender rather than a risk-taker, but the example of Northern Rock serves to graphically
illustrate the crucial point is that a mortgage valuation is done for the lender - it is not done for
Because the valuation is done for the lender, that means that the borrower can't
rely on it. Indeed, the website of the Royal Society of Chartered Surveyors makes this point, too. They
"It is designed primarily for the lender to advise them
of the existence, condition and suitability of that property for mortgage purposes. It should never be
relied upon by a purchaser as a statement of the condition, since it is not a survey and not designed
for the benefit of the applicant (purchaser)." :
Consumers Association and the Council of Mortgage Lenders both recommend that house buyers get a survey
With the Passive scheme, the valuation of the property is crucial because the scheme hinges
on properties being acquired at a substantial undervalue of between 20% and 25%. There is no indication
that any personnel of Passive Investments are qualified surveyors or valuers.
Since it appears
that Passive clients are not advised of the need to even go and visit their properties, it would appear
that these clients are taking an unnecessary risk if they do not commission an independent survey and
valuation report - for example to ensure that the property does not have any structural problems whose
rectification could eat into the crucial 20% - 25% claimed undervalue on acquisition.
assertion that "you seem determined to give everyone the impression that in some way what we are
doing is underhand and you clearly believe the worst" is unfair. BOW reports on facts. In the
course of BOW's research into Passive Investments, some unusual facts came to light, including the one-year
write-off in the accounts of the six-year advance fees and the financial assistance for share purchase.
BOW asked the company for explanations, but whilst they gave assurances of their probity etc. they did
not give any direct answers to the questions.
Moreover, Passive persists in claiming that "we
may not be answering all of your questions because they relate to private business matters and we may
not want everything we do broadcast to the world" when the key question BOW wanted to know was
whose shares had been repurchased. This is information which is required by law to be "broadcast
to the world" by submission to Companies House where it is available for public access. Passive's
Annual Return has still not been submitted to Companies House and is now more than five months' overdue.
In response to the question "What happens if I do not submit accounts or annual returns
to Companies House?" on the website of Companies House at www.companieshouse.gov.uk, the answer
is as follows:
"As a director
of a company Companies House can prosecute for not submitting these documents on time. This is a criminial
offence and upon conviction the court can fine a director up to £5,000 for each offence."
10. Correction re Maria Davies of Ladders of Success
dated 16th January 2009
Maria Davies of Ladders of Success at www.laddersofsuccess.com and
www.womeninpropertyinvestment.com has contacted BOW to ask for a correction as follows:
"I should point out that the only "gushing review" I ever wrote was for Andy's book,
NOT their portfolio build service, and when I bought into it myself it was £24,000 not almost £40,000."
It is the case, however, that Andy Shaw's book was a marketing tool for the Passive
Investments portfolio build service, as Maria herself recently said:
still think Andy's book is good for motivating people but he does take about 350 pages to say what I say
in one section of mine, and I removed it because it is basically a tool to hook people into his
membership site and then onto Passive Open Days".
like Maria Davies who marketed the book were, according to Andy Shaw's website at www.propertyinvestmentsecrets.co.uk,
also in line to receive "Serious Commissions" on people they introduced into the Passive
Investments "profit funnel":
"... Just one easy
book sale can end up making you as much as £1,598.70 (it will soon be more, see below) commissions
in time - combining front end, ongoing recurring and backend earnings ...
FREE info easily converts the subscribers you refer happily into our profit funnel (for higher conversions
and bigger commissions to you) ...
... On the initial book sale you'll earn 50% commission (raised
from 25% which in itself provided huge commissions for initial partners because conversions were so high
and sales were so easy) ...
... Then the membership site pays £10/mth commission
for the life of the membership and if the client goes on to take up my main company's service then there
is a 5% commission payable on a £35,000 product.
... A JV partner of mine, Nicola,
made over £60,000 just by recommending our service to her list - I can't promise the same results
for you, but I can promise you, this is an opportunity for a huge return on your investment ..."
also the case that Passive Investments is still listed on her website page headed "Book Maria
To Present" as a client for her business as a speaker at property investment events, together
with a testimonial from Andy Shaw and Greg Ballard of Passive Investments as follows:
"Maria spoke to a sold out audience and the level of interest which was created through her
presentation helped to make this our best exhibition. Not only that, but the organisers confirmed that
Maria's presentation was the best by far, out of around fifty, and they are pleased to offer us three
presentation slots at the next exhibition. This will raise our company profile no end and has directly
brought us new business."
Greg Ballard & Andy Shaw
August 2007, too, the Passive Open Days were listed on Maria's blog on her website www.laddersofsuccess.com
under "Recommended" with a link which looks like an affiliate (commission-bearing) link.
Also, on Maria's website at www.womeninpropertyinvestment.com Passive Investments was listed on the
"Essential Resources" page with an asterisk to indicate "Those I can personally
and unreservedly recommend to you, having had direct experience of them". In addition, there
was a picture of herself with Andy Shaw at the top of the Photo Gallery page on this website, and Maria's
review of Andy Shaw's book also appeared on this site with a link which again looks like a commission
link to download the first five chapters for free - presumably a link to the "Serious Commissions"
of "as much as £1,598.70" per sale, described above.
then disappeared from the womaninpropertyinvestment.com website, which currently promotes Caribbean 5
Star Investments (www.caribbean5starinvestments.com). This is Maria's company, and her co-directors are
Mike and Kim Withey and Dr. Rohan Weerasinghe. Maria speaks at seminars to promote the services of this
company. Andy Shaw's book was replaced by her own book "The Advantages of Real Estate by Maria Davies
(and other leading real estate experts)".
Maria has told BOW that she is no longer working
with Passive Investments nor recommending them.
11. Latest developments
per Guardian article 7.12.09
Did you see the article in Monday's
Observer by Grahm Norwood?
By my calculations Passive need to account for some £10 million of client money???
Thanks, I hadn't seen the Guardian article.
am surprised that the liquidation that Passive Investmenis about to enter is a voluntary one. I think
that there are five of issues of concern here:
- The viability of the scheme at the outset
(although business expert Gill Fielding and property expert Maria Davies clearly disagreed with my analysis
and conclusions because they thought it was great).
- The financial assistance for share
purchase which I commented on in an update to my review.
- The unusual accounting treatment
of recognising in the year of receipt the whole of the fees paid for six years' services (although, again,
James Harmey of ALB Audit Ltd presumably found no fault with this in connection with the financial assistance
for the share purchase).
- The sales activities that took place at Passive recently when
it was already set for liquidation (as stated in the Guardian article),
- The arrangements
with the new companies.
If you have invested with Andy Shaw and Greg Ballard's company (or
you are in contact with other people who are investors), then in view of the amount of money which investors
have lost I would recommend that you (or they) contact Companies Investigation branch to ensure that they
are aware of what went on in the past and what is going on now with Passive. Companies Investigation Branch
have wide powers to investigate companies' affairs and they are very good at their job, so they will be
able to decide whether or not Passive Investments is a company they should look into. They can also look
into the conduct of directors. The link for Companies Investigation branch is:
12. E-Clear goes into administration January 2010
Collapse of Scotland's biggest airline Globespan
ALB Audit James Harmey auditor of E-Clear until April
The travel industry is considered to be a high risk sector for payment firms offering
credit card processing services, because large sums of money are often paid months in advance of the date
of the holiday or the flight. If the holiday or the flight does not take place, then the money has to
be returned to the customer.
E-Clear, whose boss is Elias Elia, a Greek Cypriot with years of experience
in the travel industry, specialised in offering payment processing facilities to firms that other credit
card processors considered to be too great a risk. Their client base included smaller firms as well as
a number of travel companies. E-Clear's business was to process customer's electronic payments and pass
these payments on to their company clients, minus their commission.
According to E-Clear's accounts
for the 19 months ended 29th February 2008, the company was in a fine state of health. It had a profit
before tax of over £8 million and balance sheet assets of nearly £16 million.
handled massive cash flows, with gross processing fees of nearly £800 million.
was, astonishingly, James Harmey's tiny firm - ALB Audit - the same firm which appears to have found no
fault with the unusual accounting reatment of the six-year advance fees received by Passive Investments
iin connection with the financial assistance for the share purchase, as referred to above.
Harmey gave a clean audit report to E-Clear's 2008 accounts on 12th March 2009.
By the end of
2008, however, E-Clear was already experiencing problems due to the failure of some of its other travel
company clients. The collapse of these other travel clients meant that E-Clear became liable to make refunds
to holidaymakers for holidays and flights which had not taken place.
E-Clear went into administration
in January 2010, and according to the accountants BDO appointed to deal with the administration what happened
was that, because E-Clear had not retained enough cash to give refunds to the customers of its failed
travel clients, it made these refunds out of current receipts of cash from customers of its other solvent
As a result, E-Clear started delaying payments to its solvent clients, and this precipitated
the collapse of E-Clear client Globespan, Scotland's largest travel company.
Mr. Elia says that
this is not what happened at all, but did not further elaborate in an interview with BBC's Face The Facts
in June 2010.
According to an article in the Mail on Sunday dated 24th January 2010, E-Clear
was negotiating for a £100 million loan from a sheikh. A spokesman for James Harmey, the auditor
of the company's 2008 accounts, said that he "understood this deal was at a relatively late stage
and was a when, not an if", and this was a key factor in making him give a clean audit report.
Harmey told the Mail on Sunday that he had been auditing the firm since 2003 and had "been trying
to get them to take on a larger firm of auditors because they have grown so much".
Harmey also told the Mail on Sunday that he had resigned as auditor in April 2009. Unfortunately, there
is no record of his resignation at Companies House, whereas E-Clear was obliged under the 2006 Companies
Act to send a copy of the notice to Companies House within 14 days of the resignation.
Fraud Office is now looking into events.
In the meantime, it seems that James Harmey is closing
his ALB Audit firm since there is a proposal lodged at Companies House for the company ALB Audit Limited
to be struck off, using the normal voluntary procedure.
In July 2009 James Harmey set up a new
accountancy firm ALB Accountancy (Southern) Limited, and he remains a director of annother accountancy
firm Amberley Lockwood Brooks Accountancy Limited.
(Update 16th November 2010 - ALB Accountancy
(Southern) Limited is also set to be struck off using the normal, voluntary procedure according to a proposal
filed at Companies House.)
13. Passive Investments Liquidation 11th
Documents filed at Companies House show that Passive Investments had an estimated
deficit of £8.6 million when it went into voluntary liquidation on 11th December.
debtors are as follows:
Aberon Ltd is shown as owing £45,000, and
the liquidator estimates that this debt is worth nil. Aberon was the company which received financial
assistance from Passive Investments Ltd to purchase shares in Passive Investments Ltd in February 2008,
on the basis of a valuation which put the total value of Passive Investments Ltd at a figure substantially
in excess of £1.5 million. An obvious question is whether this valuation took proper account of
the liabilities of Passive Investments Ltd to fulfill its 6 year portfolio contracts, a question which
BOW previously put to the company and which was brushed off - see link.
ASGB Partnership is shown as owing £400,000. AS and GB are the initials of Andy Shaw and Greg
Ballard. The liquidator estimates that this debt is worth nil.
are as follows:
PAYE and National Insurance
Redundancy Payments Office £35,000
Barclays Bank plc
(deficit on assets subject to fixed charge) £56,000. See above. This would have
been monies advanced by Barclays on the security of the debenture of November 2007, which was three months
before Passive Investments Ltd gave financial assistance to Aberon Ltd for the purchase of shares in Passive.
PD Internet Futures and Profix Maximisation Ltd, companies owned and run by Phil Doolan, are
owed a total of £283,855. It seems that this has not changed Phil Doolan's testimonial headed "I
totally trust Andy with everything", because it still appears on Andy Shaw's websites at www.propertyinvestmentsecrets.co.uk
and www.property-investment-secrets.co.uk - although it does appear that these websites are in need of
updating because they still also contain the following testimonials:
"Andy is an extremely powerful and impressive thinker, doer, and facilitator of success for others"
Maria Davies: "Like all great philosophers, Andy's ideas are ahead of their time and
often contrary to the "mob mentality", but analysed to the nth degree with every angle considered
from a long-term viewpoint. Second is his obvious desire to help others break out from the mundane. Through
this desire, his ability to inspire and his revolutionary ideas, I believe he will leave a positive legacy
for generations to come."
Judith Morgan: "If you are serious about becoming
wealthy yourself then you MUST become an Andy Shaw Insider."
"The clarity of thinking Andy bring to the table is nothing short of brilliant. I would do anything
for Andy, and anyone that he holds dear. Ignore him at your peril as your financial and personal life
will be very different if you move into Andy's orbit."
Greg Ballard: "His
insight into making money is incredible".
As stated above - link
to earlier Phil Doolan information - Phil Doolan was appointed a director of Passive Investments in
August 2007 and he resigned in February 2008, a few weeks before the company gave financial assistance
for the purchase of its shares.
Portfolio agreement claims £7.9 million. This presumably
represents the liability of Passive Investments to continue supplying the services that it contracted
to supply for six years when it took the advance fees from its clients. As discussed above - link
- and as BOW queried with Passive Investments Ltd, the big question is why this liability was not shown
in the company's accounts.
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