Ashley Guy Rhodes fined $20,000 for illegal invoicing
26 March 2007
Ashley Guy Rhodes has been fined $20,000 in the North Shore District Court for 47 charges of breaching the Fair Trading Act by sending false invoices.
The invoices claimed that individuals and businesses had agreed to purchase advertising from companies owned by Mr Rhodes. In fact, the invoices were for adverts that had never been ordered. Staff were led to believe they had simply forgotten the arrangement or that someone else had ordered the advert.
Judge Morris said that Rhodes showed a "remarkable insistence for illegal forms of marketing." Rhodes and his four companies were fined $130,000 in June 1998 for similar offending.
In this case a fine of $170,000 would have been appropriate, Judge Morris said, but the Court had to take into account Mr Rhodes' current financial position and his ability to pay a fine. In this instance, the Court could not fine the companies that were used by Mr Rhodes as they were either "shell" companies or had been struck-off.
Between April 2002 and July 2004, Rhodes' agents sent hundreds of false invoices saying that people had ordered adverts in worthy-sounding publications such as NZ Child & Road Safety Journal, Regional Road and Child Safety Review, and NZ Victim Support Journal. The publications either didn't exist, or were printed in such small numbers as to render the advertisements worthless.
When victims refused to pay the false invoices, Rhodes sent threatening letters with legal wording, which falsely claimed to be from a company located in the "Russell McVeagh Building" - a reference to the law firm of that name. In fact, the physical address given was that of the Queen Street Burger King.
Commerce Commission's Director of Fair Trading Deborah Battell said the Commission would not tolerate such deceptive conduct.
"This is not the first time we have taken Mr Rhodes to court. We will monitor complaints about his business dealings and take further legal action if we find he does it again."
Ms Battell warned businesses to be wary of any invoices they received.
"To protect yourself from con artists like Rhodes, make sure you have good systems in place for paying invoices."
"Many businesses generate a specific purchase order number for every payment they approve, and they require this number to appear on any invoice."
"The bottom line is to have an established system for approving invoices, and make sure everyone in your business knows how it works."
"That should give staff the confidence to ignore the pressure placed on them by people sending these false invoices, who can be very persistent and pushy."
Mr Rhodes was also ordered to pay a total of $1959.98 in reparation orders.
Charges.Of 47 charges, 31 relate to Mr Rhodes, and 16 to companies he ran.
Companies operated by Rhodes.
Companies operated by Rhodes.Nalana Holdings Limited, Ascon Limited, Zennith Holdings Limited, Dekko Two Limited, Dekko Limited, Cera No. 3 Limited, Cera No. 2 Limited.
Rhodes operating technique.
Rhodes operating technique.Rhodes identified prospective advertising customers by looking at the advertising that appeared in other (legitimate) publications and other advertising magazines. He then approached the customers, usually small businesses and professional firms, to seek an order for advertising in one or other of the defendants' publications.
Rhodes would seek an authorisation on one publication, and then if a customer signed off on that authorisation, the defendant make further approaches for other purported publications.
Typically the complainants received an unsolicited telephone call from a sales representative telling them they had agreed to buy the advert. Many did not question this, believing the advertising had been approved by someone else, or getting confused as they had approved advertising in a journal of a similar name.
After being misled into agreeing to place advertising, the recipient would usually receive a faxed contract order form ("authorisation letter") which asked them to authorise the placement of an advertisement by signing the contract and faxing it back The authorisation letter would have a number of handwritten comments on it seeking 'urgent sign off' so as to meet a publication deadline. In other cases, complainants were mislead into believing that the advertisment was to be a 'one-off' placement by virtue of comments made that this is a "one off, no repeat" advertisment.
Once the authorisation letter was returned, the recipient invariably received an invoice for the advertising service. Often complainants were told that they would not have to pay for the advertising until they received a copy of the publication. However, the complainants would often receive the invoice almost immediately after they had signed an authorisation letter.
Previous offending by Rhodes.
Previous offending by Rhodes.In June 1998, the North Shore District Court fined Ashley Guy Rhodes, Zennith Publishing Limited, Debson Holdings Limited, Summit Publications Limited and Pana Publications Limited $130,000 for breaching the Fair Trading Act for false invoicing. The companies were fined $5,000 on each of 22 charges and Mr Rhodes $10,000 on each of two. The media release is available on the Commission's website at http://www.comcom.govt.nz/MediaCentre/MediaReleases/ArchivedReleases/1997/directorandhisfourc.aspx
Fair Trading Act. Section 13(c) of the Fair Trading Act states:No person shall, in trade, in connection with the supply or possible supply of goods or services or with promotion by any means of the supply or use of goods or services, - Make a false or misleading representation that a particular person has agreed to acquire goods or services.
Fair Trading Act penalties.
Fair Trading Act penalties.For offending prior to 8 July 2003, an individual could be fined up to $30,000 and a company up to $100,000 for each breach of the Fair Trading Act. From 8 July 2003, fines were increased to up to $60,000 for an individual and up to $200,000 for a company. Mr Rhodes was fined for an offence that occurred after 8 July 2003.