Federal Court freezes assets of Greenstar Cooperative Ltd following ACCC application

In a continuing Federal Court action against the Greenstar group of companies and associated directors, the Australian Competition and Consumer Commission has obtained, with the consent of the parties, a Federal Court order to freeze the assets of the companies for non-related business expenditure.

It also requires the companies to allow ACCC officers to inspect their accounts.

The freezing order, known as a mareva injunction, was granted against Greenstar Co-operative Ltd, Greenstar Management Pty Ltd, and one of its directors, Mr Kevin Robert Smith.

These orders follow interim injunctions granted by the Court on 14 June 2001. They will remain in place until the matter is determined at trial or any earlier order is consented to by the parties. The orders prevent the companies and Mr Smith from:

• utilising or in any way disposing of the companies or Mr Smith's financial or physical assets, whether the property is held within or outside the jurisdiction
• taking further credit card deductions from members who had withdrawn their authority to do so; and
• spending any money held in their National Australia Bank or BankWest accounts; without the prior written consent of the applicant.

The ACCC sought the orders to ensure the funds and assets of the companies are protected to the benefit of consumers currently involved in the scheme until the matter is resolved.

Background

The ACCC Federal Court action alleges Greenstar Co-operative Ltd and Greenstar Management Pty Ltd and other related companies (Bio Enviro Plan Pty Ltd, Buyplus Commodities Brokers Pty Ltd) and their associated directors were involved in illegal pyramid and referral selling schemes. The ACCC also alleges that the companies misled consumers and made false representations in relation to the attributes of a transaction card and an earthworm farming program which were part of the pyramid selling scheme.

The ACCC action alleges the conduct of the companies and directors breaches a number of the consumer protection provisions of the Trade Practices Act 1974.

The Greenstar scheme has been extensively promoted on the Internet and at public meetings in capital cities across Australia. The ACCC alleges consumers were induced by Greenstar to join the scheme by promising members a worldwide business that could generate lifelong, residual income, 24 hours a day, seven days a week, from seven different streams of income, without the member leaving his or her home.

Further, the ACCC alleges Greenstar and the directors have claimed to prospective members that:

Greenstar members who paid US$30 per month for 36 months and who wished to leave the scheme would receive their money back in full;

Greenstar would provide members with electronic 'transaction cards' which could be used for making purchases anywhere in the world where major credit or debit cards were accepted (including over the Internet), withdrawing money from ATM machines worldwide, transferring money and making phone calls at cheap international rates, and that the transaction charge from users would be returned to the members 'world pool' providing the potential for huge returns to members; and

Greenstar is the major shareholder in Australian Environmental Technologies and that dividends from these shares would flow into the Profit-Share pool with AET anticipating an April/May 2001 float.

The ACCC alleges these representations were false, misleading or deceptive.

The ACCC is seeking court orders against Greenstar, the other companies, and the directors. The orders sought include declarations of breaches of the law; injunctions stopping similar conduct in the future; refunds for affected consumers; and a compliance program and costs. The matter has been set down for further directions on a date and time to be advised after 5 August 2001.