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Special Investigation: Z-Tek trades on, defies authorities

Special Investigation: Z-Tek trades on, defies authorities

Andrew Dunner is an exhausted man. Almost 12 months ago, he was appointed liquidator for Z-Tek Pty Ltd, a wholesaler forced into liquidation after Taiwanese vendor Lite-On Technology took legal proceedings against its directors for over $1 million in unpaid debt.

As Dunner attempted to secure what was left of the company for creditors, he discovered Z-Tek would not be a straight open-and-shut case. The business had little in the way of financial records, stock had been stolen from the premises just days prior to his appointment, and various off-shoots of the Z-Tek business had sprung up around the country. He began reporting anomalies to the relevant authorities in the hope of some kind of return, but he has found nothing but resistance at every turn.

Disappearing stock, disappearing cash

As of June 30 in 2001, Z-Tek Pty Ltd had recorded a profit of $1.3 million. But just before Dunner's appointment as administrator on August 8, those finances had disappeared.

"Within a matter of days, everything was gone," he said.

The same goes for stock. Dunner believes that prior to his appointment, there should have been at least $1.5 million to $2 million worth of stock on Z-Tek's Melbourne premises. There was no stock. "In a day of normal trading activity, those premises would have been crammed full of stock," he said. "You can't tell me they sold it in those few days beforehand."

Many sources speculate the stock was moved to another premises owned by the Z-Tek group of companies. The theft would lead Dunner, backed with a "search and seizure" warrant signed by the Australian Securities and Investment Commission, to remove stock and records from Z-Tek's Melbourne, South Australian and NSW operations, as well as director Li Ping Huang's private residence.

ARN learned at the time that a separate legal entity, named Z-Tek Computer (NSW) Pty Ltd, sent a fax to its customers informing them that it had changed address. It would now operate out of Fairbank Road, Clayton, Victoria -- the registered office of the Z-Tek Computer Pty Ltd business that had been forced into liquidation a fortnight earlier. Dunner soon discovered that Z-Tek continued to operate, albeit under different names.

The birth of the phoenix

Z-Tek may have been split into several legal entities to protect itself from a chequered history. In 1998 the ACCC had taken Z-Tek to court, alleging the company advertised products that did not include a sales tax component. That same year Microsoft accused the company of selling counterfeit product, and the matter was settled out of court for $150,000. In 2000, Z-Tek principals George Guo Hong Zhou and Nelson Wei Zhou were imprisoned for six months for defrauding the Commonwealth of sales tax to the tune of $650,000.

Z-Tek Computer Pty Ltd maintained branch offices in each state. As far back as 1996, as Z-Tek's legal and financial problems began to emerge, these branch offices were transformed (at least on paper) into separate entities such as Z-Tek Computer (NSW) Pty Ltd, and Z-Tek Computer (SA) Pty Ltd.

These "branch office" businesses continued to trade as Dunner came to grips with liquidating Z-Tek Computer Pty Ltd, which had little in the way of financial records. Dunner needed to prove that despite their separate legal status on paper they were actually one and the same business.

"Despite the fact they were all separate legal entities, the accounts were all run from the Melbourne office of Z-Tek Computer Pty Ltd," he said. "All the invoicing was done through the Melbourne office. The interstate offices were just branches - they would have one office employee and a couple of warehouse workers, that was it. Nine-tenths of the work was done out of Clayton."

Proving anything was beginning to look near impossible for Dunner. Z-Tek Computer (NSW) Pty Ltd, rather conveniently, caught on fire. Blaming a faulty monitor manufactured by Lite-On Technology (the company that had forced Z-Tek Computer Pty Ltd into liquidation), the fire destroyed stock and records. Z-Tek Computer (NSW) then hit its insurance company for a claim of $2 million worth of destroyed stock.

The rise of the phoenix

With a lack of documentation, cash or stock holding Dunner and the authorities at bay, Z-Tek-related businesses have since opened up all over Victoria and South Australia. As ARN reported in December 2001, a retail group called "IT Warehouse" had opened operations in Melrose Park, Adelaide City, Port Adelaide and Noarlunga. As well as Z-Tek's old white-box brand, Olympic Technology, IT Warehouse sells HP, Kyocera, Canon and Epson printers, NetComm and Swann modems, Altec Lansing speakers, Toshiba and Compaq portables, along with televisions and VCR/DVD systems.

At these stores, staff still answer the phone as "Z-Tek" and on several occasions, competing resellers were able to collect receipts from the business that included no GST component. The Australian Taxation Office has been made aware through several complaints, but ARN understands action has not yet been taken.

IT Warehouse has since expanded back into Victoria. It now has outlets in Preston, Bendigo, and Z-Tek Computer Pty Ltd's old stomping ground, Clayton.

Eight months ago, the former principals of Z-Tek Computer Pty Ltd established a new wholesale business, which also does not hesitate to associate itself with its sunken predecessor. Named OTC Computer Pty Ltd, the wholesaler imports components from Taiwan, assembling and selling PC and peripheral products called Olympic Technology, the same brand Z-Tek Computer Pty Ltd had once called its own.

Like IT Warehouse, OTC Computer staff still answer phones as Z-Tek, and the business employs several of Z-Tek Computer Pty Ltd's directors and staff. The business operates out of both the Melbourne suburb of Mulgrave and the Sydney suburb of Silverwater.

Musical chairs

Without documentation, Dunner can only make connections between the various phoenix businesses on the basis of the involvement of past and current directors.

ARN's own investigations have discovered that most of the Z-Tek-related businesses have changed directors and secretaries several times.

The ringleaders of Z-Tek are "Nelson" Wei Zhou and "George" Guo Hong Zhou, both of whom have already served prison terms for their role in defrauding the Federal Government while running Z-Tek. Former and current directors include Li Ping Huang, the wife of Nelson Wei Zhou, and her sister Hui Ping Huang.

The directorship of Z-Tek Computer Pty Ltd has swapped and changed between Li Ping Huang and her husband, Nelson Wei Zhou.

A similar pattern emerges at Z-Tek Computer (NSW) Pty Ltd. The directorship chopped and changed between Nelson, his wife, Li Ping, and a number of other parties, including Nelson's right-hand man, George.

When trouble emerged, Li Ping was replaced by Liang Mu Zhou.

Nelson and Li-Ping were directors of both entities on several occasions. Li Ping's sister Hui Ping Huang is the director of both the new IT Warehouse and OTC Computer businesses. She confirmed with ARN that OTC employs several former Z-Tek directors, including Nelson Wei Zhou.

Z-Tek: A chequered past

1998

l The ACCC takes Z-Tek Pty Ltd to court, alleging the company advertised products that did not include sales tax.

l Microsoft accuses Z-Tek Pty Ltd of selling counterfeit Microsoft product, settling out of court for $150,000.

2000

l Z-Tek principals George Guo Hong Zhou and Nelson Wei Zhou are jailed for six months for defrauding the Commonwealth of $650,000 in sales tax evasion

2001

l Lite-On takes Z-Tek Pty Ltd to court over $1 million in outstanding debt.

l The Supreme Court of Victoria throws Z-Tek Computer Pty Ltd into liquidation.

l Andrew Dunner and Associates appointed administrators, only to find Z-Tek Pty Ltd's warehouse was emptied of stock. Dunner is provided with few financial records.

l Z-Tek's branch offices continue to trade as a separate entity. Former Z-Tek staff establish a new retail business in South Australia called "IT Wholesale".

2002

l IT Wholesale offices established back in Melbourne, the original premises of Z-Tek Pty Ltd. A new wholesale business is opened up by former Z-Tek directors, operating under its old brand name "OTC Computers".

l Andrew Dunner and Associates and Z-Tek parties reach agreement on several lawsuits.

l Reseller groups hold crisis talks over the Z-Tek plague.


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