DTI guns for the ostrich marketers

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The Independent Online
THE Department of Trade and Industry is set to crack down on the activities of further ostrich marketing firms, following its high-profile closure of the Ostrich Farming Corporation.

This weekend, the Serious Fraud Office is gearing up to join the investigation into the Nottingham-based OFC with Notts police. For "operational reasons", the SFO will not reveal which other forces are involved, but sources say Leicestershire police, at least, have also been drawn in.

"OFC is not the only firm that has been looked at," one regulatory source said. "It's fair to say that things may also be happening with other ostrich firms."

The clampdown could further hit what has been a rapidly growing industry. There are about 300 ostrich farms in the UK, with a total of around 10,000 birds. There are also up to 10 firms selling investments in ostriches, including the Ostrich Centre in Swansea, the Cheshire-based Pinstripe Farming Company, Kensington-based Associated Ostrich Farms and Ostricorp of Doncaster. All offer high returns and were still advertising in the UK press last week.

The DTI's closure of OFC a week last Wednesday has left hundreds of investors panicking while the Official Receiver tries to trace the whereabouts of thousands of ostriches in Belgium, where OFC's farms were based. The precise reasons for the DTI's winding-up petition, which OFC intends to fight, will be heard in court on 8 May.

Concerns, however, are understood to centre on the firm's promotion and marketing methods, which drew in millions of pounds from spiralling numbers of investors from the end of 1994.

In glossy advertising, OFC guaranteed annual returns of more than 50 per cent from breeding ostriches by buying back chicks at a pre-determined price.

Brian Ketchell, OFC's founder, was involved with a pyramid-selling organisation, Alchemy UK, which was closed in 1994. Two other businesses he ran, video rental chain Videomagic and retailer Full Force, also went bust in recent years.

Stephen Whitmore, a solicitor with the Salisbury-based firm Wilsons, says more than 80 people have called since he started an action group last week to press claims against OFC.

This weekend the Ostrich Centre, a rival breeder and marketing firm, also said it had been contacted by more than 100 investors over a possible OFC rescue scheme. Investments at OFC ranged from a couple of chicks to a pounds 140,000 sum for 10 ostriches, a spokesman said.

Papers on OFC and others were passed to the DTI last August by top City regulator, the Securities and Investments Board. The SIB concluded that ostrich marketing did not breach the Financial Securities Act (FSA).

But since then, OFC-like marketing practices have evolved, regulatory sources say, such that selling certificates of part ownership of ostriches may indeed have breached the FSA.

The main problem with ostrich marketing schemes, lawyers say, is that as yet there is still no end market for ostrich meat in the UK. Those restaurants that sell it, and supermarkets like Asda that have had it on trial, generally import from Europe.

Where investors flock to plans that guarantee a rate of return, the danger of a classic "Ponzi scheme" exists: that the firm has to use funds from later investors to pay the early ones and, like Alchemy UK, has to keep recruiting more investors to maintain the pay-outs.

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