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The fraud trial of three former heads of South Canterbury Finance came near to being abandoned before it started in Timaru today amid calls for Justice Paul Heath to stand down.
Opening submissions were held up due to challenges from defence lawyers relating to alleged comments made by Serious Fraud Office director Julie Read at a conference held in Auckland last week.
Justice Heath has chaired that annual insolvency practicitioners' conference in Auckland since 2003.
Lawyer Pip Hall, acting for the three accused, told the Timaru High Court that a Wellington solicitor had relayed to him a comment made by Ms Read at the conference where she allegedly said the SFO is “very fortunate” to have Justice Heath as “our judge” hearing the case.
Mr Hall, who represents defendants Edward Sullivan, Robert White and Lachie McLeod, submitted that the matter must be further investigated to allay any perception of bias and that Justice Heath should stand down.
After hearing the argument Justice Heath dictated a memo in court in which he talked about the detail of the comment and said it was his view that the allegation should not lead to accusation of bias and the defence would have to prove that whatever Ms Read said causes bias.
Justice Heath concluded by saying the case will go ahead with the Crown’s opening address but set aside some time after the opening for the defence to further argue the issue.
The SFO brought 21 charges against five people in December 2011 after the failed lender’s $1.7 billion collapse.
The alleged fraud "exceeds anything in the history of white-collar crime in New Zealand," the SFO said at the time.
Charges against two of the five men initially charged were withdrawn.
The Crown's opening submission is now under way. The three defendants have all pleaded not guilty.
SCF, founded by the late Allan Hubbard, was placed into receivership in August 2010 triggering a $1.58 billion payout to investors under the Crown Retail Deposit Guarantee Scheme. The governemnt also lent $175 million to repay secured third party lenders that held prior charges over SCF's assets.
The charges against Mr McLeod, Mr Sullivan and Mr White allege a variety of offences, including theft by a person in a special relationship; obtaining by deception; false statements by the promoter of a company; and false accounting.
Several of the charges involve correspondence with the Treasury upon SCF's application to join the deposit guarantee scheme.
The charges, all under the Crimes Act, carry maximum penalties ranging from seven to 10 years' jail.
The investigation of the collapsed finance company began in October 2010 under the Serious Fraud Office Act.
Under the act, the Solicitor General is required to appoint a panel of prosecutors for the prosecution of cases of serious and complex fraud brought by the SFO. These members serve three-year terms, with 28 lawyers currently serving on the panel.
Panel counsel for the SCF prosecution are Queen’s counsel Colin Carruthers and Nick Flanagan of Meredith Connell.