Dominion Finance boss guilty

Dominion Finance boss Paul Cropp has been found guilty of theft in relation to the collapsed finance company.

Justice Graham Lang has just delivered his verdict on the theft charges, brought by the Serious Fraud Office, at Auckland High Court.

The mixed-bag verdict saw Cropp, 49, singled out from two other co-accused – Dominion Finance director Robert Barry Whale and a third company executive who has name suppression.

Mr Whale was found not guilty of the five charges of theft in a special relationship he faced and the third executive was found not guilty of the three charges he faced.

Cropp is the first chief executive, in the recent finance comany trials before the court, to be convicted. The four charges Cropp he was found guilty of related to related-party lending of about $13.57 million in breach of Dominion's trust deeds.

He has been remanded on bail until sentencing and was asked to hand in his passport by the end of the day.

 Justice Lang heard the six-week trial alone between February and March, in which the SFO alleged the directors breached the financier's trust deeds when they took part in unauthorised related-party lending to the value of more than $20 million.

This related to allegedly stripping cash from Dominion Finance Holding's subsidiary North South Finance in favour of Dominion Finance Group, in order to stave off receivership.

A fourth director, Terence Butler, who recently died of cancer, was excused from the trial late last year.

In June, the three men face more criminal and civil charges, brought by the Financial Markets Authority after its separate investigation into Dominion's collapse.

Dominion Finance Group was placed in receivership in 2008, owing almost 6000 debenture holders $176.9 million. North South Finance was placed in receivership two years later, owing 3900 debenture holders $31 million.

Both companies were subsidiaries of NZX-listed Dominion Finance Holdings, which was placed in liquidation in 2009. They offered property and commercial loans.

Receivers have estimated recoveries of 10c-25c in the dollar for debenture holders in Dominion Finance Group and of 65c-70c in the dollar for those in North South Finance.

What the court had to weigh up

Justice Lang said the issue for the court was whether Cropp, who has more than 30 years experience in the finance industry intentionally caused Dominion Finance to breach the related-party prohibition in its trust deed.

But the judge did not accept Cropp's explanation he believed he was entitled to obtain retrospective approval of loans.

Justice Lang said that "flies in the face" of Dominion Finance's trust deed and would prove unworkable in practice.

The trustee was there to ensure related party transactions only occured with its approval, the judge said.

Justice Lang gave an example of how Cropp had not followed Dominion's credit proceedure in relation to a loan of more than $5 milllion to a related entity known as WAFD, said by insiders to be an acronym for 'what a f* disaster'.

The loan should have gone to the board for approval, the judge said.

Cropp realised if he had gone to the board, the credit committee would have realised it was a related party loan and then the issue of trustee approval would have been raised.

"He didn't have time" to go down the established route, Justice Lang said. "He needed the loan to be made that day."

Cropp had later tried to seek retrospective approval of the credit committee to legalise the loan.

"Mr Cropp acted as he did because he knew he had caused Dominion Finance to act completely out of its credit proceedure," the judge said.

However, Justice Lang said "by a fine margin" he had reached the view he was not satisfied beyond reasonable doubt that Mr Whale knew of the prohibition on related party lending in the trust deed in 2008.

"It was reasonably possible he left the issue to the executive members of Dominion Finance's staff."

Justice Lang said he could not find evidence the third executive, with name suppression, knew of the prohabition on related party lending and he was left with "reasonable doubt" as to whether the man had assisted the company to breach the trust deed in relation to some of the loans.

The judge said the Cropp never acted out of a desire to obtain personal gain from the transactions. Rather, the related-party loans were designed for Dominion Finance to survive in what was a "difficult and challenging time for a finance company".

Name suppression remains

Name suppression continues to extend to the unnamed Dominion Finance executive, post acquittal.

After delivering the verdict, Justice Lang heard arguments from the executive’s lawyer, Michael Lloyd, in favour of why the name suppression orders should remain.

Suppression orders are lifted at the discretion of the judge.

However, it was discovered the initial orders for suppression, made by Justice Peter Woodhouse in March, were permanent and could not be revisited.

The only way the suppression could be challenged is if the Crown took the matter to the Court of Appeal.

However, Crown Prosecutor Brian Dickey had indicated the Crown was neutral on the matter.

The unnamed executive applied unsuccessfully for suppression from the District Court then appealed the decision to the High Court, where Justice Woodhouse granted suppression, on the basis that adverse consequences for the executive were out of proportion to the adverse consequences to the public in not being informed of his identity.

Serious Fraud Office boss pleased with outcome

The SFO's acting chief executive Simon McArley says the SFO is pleased to have brought another finance company case to an end.

"These prosecutions deliver a strong deterrent to future offending. The finance company experience has also taught us valuable lessons.

"A key to reducing the cost and impact of economic crime is early detection and intervention. SFO can only achieve this with strong interagency collaboration and the support of the community in reporting suspect and unethical behaviour," Mr McArley says.

SFO opened its investigation into Dominion and North South in October 2010, following a referral from the Securities Commission (now the Financial Markets Authority).

The trial had a false start when Justice Pamela Andrews stepped down over a career crossover with one of the defendants, Mr Whale.

It resumed a week later, before Justice Graeme Lang.

Ex-Kiwi league star Matthew Ridge gave evidence during the trial about how he borrowed from Dominion for his ill-fated luxury apartment development on Bassett Rd, in the Auckland suburb of Remuera.

# Please note: The comments on this story have now been turned off

This article is tagged with the following keywords. Find out more about My Tags

Post Comment

11 Comments & Questions

Commenter icon key: Subscriber Verified

This is an interesting result - particulary as the decision to prosecute this case was from the Feeley era. It will be interesting to follow the inevitable applications for costs and to see whether the Court felt Whale and the other acquitted accused should have been prosecuted at all. It will also be interesting to see whether the Court's decision here will influence the outcome of the on-going four-year investigation into Hanover Finance.


Ask the shareholders of Dominion Finance and noteholders who lost everything. Ask them if the three guys on trial were guilty. Guilty of poor directorship! Did they happily take their director's fees? An interesting result...


I guess that's why we ask independent and legally trained judges instead.....


If the Dominion Finance CEO is guilty then one assumes the SFO/FMA cases against Hanover, Strategic Finance and SCF looks strong or even stronger.

Isn't it about time the authorities moved on these people so that the financial markets can move on also.


Would you prefer a fast conclusion or justice served?


Doesn't bode well for the SCF directors whose related party lending was on a massive scale.


Justice system found wanting, again. How did the other two get to walk?


Perhaps because they were found not to have broken the law?


However, Justice Lang said "by a fine margin" he had reached the view he was not satisfied beyond reasonable doubt that Mr Whale knew of the prohibition on related party lending in the trust deed in 2008.

"It was reasonably possible he left the issue to the executive members of Dominion Finance's staff." are a fine line.
Who was the architect of WAFD? And what about the noteholders who basically lost the lot?


So, ignorance of the law (or in this case the provisions of the trust deed) is indeed bliss.
I would have thought that a trust deed constitutes such a fundamental document to a finance company that any director who was not aware of its provisions should be prosecuted for fraud.
Perhaps not in the way the SFO action was taken, but for the fraud of taking their director's fees while clearly not doing anything to earn them!
They (or as these things unfortunately seem to transpire to the detriment of society as a whole - their insurers) should certainly be made financially responsible for investor losses.


If a director can plead ignorance to knowing what's in the trust deed, then he is surely pleading guilty to a breach of his fidjuciary duties.


Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot


Sym Price Change
USD 0.7769 0.0072 0.94%
AUD 0.9505 0.0036 0.38%
EUR 0.6323 0.0084 1.35%
GBP 0.4958 0.0018 0.36%
HKD 6.0259 0.0559 0.94%
JPY 92.3800 0.9250 1.01%


Commodity Price Change Time
Gold Index 1189.4 -7.590 2014-12-17T00:
Oil Brent 61.2 -2.590 2014-12-17T00:
Oil Nymex 56.8 0.570 2014-12-17T00:
Silver Index 15.9 0.176 2014-12-17T00:


Symbol Open High Last %
NZX 50 5518.5 5538.2 5518.5 0.29%
NASDAQ 4712.4 4748.4 4644.3 2.24%
DAX 9711.6 9811.1 9544.4 2.79%
DJI 17367.8 17778.4 17356.9 2.43%
FTSE 6336.5 6466.0 6336.5 2.04%
HKSE 22878.3 22935.0 22585.8 1.09%
NI225 17143.0 17274.2 16819.7 2.32%