Feltex directors plead not guilty to new court charges
Five former directors of Feltex Carpets say they are confident of successfully defending charges brought against them by the Registrar of Companies under the Financial Reporting Act.
Michael Feeney, John Hagen, David Hunter, Tim Saunders and Peter Thomas pleaded not guilty at a procedural hearing at the Auckland District Court this morning.
The charges relate to Feltex’s interim financial statements for the six-month period ended 31 December 2005. These were the first set of accounts prepared by Feltex under the new international financial reporting standards (IFRS).
If convicted, each director is liable to a fine not exceeding $100,000.
The charges allege that under IFRS Feltex’s accounts should have categorised the company’s debt with the ANZ Bank as a “current” liability rather than as a “non current” liability, and that the accounts should have included a note referring to a breach of the debt and interest ratios in Feltex’s banking agreement (this breach was later formally waived by the ANZ).
Feltex listed on the New Zealand stock exchange in 2004 at $1.70 a share after a share float raised more than $250 million.
But two years later the firm was placed in liquidation with debts of up to $40 million.
In a statement issued this morning the directors say they believed they acted appropriately by relying on the professional advice they received.
“We do not believe there is any proper basis for the decision to bring these charges, and we will vigorously defend them,” they say.
The charges are brought under section 36A of the Financial Reporting Act and will be heard in the Auckland District Court.
The trial is likely to be in the second half of the year.
Feltex directors are also fighting a class action brought against them and Feltex’s former owners, Credit Suisse First Boston Asian Merchant Partners, Credit Suisse Private Equity as promoter of the 2004 IPO, and organising participants and joint lead managers, First NZ Capital and Forsyth Barr.
Shareholders have filed a claim in the High Court to get their money back.
If they succeed, the amount could be up to $254 million -- the amount invested in the 2004 float of Feltex.
Shareholder organiser Tony Gavigan has gained the backing of a group of unnamed "associates" who are funding the action.
In what would be a separate court case, Feltex liquidator McDonald Vague is also committed to pursuing claims against the Feltex directors.
It has engaged legal counsel to prepare a statement of claim.