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The heat goes on Pyne Gould Corporation

Pyne Gould Corporation has moved to full damage control mode as speculation swirls as to why its auditor quit suddenly yesterday.

PGC, which is 77% owned by a limited partnership between director George Kerr and US hedge fund Baker Street Capital, said yesterday that its auditor, KPMG, had resigned.

The reason given was “unresolved differences as to whether certain transactions should be disclosed as related party transactions, and concerns over the adequacy of governance and management of financial reporting.”

Mr Kerr and Baker Street gained control of PGC in March following a takeover offer of 37c a share, despite being well below the independent expert’s valuation of between 49 cents and 57 cents a share.

Yesterday, NBR ONLINE revealed the Financial Markets Authority (FMA) has been making enquiries over related party transactions involving PGC over the past two weeks.

NBR ONLINE also revealed a series of loans recently made by PGC’s Perpetual Trust funds to entities owned by Torchlight Fund No 1, which is also controlled by Mr Kerr.

Investors in the $150 million Torchlight Fund include Mr Kerr, PGC chairman Bryan Mogridge and South Canterbury Finance (in receivership).

Last year a mystery US investor bought a 27% stake in Torchlight (GP) 1, the general partner of Torchlight Fund No 1, forcing the fund to gain OIO approval for its land purchases in Queenstown and Wanaka.

The loans from funds administered by Perpetual Trust were issued just one week after Mr Kerr and Baker Street declared their takeover offer unconditional and shortly after independent director Bruce Irvine resigned.

Last week former PGC managing director John Duncan resigned suddenly.

Companies Office records show he is still a director of the two Torchlight companies that borrowed funds from Perpetual in February.

It is understood the NZX requires PGC to appoint at least one independent director to the board by the end of today.

Meanwhile, PGC’s purchase of shares in wannabe bank Heartland through another Torchlight vehicle is also under scrutiny.

In early March PGC lifted its stake in Heartland from 6.02% to 10.39%.

The transaction involved PGC-owned Torchlight Securities acquiring 17 million Heartland shares for $7.61m.

The transaction followed an earlier transfer of Heartland shares held by Mr Kerr’s private company Pyne Holdings, prompting speculation the deal was helping fund Mr Kerr’s own takeover of PGC.

However, this was strongly denied by PGC.

NBR understands separate complaints have been made to the FMA regarding these share purchases.

More by Duncan Bridgeman

Comments and questions

heartland shareholders hang on to your seats.
this may end up messy but shareholders who stay the distance will profit in the end

Your dreaming get out now. There is no way they are going to let this thing gain a license its looks and sounds like Strategic Finance.

The latest NBR related party article is interesting. The only Perpetual Fund that has the resources to align with the security positions reported is the Perpetual cash fund. This fund consisits of cash managed by Perpetual Trust in its trustee capacity. If this is correct looks like George has used money managed by Perpetual (a PGC subsidiary) in its trustee capacity to acquire high risk Torchlight assets or pay for his AEP acquistion of PGC shares. Little wonder John Duncan/KPMG have gone and the FMA is all over the place. Perpetual trust clients or investors in Perpetual funds must be getting very nervous.

Hopefully investors sold PGC at 37 cents and purchased Heartland below 50 cents, they are looking a lot healthier now.All looking a like a total mess but not un-expected.Watch this space.

if george kerr off loads his shares then i think heartland will be okay
if not then trouble could be ahead

Bryan Mogridge ? Who ? PGC 1.60 now .32 .Rakon 1.20 now .50 . Titanic and Tuis combined .

Not to mention Feltex ...

Something smells here.

Good to see the auditors and regulator appear to be doing something upfront. If the Securities Commission and the Big Four had been doing their jobs in 2006 - 2008 (or earlier).

Opps, that should have said, If ONLY the Securities Commission and the Big Four had been doing their jobs...

Related party transactions [ fudged from public gaze] in NZ finance companies were the reason most failed. If only other auditors had the balls KPMG is showing at PGC , things may have turned out better.

Other auditors had the balls - KPMG, Deloitte, EY and PwC refused to take on finance company audits. The auditors of these companies were mainly second and third tier firms who probably were more desperate for the fees, giving the power to the company to bully them into signing things off.

Firms such as BDO (or at least their partners) should be held accountable to the investors and not just sanctioned by the Accounting Society.

One of the reasons this is so significant is that the minority shareholders made their decision whether to sell into the Kerr offer or not based on the previous accounts and also the information provided to Grant Samuel. If this information is shown to be incorrect (i.e. there were tons of related party transactions not disclosed) then it seems to me like the integrity of our financial markets has been significantly undermined.

Most peculiar. So what then happens if terrible deeds are found. A body in the woodshed? Or woolshed? Or worse?
What are our Regulators going to do? Dont try to answer as Doing Nothing is not acceptable.

This affair is beyond comprehension for all and I am afraid it is all too little too late and at the end of the day nothing will happen and KERR will go on blindly doing as he chooses.God he desperately needed that PGC ownership to cover all his actions, and he will not get it ever. Again watch this space as time is now running out fast for all concerned.

But what will be done about it?