Prison-garbed duo admit misleading investors

Two jailed Capital + Merchant Finance directors pleaded guilty to misleading investors at Auckland High Court this morning.

Wayne Leslie Douglas and Neal Medhurst Nicholls, who are already serving seven and a half year jail terms for fraud, appeared before Justice Patricia Courtney.

Wearing prison garb – jandals, shorts and track pants – they pleaded guilty to five charges between them of signing prospectuses which contained false statements between December 2006 and December 2007.

The misleading statements included information about Capital + Merchant's liquidity and cashflow, management of loans and related-party lending.

The charges, laid under the Securities Act, were brought by the Financial Markets Authority.

Nicholls pleaded guilty to two charges of making an untrue statement in a registered prospectus and one charge of distributing advertisements which included an untrue statement.

Douglas pleaded guilty to two pleaded guilty to one charge of making an untrue statement in a registered prospectus and one charge of distributing an advertisement which included an untrue statement.

Both were convicted on them all and remanded for sentencing for a date to be fixed.

Capital + Merchant's chief executive Owen Tallentire pleaded guilty to the charges last month. He will be sentenced on March 15.

Australia-based directors Robert Sutherland and Colin Ryan pleaded guilty to the charges earlier this month adn will be sentenced next month.

FMA head of enforcement Belinda Moffat says today's guilty pleas bring to a close FMA's criminal proceedings against five directors of Capital + Merchant Finance.

"All five directors have now pleaded guilty to the most serious charges we brought against them.

"These cases are important in the work we do to hold directors to account and to restore public confidence in our markets."

Nicholls and Douglas were found guilty of theft by a person in a special relationship at two related trials, brought by the Serious Fraud Office, in June and July last year, which have been described as one of the most complicated finance company trials. Read more about the trial here.

Their seven and a half year jail sentences are the longest sentences so far given to failed finance companies bosses.

Tallentire was also found guilty of two charges of theft and was sentenced to five years' jail.

The trio are now trying to overturn their conviction and jail sentences. The first attempt was thrown out by the Court of Appeal in before Christmas.

 

"Simply put, this is theft on a grand scale," the court said.

Douglas and Nicholls are now trying to take their appeal to the Supreme Court, which will hear their application for leave to appeal in April.

Capital+Merchant owed $167 million to about 7500 investors when it collapsed into receivership in 2007.

Recoveries are not expected.

gbond@nbr.co.nz

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