Working through finance firm cases
Progress and penalties in other finance company cases
Bridgecorp and Bridgecorp Investments: Rod Petricevic and Rob Roest jailed for 6.5 years each, Bruce Nelson Davidson, Gary Urwin and Peter Steigrad got home detention and paid reparation.
Lombard Finance: Sir Douglas Graham, Lawrie Bryant, Michael Reeves, Bill Jeffries lengthy community work and reparation.
National Finance: Trevor Ludlow jailed for six years
Dominion Finance Group and North South Finance: Trial date awaited.
Belgrave Finance: Trial date awaited.
Capital+Merchant directors Neal Nicholls, Owen Tallentire, Wayne Douglas: Their trial ended last week with a reserved decision pending.
In most cases civil proceedings were stayed until resolution of the criminal case.
Other players penalised
Disciplinary action was taken by the New Zealand Institute of Chartered Accountants Disciplinary Tribunal against members.
They were: Staples Rodway Hamilton partner Christopher Hughes (Nathans Finance accounts), Woodnorth Myers partner Byron Pearson (South Canterbury Finance), Hayes Knight partner Colin Henderson (Clegg&Co and Belgrave Finance), KPMG partner Bill Wilkinson (Hanover Finance), BDO chartered accountant Robert-Innes-Jones (Blue Chip, Beneficial Finance) and BDO chartered accountant Peter McNoe (Capital+Merchant, Beneficial Finance).
Prosecution of the Nathans Finance directors kicked off a chain of high-profile court cases in the wake of spectacular finance company crashes.
More than 60 finance companies collapsed from 2006, putting at risk about $6 billion of investors’ deposits, with losses estimated at more than $3 billion.
Roger Moses, John Hotchin, Mervyn Doolan and Donald Young were the first of a line of directors put on trial to justify what they believed was their lawful and prudent handling of investors’ funds.
After protesting his innocence for some time, Hotchin, the younger brother of Hanover Finance’s Mark Hotchin, pleaded guilty and gave prosecution evidence against his former business pals.
In finding Moses, Doolan and Young guilty of misleading investors, Justice Paul Heath said they did not act dishonestly but had acted “honestly throughout.”
Justice Heath accepted each had held an honest belief at the relevant time that the investment statements were not misleading, despite there being no objective or reasonable grounds for them to believe that was the case.
In attempting to reconstruct events the Nathans directors had convinced themselves a state of affairs existed that was consistent with their actions throughout.
“In other words, their evidence was honest but mistaken,” Justice Heath said.
Why chase careless directors via criminal law?
Not everyone believed the criminal law should have been used to “chase directors through court for carelessness and bad judgment,” leading commercial lawyer Stephen Franks told NBR in December.
He said he couldn’t fathom why Justice Heath needed to say in his mammoth 156-page judgment that the Nathans director did not act dishonestly.
“It’s a healthy thing the court cases are being brought as long as they are focused on lies, on whether people told lies or knew stuff they were obliged to disclose and didn’t because of self-interest,” Mr Franks said.
Former ACT MP Mr Franks was a member of the Securities Commission, a council member of the Institute of Directors and deputy chairman of the stock exchange’s market surveillance panel.
He described the Lombard Finance directors’ trial as “a classic situation of people who were honest but not capable of detecting and not temperamentally up to the levels of suspicion that were needed once everything turned to custard.”