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.
Five Star Finance: Marcus MacDonald and Nicholas Kirk jailed for two years each, Anthony Bowden sentenced to nine months' home detention. Neill Williams to face trial this month.
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.”
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Comments and questions8
Where was the Commerce Commission while all this was going on?
liberte
Too busy meddling in telecommunications and lines company regulations.
The authorities have eventually done a reasonable job but have failed with Hanover Finance and Strategic Finance - the two worst finance companies.
Only when they nail these guys will the markets be able to truly move to a new phase of the economic/finance sector cycle where the governance is exceptional, the rules are in place and the retribades from Hanover finance and Strategic Finance will never be able to operate again or borrow money from the public - or Banks for that matter - the money Banks lend to these guys for their property deals actually still comes from the investing public, so if and when they fail on deals again, it is the investors who eventually miss out when the Bnaks have to compensate for losses via their huge fees.
Hopefully John k
Key in his second term has the balls to ensure justice is done after halting any action on Strategic because of rugby legend Jock Hobbs sickness and demise.
It is not just dodgy finance co. directors.
There is a who;e other level where the trustees and receivers dwell.
Hopefully the case involving LDC and Finance and Investments in Nelson, a case where the actions of the trustee and receiver have had some scruitiny, will be ongoing. A hearing in the High Court has already established that Maurice Noone a partner in PwC altered a document that was on it,s way to the Companies Office. The result of that alteration had serious ond lasting effect on hundreds of people.
Serious stuff indeed and more to come.
roll on scrutiny of trustees and recievers...as for Strategic...Mark the shark Hotchins mate...Finnegan was NOT an All Black!:)
These problems should have been halted prior to receivership. 1/: when a prospectus is developed, it must have a trustee company, they are in essence the "person" who k on behalf of the investors & scrutinise the accounts directors etc. They also 2/: employ an auditor to look over the books, 3/: the securities commission & company office the look over the whole application and sign it off.
The problem with 1 & 2 is this is all paid by the finance company, and therefore conflicts on interest could be called into question. Did any trustee company or auditor sign off even a minor infraction in an effort to keep their contact with the finance company? But with all these check one would have thought the problems the finance companies, that have prosecuted, false statements, false accounting etc, should have been picked up.
It would be very interesting to know just what “Disciplinary action was taken by the New Zealand Institute of Chartered Accountants Disciplinary Tribunal against members”.
I suspect this is not available as investors may wish to take ;legal action against those charged.
A disgraceful period by all concerned in our history; hopefully it is coming to an end and we at last have in place controls and controllers that will do an effective job.
liberte
The Securities Commission did an shocking job. Let's hope for better from the FMA.
There is a distinction between lying and making commercial mistakes. Graham should not have faced criminal charges.
Franks final comments are insightful and salutary.
... 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.