Jail for two Nathans Finance directors

UPDATED: Nathans Finance director Mervyn Ian Doolan, the third and final of the failed finance company directors to be sentenced in the Auckland High Court today, has been sent to jail for two years and four months and ordered to pay $150,000 in reparation.

UPDATED: Convicted Nathans Finance chairman Kenneth Roger Moses has been sentenced to prison for 2 years and 2 months and ordered to pay reparation of $425,000 with Justice Heath saying that home detention was not a viable option.

Moses slumped visibly in the dock as the sentence was handed down. His wife dropped her head to her lap on hearing the news and was comforted by a companion. She refused to stand for the judge. Moses' daughter was also in court.

The first of the three Nathans finance directors facing sentence in the Auckland HIgh Court today, Donald Menzies Young (68) has been handed nine months home detention, ordered to do 300 hours community service and ordered to pay $310,000 reparation. He wil serve his time at his Upland Road address in Auckland's upmarket Remuera.

Young is one of three Nathans directors appearing for sentence today. Mervyn Ian Doolan and Kenneth Roger Moses are still to hear their fates.

Justice Paul Heath after hearing extensive submissions from both the Crown and defence lawyers, described Young as the least culpable of the four directors of Nathans Finance, including John Hotchin who earlier pleaded guilty and was sentenced to 11 months home detention, ordered to do 200 hours community service and ordered to pay $200, 000 reparation. 

The courtroom was packed with family, friends and investors. Sentencing is continuing. MORE TO COME

Defence lawyers had sought sentences of 2-2.5 years as a starting point and requested home detention for their clients. They emphasised the court’s finding that the three men had all acted honestly without the intent to mislead investors.

But crown prosecutor Colin Carruthers QC said honesty was not an ingredient of the offence and that the offending was at the serious end of its kind. He said the 'prisoners' had acted 'knowingly and recklessley" and that their offending was significantly more serious than that of fellow company directorJohn Hotchin. 

“Care needs to be exercised so this is not seen as a penalty for a particular class of offender,” Mr Carruthers said. The Crown sought four year prison terms as a starting point.

Moses, Doolan and Young were, eight weeks ago, found guilty of lying to thousands of out-of pocket investors about a Nathans prospectus aimed at raising $100 million from the public.

The trio were remanded on bail and asked to surrender their passports when Justice Paul Heath delivered his guilty verdict on July 8, after a three-month trial.

Nathan’s Finance collapsed into receivership on August 20, 2007, owing about $174 million to some 7000 investors.

Today's sentencing could inspire a change of heart and change of plea by other finance company directors facing trial – the next being Bridgecorp directors Rodney Petricevic, Rob Roest, Bruce Davidson, Peter Steigrad and Gary Urwin, whose 12-week trial is due to start on Monday. They are in court today seeking an adjournment.

The plea-revising exit strategy was chosen by Nathan’s director John Hotchin who, after initially protesting his innocence, spent months negotiating an out-of-court deal before changing his plea to guilty.

Hotchin, the younger brother of Hanover Finance’s co-founder Mark Hotchin, was convicted and sentenced to 11 months home detention, ordered to do 200 hours community work, made reparation of $200,000 to company receivers and testified against his fellow directors.

A key element of the Nathan’s decision was Justice Heath’s finding that Moses, Doolan and Young held an honest belief at the time that the investment statements were not misleading but that viewed objectively “there were no reasonable grounds for them to believe that was the case.”

Justice Heath said there was a failure to disclose the full extent of related-party lending to Nathan’s parent company Vending Technologies, which sold vending machines, franchise and technology in the US, Australia, New Zealand, the UK and across Europe. 

Sentenced:
Mervyn Ian Doolan, an accountant and the director responsible for overseeing preparation of Nathans’ contentious 2006 prospectus at the heart of the prosecution. He co-founded VTL with Hotchin in 1998 and spent time spearheading the company’s growth in Europe. He was a former chairman of the International Association for Financial Planning and life member of the Institute of Financial Advisers.

Kenneth Roger Moses was Nathans’ chairman who, along with VTL chairman Gary Stevens, was a former director of failed contributory mortgage company Reeves Moses Hudig (later known as Harts Contributory Mortgages), which collapsed in 2000. In 2001, both men were acquitted of 30 breaches of the Contributory Mortgage Regulations and breaches of the criminal provisions of the Securities Act.

Donald Menzies Young was an accountant and a founding investor in water cooler company AquaCool.