Petricevic admission on related-party loans

Bridgecorp's Rod Petricevic has told Auckland High Court that with hindsight, independent opinion of the firm's related-party lending should have been sought.

But the reason he didn't direct this, as the firm's managing director, was because he hadn't been advised to do so.

Bridgecorp's tangled related party lending, including its biggest loan known as the Barcroft transaction, was the focus of Crown lawyer Warren Cathcart's cross examination of Mr Petricevic this morning.

Mr Petricevic and fellow directors Rob Roest and Peter Steigrad have denied Financial Markets Authority charges they mislead investors in the company’s 2006/2007 prospectus and associated financial statements.

The charges carry a maximum penalty of up to five years in jail or a fine of up to $300,000.

Among concerns the Crown has raised about the Barcroft transaction is that Bridgecorp director Gary Urwin, awaiting sentencing after pleading guilty to the 10 charges of making untrue statements in investor documents, was a common director of parties on both sides of the transaction.

Giving evidence in his defence, Mr Petricevic told the court potential related-party issues were not something he was focused on as Bridgecorp entered into the Barcroft transaction.

Earlier in the trial, Mr Petricevic described himself as an entrepreneur and said he relied on professionals around him for advice on areas he was not an expert in, such as accounting.

However, no professional, independent advice was sought on the related party loans, ahead of him signing of the company's 2006/2007 prospectus, he told the court today.

Mr Petricevic told the court he was comforted by the fact Bridgecorp chairman Bruce Davidson, a senior commercial lawyer whom he trusted, had checked out the transaction.

"I believe if Barcroft needed to be treated as a related party it would have been."

"Even when I look at it today, I believe that we ultimately did treat it properly. We had the accounts audited.... my understanding is the auditors had all the documentation."

Mr Petricevic said no one told him there was a potential related party issues that required an independent opinion.

"Bruce Davidson should have, I think, obtained a legal opinion on that at that point of time, he said.

"But it's not something I focused on.

"With hindsight I think the company should have got an independent opinion."

The Crown produced as evidence a December 15 2006 report to Bridgecorp's executive committee, in which concern about related-party lending was raised.

This was found in a minute from the October 3 2006 meeting, recording that a Geoff Bollard from PIR had concerns about related-party lending to Barcroft and Gary Urwin's chairmanship of the credit committee.

Further evidence, minutes of the November 2 2006 credit committee meeting, noted questions around related party lending, Barcroft's large exposures and possible conflict of interest via Gary Urwin's position.

The trial, before Justice Geoff Venning alone, continues.