Viaduct Capital and Mutual Finance directors try to get retrial stopped

The three remaining defendants in a finance company trial have applied for a stay of proceedings, which would effectively end the Financial Markets Authority’s case.

Last month, the FMA said it would push ahead with a retrial against Paul Bublitz, Bruce McKay and Richard Blackwood, after a judge ordered the nine-month case against them be aborted. The FMA dropped charges against Lance Morrison, leaving just three of the original six defendants standing.

The three and others were directors of Viaduct Capital and Mutual Finance, which collapsed in 2010, owing a total of about $17 million.

Mr Bublitz’s lawyer, Rachael Reed, QC, says the defendants applied for a stay of proceedings and an award of costs in the High Court at Auckland this morning.

She says the basis of the application is how the trial proceeded, how it was aborted and the delays and impacts on the defendants.

A hearing has been set down for September, with the costs application to be considered after that.

It was revealed two weeks ago that the taxpayer has footed the bill for much of the defendants' case, with all three defendants receiving legal aid from the Ministry of Justice.

And an OIA response that NBR has seen showed the FMA had spent $3.4 million on the trial since mid-2011 until February 2017 (six out of the nine months), which included staff time and investigation costs.

Expenses are also expected to have been incurred by Crown Law and the Ministry of Justice.

The FMA has been contacted for comment about what charges it will lay against the three defendants.

Nine long months
In May the judge presiding over the case against the four men involved in the two failed finance companies ordered a mistrial because of late disclosure after nine months in the Auckland High Court.

In Justice Mark Woolford's judgment outlining his reasons, he said the FMA had disclosed an “unprecedented” amount of late information — more than 14,000 documents (some duplicates) the market watchdog had deemed irrelevant or subject to litigation privilege.

Responding to the judgment, the FMA argued the late disclosure issue was inadvertent.

“There is no suggestion of any bad faith. We will consider our processes concerning disclosure in light of the issues that have arisen during the course of this trial,” a spokesman said.

Viaduct Capital and Mutual Finance collapsed in 2010, owing a total of about $17 million but, because they held deposits insured by the government’s retail deposit guarantee scheme, investors were bailed out.

Messrs Bublitz, McKay and Blackwood are linked to both companies and were charged with theft by a person in a special relationship, making false statements in a prospectus, and making false statements to a trustee.

Mr Morrison also faced charges of theft by a person in a special relationship and making false statements to a trustee but only for Mutual Finance.

The FMA alleged Mr Bublitz and his co-defendants deliberately misled investors in the finance companies over the extent of related-party transactions for their benefit and for Mr Bublitz’s property company, Hunter Capital.

The defendants denied the charges.

The FMA’s decision not to retry Mr Morrison means just three of the six men originally charged remain. Property developer Peter Chevin pleaded guilty shortly before the trial began and was sentenced to home detention in March while former Blue Chip boss Nick Wevers died in 2014.