8 Dec 2011

Charges laid over Sth Canterbury Finance collapse

5:18 am on 8 December 2011

The SFO has laid 21 charges against people connected to failed company South Canterbury Finance - the largest amount for any fraud charges laid in New Zealand.

The charges against five people were laid in the Timaru District Court on Wednesday, following a 14-month investigation.

South Canterbury Finance was placed in receivership in August last year, costing taxpayers $1.8 billion in payouts under the Government's retail deposit guarantee.

Serious Fraud Office chief executive Adam Feeley says the charges involve approximately $1.7 billion worth of transactions. The biggest single transaction was $1.58 billion - the amount accessed from entering the Crown Retail Deposit Guarantee Scheme.

The charges allege a variety of offences, including theft by a person in a special relationship; obtaining by deception; false statements by the promoter of a company; and false accounting. The offences carry maximum penalties of between seven and 10 years' jail.

Mr Feeley told Checkpoint on Wednesday he can't provide any more detail about the people charged.

"In terms of particular charges and the transactions they relate to, until the individuals in question have appeared before the court and any issues regarding suppression have been dealt with, our hands are very much tied and we can't comment on that."

Radio New Zealand's business editor Patrick O'Meara says the charges raise questions over whether the money should have been paid out from the Crown Retail Deposit Guarantee Scheme.

"The value of the estimated alleged fraudulent transaction is $1.7 billion and that includes the $1.6 billion from entering the Crown Retail Deposit Guarantee Scheme.

"It raises some very interesting questions about whether South Canterbury Finance actually should have been in this scheme in the first place and which we know that the taxpayer has already paid out $1.8 billion for."

Mr Feeley says the collapse of South Canterbury Finance is one of the most significant of all the failed finance companies in New Zealand. He says the total value of the charges, which cover five different transactions, exceeds anything in the history of white-collar crime in this country.

"If you look at the value of South Canterbury's assets and relate that to these charges in essence, I guess, you could say that that's what we're alleging."

Mr Feeley says the SFO has not tried to explain the reason for the Timaru-based lender's collapse, or look at every aspect of it.

"We have simply focused on the most material transactions that have been of concern to us. There is a possibility that we may look at other transactions, but our priority at the moment is very much focused on these five or so transactions to which these charges relate."

The five people charged will appear in court in Timaru in January next year.

FMA supports court action

The Financial Markets Authority says it has completed its criminal investigation into South Canterbury Finance and will support the SFO court action.

The capital markets regulator says it found untrue statements in two South Canterbury Finance prospectuses, which will support some of the 21 charges laid in the Timaru District Court on Wednesday.

The authority says the untrue statements relate to the level of loan impairments and the availability of banking facilities.