13 Apr 2013

Judge delivers verdicts on finance firm heads

11:45 am on 13 April 2013

A former chief executive of finance companies that failed owing about $400 million has been convicted on four charges of intentionally breaking the firms' trust deeds.

Paul Cropp, former chief executive of Dominion Finance and North South Finance, was found guilty in the High Court in Auckland on Friday of charges linked to related party lending of $13.6 million which breached the companies' trust deeds.

Cropp was convicted of four charges of theft by a person in a special relationship. The charges were brought by the Serious Fraud Office.

About 6000 investors lost money when the Dominion Finance Group companies collapsed in 2008.

Justice Lang told the court that Cropp intentionally broke the trust deeds by authorising related party lending loans and kept such transactions from others because he knew that it would set off alarm bells.

The judge said Cropp did not seek consents for related party loans, bypassing the companies' credit committee, because he knew that some of the loans would not be approved.

Justice Lang said Cropp knew about the limits under the trust deeds.

"He believed that the companies were permitted to engage in related party lending, provided they obtained the consent of its trustee.

"Now, I don't accept that explanation. First, it flies in the face of the plain wording of the Dominion's trustees. Secondly, it would prove completely unworkable in practice."

Paul Cropp will be sentenced in May.

Two found not guilty

Justice Lang on Friday found that the former director of the companies, Robert Whale, and another person, who has name suppression, not guilty on several charges of theft by a person in a special relationship.

However, the judge said none of those who stood trial wanted to take investors' money for their own personal gain.

Outside court, Mr Whale said he would have acted differently in hindsight, but never thought that he was committing any crime.

"It's very easy looking back now with the benefit of hindsight we would've done quite a few things differently, but at the time we thought we were doing the best we could for the company to help it survive. I had no we were doing anything wrong, so I'm very relieved the judge believed me."

Robert Whale will stand trial in June for separate charges brought by the Financial Markets Authority which relate to the companies' collapse.