6 Aug 2014

SCF used as cash box, trial told

5:43 pm on 6 August 2014

The fraud trial of three former South Canterbury Finance directors has been told that the chair of the company, the late Allan Hubbard, treated the company as a cash box.

From left: Edward Sullivan, Robert White and Lachie McLeod.

From left: Edward Sullivan, Robert White and Lachie McLeod. Photo: Mytchall Bransgrove

Lachie McLeod, Robert White and Edward Sullivan are facing 18 fraud charges brought by the Serious Fraud Office following the 2010 collapse of the company and the subsequent $1.7 billion Government bailout. They include theft by a person in a special relationship, false statements by a promoter, obtaining by deception and false accounting.

After a five-month trial, the High Court in Timaru has begun hearing closing submissions.

On Wednesday, Crown prosecutor Colin Carruthers, QC, outlined a $9 million loan to Woolpak, a company the Crown says was a related party.

Mr Carruthers said the loan was structured to disguise that the money was for Mr Hubbard to buy shares.

"The loan to Woolpak was not in South Canterbury's ordinary course of business, it was not a proper commercial loan - but one that treated South Canterbury as Mr Hubbard's cash box."

Mr Carruthers said the man who theoretically took out the loan, wrote to South Canterbury finance saying he wanted to to make it clear he wouldn't act as a guarantor for the loan.

Mr Sullivan and Mr White wrote back giving the man indemnity from the loan.

The Crown also said the directors were reckless in their treatment of declarations about a $25 million loan.

Mr Carruthers told the court the loan had been recorded as going to a company called Hilltop, but actually went to a subsidiary of South Canterbury Finance. He said this wasn't accidental, as claimed by the defence.

"So if this was a mistake, it was one that followed directly from the improper accounting practices that the directors knew of and condoned - and that is plainly reckless behaviour for the purposes of the charge."

Mr Carruthers' submission will continue until the end of the week.