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Treasury has announced Equitable Mortgages Ltd, which has a BB credit rating from Standard and Poor’s with a negative outlook, has received an extended government guarantee until the end of 2011. More detail on the terms of the extended guarantee are on the Treasury website here. Equitable is controlled by the Spencer Family.

The existing government deposit guarantee scheme is due to expire in October this year, but finance companies with BB credit ratings or better are eligible to apply for an extension until the end of next year. Equitable is only the second to be granted an extension after Marac Finance.

Standard and Poor’s latest rating report on Equitable is available here.

The Securities Commission has laid criminal charges against Capital + Merchant Directors Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland, alleging they issued prospectuses that mislead investors over related party lending, cashflow and liquidity. The charges could result in up to 5 years jail or NZ$30,000 in fines, the Securities Commission said.

Capital and Merchant was put into receivership in November 2007 owing 7,000 investors NZ$167 million. Receivers have said none of this will be recovered. See our DeepFreeze list here.

See the full Securities Commission statement below:

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Here are my Top 10 links from around the Internet at 10 to 1. I welcome your additions and comments below or please send suggestions for Monday’s Top 10 at 10 to bernard.hickey@interest.co.nz We have no poltergeists at interest.co.nz

1. Easter meltdown? - Germany is now openly saying it wouldn’t mind if Greece applied to the IMF for a bailout, while Greece is saying it may have to apply for an IMF bailout as early as the Easter weekend. This could easily get very ugly very quickly. Hold onto your hats people. If this happens the Greeks will rightly ask if there’s much point in being in the Euro at all, as will the Germans. Who wants to bet on a broken euro by Christmas? Maybe not me yet, but we have a hairy few months ahead with the UK election in May too. Here’s the latest from the Wall St Journal.

Germany signaled it was open to supporting a joint bailout of Greece by European governments and the International Monetary Fund should the country need assistance, as Greece called on Europe for concrete help by next week.

Chancellor Angela Merkel is “open to a financial participation by the IMF” in any aid package for Greece, a senior German official said, while stressing that no final decision had been made. The official added that Greece hasn’t asked for a rescue and that Germany still wants Greece to solve its debt crisis alone through budget cuts.

The German finance ministry had raised objections to an IMF program for Greece as recently as last week.

Germany’s shifting stance sets the stage for a potential confrontation with other European countries at a summit meeting in Brussels next week. The comments come amid an increasingly contentious debate between Germany and its EU partners over how and when any rescue of Greece should occur. France and other members of the 16-nation euro zone have vociferously opposed a financial role for the IMF in Greece.

Greek Prime Minister George Papandreou said in Brussels on Thursday that he wants guarantees of financial support to come out of the summit, which is set for next Thursday and Friday. But European officials say privately that a decision on Greek aid may not be reached at next week’s EU summit, despite Greek pressure.

2. Trouble brewing – Ed Harrison at Credit Writedowns has a nice summary of the growing tensions in political systems globally after two years of the worst global recession since the end of WWII.

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The BNZ has called in Maurice Noone and John Fisk from Pricewaterhousecoopers as receivers for Patoka Dairies Ltd and McVitty Properties Ltd, both large dairy farming groups in the Manawatu and Hawkes Bay. (Updates with PwC confirming BNZ is the bank involved, details of PwC’s plans and McVitty’s convictions)

Pricewaterhousecoopers announced the receiverships and confirmed that BNZ was the bank. Patoka and McVitty Properties have 6 dairy farms, two grazing properties and two beef properties.

Maurice Noone later told Interest.co.nz McVitty was owned by Bob McVitty, while Patoka was controlled by McVitty. Noone said McVitty would not have any involvement in the business in the future.

PwC wanted to reassure staff it had no intention to launch any firesales or immediate cutbacks and would instead take a year or two to inject value back into the assets, some of which were farm conversions that had yet to be completed, Noone said.

McVitty was convicted in 2008 of obstructing a MAF inspector after an incident where McVitty shot a sick cow (pictured above). Here’s some details of the incident and McVitty’s use of a shotgun.

The first the investigator knew of McVitty’s presence was being approached directly by an angry farmer with a closed, loaded, single barrelled shotgun. McVitty’s silence made the investigator extremely anxious about his safety. McVitty then stormed directly past the investigator and in a deliberate and wilful act of rage shot the cow despite the investigator’s protestations. Defendant McVitty then stated “well it’s dead now. It’s all over and you can get off my property you’re trespassing”. He further stated that a vet was not welcome either.

McVitty also clashed in a FairGo programme with the widow of a murdered Onga Onga man after McVitty failed to pay a NZ$66,000 debt, Hawkes Bay Today reported. McVitty has also received infringement notices from the central North Island Horizons Regional Council over effluent discharges onto paddocks.

Here are the full statements below from PwC. I welcome any more detail informed readers might be able to provide in the comments.

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Bill English has signalled that Treasury’s forecasts for extra tax revenues from potential property taxation changes in the May 20 Budget are lower than the NZ$1.3 billion estimated by the Tax Working Group and that any tax cuts are therefore likely to be smaller than some might have expected.

English made the comments in Wellington yesterday while announcing the creation of the Productivity Commission. Here’s what Radio Live reported:

The Government could have to back track on personal tax cuts after revelations it won’t be getting enough revenue to cover them. The money was to come from a hike on the tax on investment property as well as a rise in GST.

Last year’s Tax Working Group said up to $1.3 billion could be raised by better targeting investment property. But Finance Minister Bill English says Treasury’s estimates of that are now falling, and although that means there’s less money for tax cuts, he’s playing down the changes.

Here’s how Radio NZ reported the dampening of expectations:

Finance Minister Bill English says Treasury has a different view from the Tax Working Group on how much extra tax will be generated by changes to the way property is taxed. Mr English says that means the trade-offs between tax changes and cuts to income tax rates will be tighter.

My view

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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news that former ASB banker Stephen Versalko has been convicted of fraud and sentenced to 6 years in prison after stealing NZ$18 million from 30 wealthy ASB clients over a 9 year period.

Versalko was running a classic Ponzi scheme and hiding it from ASB’s systems. He was only found out after a client saw a documentary about New York Ponzi schemester Bernie Madoff and got curious and worried. The client talked to another ASB banker and the fraud was quickly identified. Versalko used the money to buy luxury properties and a portfolio of investment properties. He also spent NZ$3.4 mln on two prostitutes, althought NZ$1.2 million of that was extortion from one of the prostitutes. Meanwhile, he was also using new money being invested to pay the interest on previous money invested — a classic Ponzi scheme. The NZHerald has more detail here on how the “pathetic creep” stole the money and why his wife was not in court yesterday.

The SFO summary of facts shows that funds were taken from ASB client accounts to Versalko’s personal accounts or a “ghost” account created in the name of an existing client. Versalko was able to manipulate the ASB computer system so that none of the transfers were recorded on bank statements.

Wayne Kiely, a senior investigator at Paragon New Zealand and a former head of security for New Zealand Post and Kiwibank, was surprised at how long Versalko managed to get away with the fraud. While it can be hard to detect a “cunning operator” like Versalko, Mr Kiely said tighter checks and balances could have prevented the fraud.

“That’s the big question: If the money went into an ASB account, and they didn’t pick it up in an audit, then something is terribly wrong. There also should have been controls in place about employees opening accounts. You can only do something like this if you’re in a position of trust.”

But how did he get away with it for so long while operating under ASB’s noses? How well was he supervised? He called himself ‘Mr Invincible’. ASB has repaid clients the lost money and says it has changed its systems to stop a repeat. The full ASB statement is below.

Meanwhile, the government is setting up an Australian style Productivity Commission as part of its coalition agreement with ACT. It will cost NZ$5 million to run.

Finally, Finance Minister Bill English has signalled tax cuts in the May 20 budget are likely to be smaller than expected because Treasury’s forecasts of revenues from property tax tweaks are lower than the Tax Working Group’s estimate of NZ$1.3 billion, Radio Live and Radio NZ have reported.

ASB statement below.

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