See the release from the Financial Markets Authority on the High Court's guilty verdict for three directors of Nathans Finance:
The Financial Markets Authority (FMA) today welcomed the High Court’s verdict in its case against three directors of Nathans Finance NZ Limited (Nathans).
Directors Donald Young, Kenneth Moses and Mervyn Doolan were today found guilty of offences under section 58 of the Securities Act on the basis of untrue statements made in Nathans’ 2006 prospectus and investment statement.
FMA Chief Executive Sean Hughes said Justice Heath’s judgment sent a clear message of responsibility to issuers of securities and their directors.
“It makes clear that directors have a personal duty to ensure that disclosure documents and other advertisements do not mislead or deceive.
“That is a duty that cannot be delegated to staff or external advisers – the directors must form their own opinions.”
Mr Hughes said accurate and timely information was critical to ensuring investors could make informed investment decisions and to participate confidently in New Zealand’s financial markets.
“Today’s decision has reinforced the responsibility that every director of an issuer has to provide truthful and complete information to investors,” said Mr Hughes.
“This verdict will also send a clear signal to investors that it’s safer to enter the markets, with greater policing of behaviour, and this will contribute to capital markets growth over time.”
FMA alleged that the directors were responsible for untrue statements made in the registered prospectus and investment statement of Nathans in December 2006. The statements concerned lending to related parties (including Nathans' parent company VTL Group), and claimed that Nathans had no bad debts, that it had adequate liquidity, that its lending was diversified, that it made loans and managed them in accordance with robust policies and processes, and that all material matters had been disclosed in the prospectus.
A sentencing hearing is scheduled for 2 September. The charges, laid under section 58 of the Securities Act, carry a maximum penalty of five years imprisonment or fines of up to $300,000 plus $10,000 for every day the offence is continued.
Background
Defendants: John Hotchin, Donald Young, Kenneth Moses and Mervyn Doolan
Charges: FMA alleged:
· that the directors made untrue statements in the registered prospectus and investment statement of Nathans Finance NZ Limited (in receivership) dated 13 December 2006. These statements concern lending to related parties (including Nathans' parent company VTL Group), that Nathans had no bad debts, that it had adequate liquidity, that its lending was diversified, that it made loans and managed them in accordance with robust policies and processes, and that all material matters had been disclosed in the prospectus.
· that the directors made further untrue statements when they signed a prospectus extension certificate on 30 March 2007. These stated that the company's financial position had not materially and adversely changed since its last balance date, and that the 13 December 2006 prospectus was not false or misleading.
· that letters sent to members of the public advertising Nathans Finance debenture stock contained untrue statements about some of the matters referred to above. These claims do not apply to Mr Hotchin who had resigned his directorship by the time the advertisements were sent out.
The Defendants denied the charges.
Penalties: as follows:
Criminal charges - These charges were laid indictably under section 58 of the Securities Act on12 December 2008 and carry a maximum penalty of five years imprisonment or fines of up to $300,000 plus $10,000 for every day the offence is continued.
Civil proceedings - The proceedings were issued under section 55C and related sections of the Securities Act. FMA has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the five directors. The civil proceedings are stayed pending resolution of the criminal case.
Previous plea:
John Hotchin entered a guilty plea and was sentenced on 4 March 2011 to 11 months’ home detention and 200 hours community service, and was ordered to pay reparation of $200,000. He gave evidence for the prosecution.
12 Comments
I don't know. But they don't seem to be this slow overseas when dealing with these sorts of problems. As it affects so many people, I would hope that it would take priority over less important cases, as what happens with health waiting lists. The receivers I beleive were waiting for this, before they were able to work out how much more they would be able to pay out. I guess it will be a bit of good news for investors.
yes
first draft copy summary below
https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organiza…
In many cases, the threat of a RICO indictment can force defendants to plead guilty to lesser charges, in part because the seizure of assets would make it difficult to pay a defense attorney. Despite its harsh provisions, a RICO-related charge is considered easy to prove in court, as it focuses on patterns of behavior as opposed to criminal acts.[2]
Firstly, it depends on whether the FMA will pursue civil proceedings against these guys now that they have been found guilty on criminal charges. Whether that results in anything sho knows... but if there is no cash pile at the end of it then there wouldn't be much point.
On making it faster? The court process is where the real delays are and the FMA can't do much about that - more a case of beating up your local Minister of Justice to put resources into a full commercial division of the high/district courts so that these cases can be worked through faster and not be delayed by other cases (P dealers being the prime example)...
Surely they shouldn't have told you that, without inforning other investors, which I am one.
I think they need to look at what recievers get paid, as well as a cap. Over the last few years I have been owed by a number of companies that have gone into receivership, and received nothing back. The fees have always been what was remaining, and there is no incentive for the receivers to be efficient.
This is what the Shareholders Association has to say:
The New Zealand Shareholders Association welcomes the conviction of three Nathans Finance directors today.
The decision supports our view that it is the duty of all directors to act in good faith and in the best interests their company and its shareholders. “Directors needed to exercise the care, diligence and skill that a reasonable director would exercise and not just warm the seats around the board table” said Chairman John Hawkins.
Hawkins said the defence of relying on advice from others has now been shown to be flawed both in this case and the recent Centro decision in Australia. “That is exactly how it should be. Directors are paid to do a job and an important part of that is to bring their own skills and experience to the task” he said. “These three were so incompetent and deceitful they did not even warrant the title of Director”.
Hawkins said the three convicted directors were commercial hazards who had cost investors $174m and contributed to a loss of confidence in the markets when the country could least afford it. The scale of offending requires a message to be sent loud and clear. The NZSA would not be satisfied unless there was a substantial custodial sentence and reparations. “They bled the investors dry. Now they should feel the pain themselves”, he said.
Hawkins was also scathing of the manner in which the former Securities Commission had discharged its duties. “These three have been convicted under laws that were available to the Commission, but they waited until the damage was complete before stepping in”, he said.
“The Shareholders Association strongly supported the formation of the FMA to replace the Securities Commission. The FMA has already shown a much more proactive approach. Combined with law changes that the NZSA has been closely involved with, we believe there will be a greatly reduced likelihood of similar offending in the future” Hawkins said..
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