The Serious Fraud Office (SFO) and Financial Markets Authority (FMA) have laid a combined 129 charges against two former Belgrave Finance directors and an associate. Both sets of charges carry maximum potential jail terms of 10 years.
The SFO said it was laying 60 charges against ex-Belgrave director Stephen Charles Smith, fellow ex-director Shane Joseph Buckley, and an associate Raymond Tasman Schofield, over NZ$18 million of loans made by Belgrave Finance to entities allegedly related to Schofield and Belgrave. Meanwhile, the FMA is laying 69 charges against Smith, Buckley and Schofield.
The FMA says the three breached the Securities Act by making untrue statements in documents offering securities to the public, and breached the Companies Act by making a false or misleading statement to Belgrave's trustee Covenant.
The SFO says the related party loans took place between June 2005 and March 2008. Property lender Belgrave collapsed into receivership in May 2008, owing about 1,000 investors roughly NZ$22 million. Belgrave provided financial accommodation and mortgage facilities for commercial and residential property developments.
Its funding for lending was sourced largely by issuing debenture stock and convertible capital notes to the public.
SFO chief executive Adam Feeley said Smith and Schofield appeared in the Auckland District Court today. Buckley will appear at a later date. Feeley said the charges were laid under the Crimes Act and, if convicted, the defendants face penalties of up to ten years imprisonment.
The SFO alleges the three defendants misrepresented to investors how their investments in Belgrave Finance would be used, and subsequently used those funds in an unauthorised manner.
Meanwhile, the FMA says it has laid 69 criminal charges against Smith and Buckley, plus Schofield. The alleged untrue statements relate to related party lending, asset quality and lending practices, source of funding, connections with other financial institutions, concentration of credit risk, and liquidity.
If convicted under the Securities Act charges, the three men face a maximum penalty of five years’ imprisonment or fines of up to NZ$300,000 plus NZ$10,000 for every day the offence continued. The Companies Act charges face a maximum penalty of five years' imprisonment or a NZ$200,000 fine.
The Belgrave probe is the 12th into a collapsed finance company concluded by the SFO. It continues to investigate Rockforte Finance, Dominion Finance, South Canterbury Finance and Hanover Finance.
Simon McArley, the SFO's general manager of financial markets and corporate fraud, told interest.co.nz in July that the SFO was aiming to wrap all its finance company investigations by Christmas.
Today Feeley said the SFO expects to conclude the majority of the four live cases shortly, but timing will ultimately be determined by the evidence acquired and the issues arising.
Feeley added that the FMA's predecessor, the Securities Commission, made initial investigations into Belgrave’s collapse before referring it to the SFO in June 2010. He said the SFO was continuing investigations into Belgrave to determine whether additional persons should be charged.
Chronological summary of SFO finance company investigations
1) Waipawa Finance – Charges laid and conviction secured.
2) Clegg Finance – Closed without charging. Prior conviction secured by Ministry of Economic Development.
3) National Finance – Charges laid and conviction secured, further charges to be tried by the FMA.
4) Bridgecorp – Charges laid, trial pending.
5) Capital + Merchant Finance – Charges laid, trial pending.
6) Five Star Finance – Charges laid and convictions secured, further charges to be tried.
7) Nathans Finance Limited – Closed without charging. Prosecution completed by FMA.
8) Kiwi Finance – Closed and referred to FMA.
9) Mutual Finance – Closed and referred to FMA.
10) Viaduct Capital Limited – Closed and referred to FMA.
11) Capital + Merchant (No.2) – Further charges laid, trial pending.
12) Belgrave Finance – Charges laid, trial date to be determined.
13) Rockforte Finance – Under investigation.
14) Dominion Finance – Under investigation.
15) South Canterbury Finance – Under investigation.
16) Hanover Finance – Under investigation.
See more from the SFO on Belgrave below:
Belgrave Finance Limited was incorporated in September 2000. Belgrave Finance provided financial accommodation and mortgage facilities for commercial and residential property developments. Funds for lending were sourced primarily from the issue of securities to the public in the form of debenture stock and convertible capital notes.
Belgrave Finance was placed into receivership in on 28 May 2008 owing around $22 million to approximately 1,000 investors.
The company was placed into liquidation in April 2010 and at the time, was the 20th finance company to collapse in two years. Following the collapse of Belgrave, the (then) Securities Commission made initial investigations into the company before referring the matter to the SFO in June 2010. The Director determined that an investigation into the affairs of Belgrave Finance may disclose serious or complex fraud, and the SFO commenced an investigation under Part II of the Serious Fraud Office Act in July 2010.
Crimes Act offences: Section 220: Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person— (a) to account to any other person for the property, or for any proceeds arising from the property; or (b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.
(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.
(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control. (4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.
Section 242: False statement by promoter, etc (1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent— (a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or (b) to deceive or cause loss to any person, whether ascertained or not; or (c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.
(2) In this section, false statement means any statement in respect of which the person making or publishing the statement— (a) knows the statement is false in a material particular; or (b) is reckless as to the whether the statement is false in a material particular.
And here's the FMA's statement
The Financial Markets Authority today announced that it has laid 69 criminal charges against three people associated with failed finance company Belgrave Finance Ltd (Belgrave). FMA alleges former Belgrave directors Stephen Charles Smith and Shane Joseph Buckley, and associate Raymond Tasman Schofield, breached section 58 of the Securities Act by making untrue statements in documents offering securities to the public.
FMA alleges that in substance Mr Schofield acted as a director of Belgrave.
The statements related to:
* related party lending
* asset quality and lending practices
* source of funding
* connections with other financial institutions
* concentration of credit risk, and
If convicted, the three men face a maximum penalty of five years’ imprisonment or fines of up to $300,000 plus $10,000 for every day the offence continued.
FMA further alleges the three men breached section 377 of the Companies Act 1993 by making a false or misleading statement to the trustee appointed to safeguard the interests of investors in Belgrave secured debenture stock.
The maximum penalty for a breach of section 377 is five years' imprisonment or a $200,000 fine.
The charges follow an investigation started by FMA’s precursor, the Securities Commission. Shortly after its establishment on 1 May 2010 FMA referred the investigation to the Serious Fraud Office (SFO).
(Updated with details of FMA charges).