Serious Fraud Office lays 21 charges against 5 people 'involved with South Canterbury Finance's affairs' over alleged NZ$1.7 bln fraud

Serious Fraud Office lays 21 charges against 5 people 'involved with South Canterbury Finance's affairs' over alleged NZ$1.7 bln fraud

The Serious Fraud Office (SFO) has laid 21 charges against five so far un-named people involved in failed lender South Canterbury Finance's affairs in what it alleges is a NZ$1.7 billion fraud, exceeding anything in the history of New Zealand white-collar crime.

Meanwhile, the Financial Markets Authority (FMA), which after its own South Canterbury Finance (SCF) probe, will supply information supporting some of the charges filed by the SFO at the Timaru District Court today, is eyeing action to try and recover some of the NZ$1.58 billion worth of taxpayer money paid out to SCF investors under the Crown retail deposit guarantee scheme after the company's collapse last year.

SFO chief executive Adam Feeley said, after a fourteen-month investigation into a variety of transactions involving SCF, the SFO had laid the charges.

“However, until such time as the charges are first heard before the Court, and any issues regarding suppression have been fully dealt with, it would not be appropriate to make any comment on which individuals have been charged," Feeley said.

He said the charges allege a variety of offences, including theft by a person in a special relationship; obtaining by deception; false statements by the promoter of a company; and false accounting. The offences carry maximum penalties of between seven and ten years imprisonment.

"The total estimated value of allegedly fraudulent transactions is approximately $1.7 billion, which includes an estimated $1.58 billion from entering the Crown Retail Deposit Guarantee Scheme," Feeley said.

“The collapse of SCF was one the most significant of all the failed finance companies. The value of the fraud alleged to have been committed exceeds anything in the history of white-collar crime in New Zealand, and the time we have taken to complete this matter is a reflection of that scale," Feeley added.

The SFO revealed in October last year it was investigating five SCF related party loans made between 2005 and 2009 for potential false statements or other fraudulent conduct. See more here in this Double Shot interview with Feeley.

FMA eyes action to recover taxpayer money paid out to SCF investors

Meanwhile, FMA chief executive Sean Hughes also said the FMA was examining possible ways to take civil proceedings in order to recover some of the money paid out to SCF investors under the Crown Retail Deposit Guarantee Scheme.

The FMA said its support of the SFO case comes after it completed its own criminal investigation of SCF. Hughes said the FMA will supply particulars of false statements in two SCF prospectuses to support some of the SFO charges.

"The untrue statements relate to the level of loan impairments and the availability of banking facilities," Hughes said.

“As with other investigations into failed finance companies, FMA has worked closely with the SFO on this case. A single prosecution is more efficient and is consistent with FMA’s Enforcement Policy, which allows for joint prosecutions where appropriate," Hughes added.

“We have also taken into account the fact that the Crimes Act charges laid by the SFO carry heavier maximum sentences than Securities Act charges targeting the same behaviour. Convictions on Securities Act charges would be unlikely to add to the penalties resulting from the SFO charges.”

SCF collapsed into receivership on August 31 last year triggering a NZ$1.58 billion taxpayer funded payout to 35,000 of the company’s investors under the Crown retail deposit guarantee scheme. Receiver McGrathNicol has so far recovered NZ$395 million and the government expects it to recoup about another NZ$285 million for taxpayers. The government also provided the receiver with a NZ$175 million loan to repay SCF's prior charge holders, including Pyne Gould Corporation's Torchlight, which was repaid by McGrathNicol in February.

 (Update adds detail, SFO comments).

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Moreover, does this mean the taxpayers crack a bottle of someone else's bubbly - or is Hubbard's cupboard bare? 

 "charges allege a variety of offences, including theft by a person in a special relationship; obtaining by deception; false statements by the promoter of a company; and false accounting. The offences carry maximum penalties of between seven and ten years imprisonment."

Jeez all 5 must be so thankful for their white collars....Time to spruce up the mansion and prepare for home detention..now which lawyer will get sick first I wonder.

I think you're likely right, Wolly. Given the independent judiciary’s construction of justice and punishment in this country I fully expect that any of those found guilty of New Zealand's largest ever billion dollar crime to expect to feel the full weight of the law. Two weeks home detention and a thoroughly good telling off. We won’t have any of that 154 years for Bernie Madoff’s billion dollar crimes nonsense in this country, thank you very much.

By the way, can you tell me, in the judicial sense of course, what is the difference between being fully independent and aristocratically arrogant?

Heck DB...that's a MOOT point mate....it would keep the lawyers busy for...oh ten years at least....or until the money ran out! The judges however have longer time frames cos their money never runs out.

Two weeks HD is a tad light and rather cynical of you....they face at least 6 months home detention and can expect to have their legal fees paid for by you....gosh if any of them are members of the National Party...they are likely to be black balled...for at least three meetings or until they get new wigs and learn how to look humble.

Haha, that is enough to pay off a few judges.

How is it that you are smart enough to steal 1.7 billion, but too stupid that you get caught? 

Worse case scenario a couple of months prison in the paratai drive mansion.

I wasn't aware that there were any Paratai Drive mansions in Timaru, scarfie?

In a small town, smart ,wealthy lawyers and accountants can get away with murder. These guys got too big for their boots . They totally abused their positions and thought they could do what they bloody well liked. They all need to experience serious jail time ,bankrupted and barred from business for the rest of their pathetic lives.BUT,we all know after a bit of home D,They will be back terrorising little old ladies.

 

 

And the tax payer pays for their defence.......

 

1.7 Billiion is no small amount.....

I was right .....  ;)

 

Your comment is awaiting moderation.
July 6th, 2009 at 11:28 pm

 

We new this was going on 2.5 years ago eh Bernard.

 

 

Has anyone seen Bill or Connor around lately?

Whitebaiting out of season....such is the privildge for our illustrious duo....

Justice!!!!!! $1.3b now $1.7b! Greedies having a lovely time - we're forever blowing bubbles * * * * !      

Where does FORSYTHE BARR AND SANY MAIER fit into all this.Surely they along with lachie new all this was happening.

In an interview after the SFO probe was announced last year Adam Feeley said Sandy Maier was not under investigation.

No worries Ivan...the banks will be lining up to lend them the dosh to pay the fines...expect it to run into oh maybe ten grand each!

The Greens, like Labour, want an inquiry:

Government must answer questions over SCF bailout

The Green Party is supporting calls for an investigation into the Government’s management of the Crown deposit guarantee scheme, following the Serious Fraud Office laying charges over South Canterbury Finance (SCF) transactions worth $1.7 billion.

“It appears fraud may have occurred while South Canterbury Finance was covered by the Government’s retail deposit guarantee scheme. That indicates a complete lack of Government oversight,” said Green Party Co-leader Dr Russel Norman.

“While there were good reasons to introduce the guarantee scheme, it was critical the scheme was managed in a way that minimised tax payer liability. The Government’s management of the liability relating to SCF is now highly questionable. 

“The public needs to know what Treasury and the Government were doing to stop alleged fraud happening while the taxpayer was underwriting SCF. It seems whatever they were doing wasn’t enough.”

The Auditor General’s report on Treasury’s management of the Crown Retail Deposit Guarantee Scheme criticised the Treasury and the Government for not managing the size of the Crown’s potential liability. Deposits with SCF grew by 25% after the guarantee was put in place and Treasury did not attempt to moderate this behavior, ‘even when it could see the Crown’s potential liability increasing’.

“The Government and Treasury need to take responsibility for their actions. There is mounting evidence they made poor quality decisions that benefited those who invested in SCF over the taxpayer,” said Dr Norman.

“When such large companies entered the retail deposit guarantee, it was important to minimise any cost to the public. On the face of it, this wasn’t the case with SCF, so an inquiry is needed to clear things up.

“We support the Labour Party’s call for a thorough inquiry. It should happen immediately. Any inquiry should also cover the use of consultants by Treasury and their role, if any, in this affair.

“We need to determine if tax payer’s money has been wasted on SCF through poor decision making, a lack of on-going oversight, and inaction on alleged fraud,” said Dr Norman.

 

Enjoy your coffee & Sky TV with Jane!

The fact that the SFO is laying charges does not mean much. They often get it wrong, and in the case of the Winebox could not get it right even with the help of the judiciary. I remember my tax law lecturer telling us what serious problems they have in doing their duty, and then I saw it it for myself in court one day.