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).