Published 22 March 2010
The Securities Commission has laid criminal charges and issued civil proceedings against Capital + Merchant Finance Ltd directors Neal Nicholls, Owen Tallentire, Colin Ryan & Robert Sutherland. The commission has also laid criminal charges against Wayne Douglas, who resigned as a director in February 2007. Commission chairman Jane Diplock said on Friday the commission had made extensive investigations since Capital + Merchant Finance went into receivership on 23 November 2007 owing $167 million to 7000 investors. The receivers have said it was likely none of this would be recovered. “The commission alleges that Capital + Merchant Finance’s offer documents & advertisements misled investors by misrepresenting the investment risks, especially in relation to related-party lending, insurance cover & liquidity.” The commission alleges the directors made untrue statements in the registered prospectus & investment statement dated 15 August 2006, mainly in respect of related-party lending & loan management. The commission also alleges the current 4 directors made similar untrue statements in the registered prospectus & investment statement dated 10 September 2007, as well as untrue statements about liquidity & cashflow, and incorrectly stated in the prospectus that no loans were impaired and the company’s financial position had not materially & adversely changed since its last balance date. In addition, the commission alleges that 5 advertisements distributed during 2007 contained untrue statements about insurance cover for capital secured debenture stock and some of the matters referred to above. These claims don’t apply to Mr Douglas, who had resigned his directorship by then. The commission further alleges that Mr Nicholls & Mr Ryan knowingly misled the commission. Criminal charges Most of the criminal charges are laid under section 58 of the Securities Act and carry a maximum penalty of 5 years’ imprisonment or fines of up to $300,000. Criminal charges are also laid against Mr Nicholls & Mr Ryan under section 59A of the Securities Act, carrying a maximum fine of $300,000. The charges were filed at the Auckland District Court on 18 December 2009 and first court appearances are scheduled for Thursday 8 April. Civil proceedings The commission has applied for declarations of civil liability & civil pecuniary penalties of up to $500,000 against each of the current 4 directors. Under the Securities Act these applications must be made together. Ms Diplock said the commission’s main purpose in making them was to take the first step towards compensation for investors who invested under the 10 September 2007 prospectus: “A declaration of civil liability is conclusive evidence that can be relied upon by either the commission or investors themselves in any subsequent claims against the directors for compensation. The commission will consider pursuing compensation claims in due course, should it be in the public interest to do so. “Investors can take their own civil compensation proceedings, whether or not the commission also has power to do so.” The civil proceedings are issued under section 55C & related sections of the Securities Act. They were filed on 30 November 2009 at the Auckland High Court.
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Attribution: Commission release, story written by Bob Dey for the Bob Dey Property Report.