Reeves Moses directors cop plenty of stick in trial’s closing session
Former Reeves Moses mortgage manager Peter van Nieuwkoop was fined $12,000 today — $3000 on each of 4 charges laid under section 58 of the Securities Act — for his breaches of securities law in 1999, which subsequent company owner Sovereign Ltd said had cost it $1.5-2 million.
On all other charges Judge Barry Morris convicted & discharged Mr Van Nieuwkoop.
He was found guilty in March on 23 charges out of 36 (1 was duplicated & 12 were laid in the alternative) — the 4 section 58 charges of issuing an untrue advertisement, 8 under section 59 of offering offer documents to the public in contravention of the regulations, and 11 of failing to comply with the contributory mortgage regulations.
Defence hoped for discharge
By sentencing time a jail sentence had been ruled out, the prosecution hoped at least periodic detention or a fine of $20-30,000 might be imposed, and the defence was angling for a discharge without conviction so Mr Van Nieuwkoop could keep his present job, while holding out an offer to contribute to the costs of prosecution. He is a director, but not a shareholder, of Contributory Mortgage Investments Ltd.
He could have been jailed for 3 months or fined up to $15,000 on the section 58 charges, fined up to $15,000 on the section 59 charges, or fined up to $5000 on the regulations charges.
Mr Van Nieuwkoop claimed through his trial in February-March that he was the scapegoat. An affidavit produced for the judge at sentencing in the Auckland District Court showed Mr Van Nieuwkoop reported directly to director Gary Stevens.
Counsel says directors should have acted faster but didn’t
Counsel Kit Toogood QC, appearing for Mr Van Nieuwkoop only at sentencing, said Mr Stevens recognised systems deficiencies arising from rapid growth of the company’s mortgage book. The directors recognised they needed a mortgage care manager at the end of 1998, decided they wouldn’t appoint one for some months and had Mr Van Nieuwkoop carry on in his arduous role.
“In March 1998 the book totalled $35 million. The directors had set a target of $50 million by December 2000. By December 1998 it was $58 million. It was already $105 million by December 1999, growing like topsy, and still nothing was done until July 1999.
“It wasn’t until October or November, after Mr Van Nieuwkoop had resigned, that adequate systems & controls were put in placeâ€¦ The responsibility for failing to provide these systems rests entirely with the directors of the company.”
Mr Toogood said “there was gross mismanagement of this company by the directors and it would be unfair to saddle Mr Van Nieuwkoop with full responsibility for the actions for which he was convicted.”
Tit-for-tat accusations against those who can’t answer
Neither Mr Stevens nor Roger Moses, his fellow former director & owner of the Reeves Moses group and Reeves Moses Hudig Mortgage Nominee Co Ltd, the particular company involved in these charges, was in court to defend these allegations.
They’d already done plenty of that during their own trial in 2001, when Mr Van Nieuwkoop copped all the blame and — with his own trial then pending — was unable to defend himself against the aspersions.
The directors were found not guilty on all charges, some of which (laid under section 58 of the Securities Act) were dismissed during the trial. In the High Court on 8 May, Justice Mark O’Regan upheld their district court acquittal on charges laid under regulation 41 of the Securities Act (Contributory Mortgage) Regulations, but overturned their acquittal on charges laid under section 59 of the Securities Act.
The directors were found not to have been involved in the day-to-day running of the contributory mortgage company loans. The essence of their trial was whether the securities law made them liable for the (criminal) actions of their staff when they had no knowledge of the alleged frauds being committed.
Irksome having trial after directors’ acquittal
Although Judge Morris has said many times his focus had to be on the charges, not on wider aspects of the business or on the other court case, having the executive tried after the directors’ acquittal on the same charges (though from a different perspective) has plainly been irksome. Mr Van Nieuwkoop was charged in December 2000 but an administrative error caused his trial to be deferred. Sentencing has also been deferred because of the High Court proceedings in the Moses/Steven case.
Prosecutor Brian Dickey said a discharge could effectively be used as a reference for Mr Van Nieuwkoop, and he said it would send all the wrong messages to the markets. It was also rare for the court to contemplate a discharge under section 19 of the Criminal Justice Act “without true contrition. There is no true contrition in this case. Mr Van Nieuwkoop in his last affidavit really questions the basis of the verdicts. He blames Sovereign, who took over the company, for not recovering much of the money. He still blames the directors. The defendant acknowledged no blame on his part beyond that [not managing his workload] which was thrust on him by others.”
Mr Dickey said the offending was persistent. Contributors to the mortgages faced a potential $10 million shortfall loss, which was boiled down to an actual loss by the Sovereign Assurance Co Ltd estimated at $1.5-2 million.
Judge Morris said the whole Reeves Moses organisation, including Mr Van Nieuwkoop, clearly had a “gung-ho approach” in growing the mortgage business from 10s of millions of dollars to 100s of millions over a short period, and this meant the imperfections of the system brought Mr Van Nieuwkoop to court for his role.
“Clearly it would be wrong to visit him with all the imperfections of the system.”