The Serious Fraud Office (SFO) today announced that it had launched an investigation into a number of related party transactions undertaken by Dominion Finance Group Limited and North South Finance Limited prior to their collapse in 2008.
Dominion Finance investigation launched
The Serious Fraud Office (SFO) today announced that it had launched an investigation into a number of related party transactions undertaken by Dominion Finance Group Limited and North South Finance Limited prior to their collapse in 2008.
Chief Executive, Adam Feeley, said the matter had been the subject of an extensive preliminary inquiry prior to commencing a formal investigation.
“We have concluded a number of cases which now enable us to address issues identified in the preliminary inquiry. The investigation will focus on a small number of related party transactions which will ensure we complete the investigation in a timely manner.”
Mr Feeley added that the SFO would coordinate its efforts with the Registrar of Companies and the Securities Commission.
“We have already worked closely with the Securities Commission in relation to this matter, and continue to do so.”
In July this year the Securities Commission laid criminal charges and issued civil proceedings under the Securities Act against former Dominion Finance Group Limited and North South Finance Limited directors.
For further information
Adam Feeley
Chief Executive
Serious Fraud Office
Phone 021 333 539
Note to editors
Dominion Finance Group Limited (DFG) and North South Finance Limited (NFS) were the operating subsidiaries of NZX listed Dominion Finance Holdings Limited (DFH). DFG had been operating, under various names since 1954. It was acquired by Terry and Ann Butler in 1987. They remained the majority shareholders of DFH up to its liquidation in 2009. DFH acquired NSF in 2005.
Both companies suspended performance of their obligations to investors in July 2008 and proposed moratorium arrangements.
The Trustee appointed for the DFG depositors, Perpetual Trust Limited, declined to support the proposal and the company was put into receivership in September 2008. At the time of the appointment of receivers DFG owed 5,937 debenture holders approximately $177 million. Wholesale lenders were owed approximately an additional $55 million. The receivers expect a return of between 10 and 25 cents in the dollar will be available for secured creditors. No funds are expected to be available for unsecured creditors.
The Trustee acting for the NFS depositors, Covenant Trustee accepted the proposal and the moratorium continued until July 2010. At the time of the appointment of receivers NFS owed debenture holders approximately $31 million. In addition wholesale lenders were owed approximately $15 million. The receivers are yet to estimate the likely recovery.
DFH entered voluntary administration on 15 October 2008. Following an administrators recommendation to that effect, it was placed into liquidation on 3 February 2009. It has an estimated deficit owed to creditors of in excess of $115 million.
In total the group is recorded as having unpaid creditors in the region of $400 million.
The role of the Serious Fraud Office
The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Act(external link) in response to the collapse of financial markets in New Zealand at that time.
The SFO operates under two sets of investigative powers. Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”
Part 2 of the SFO Act provides the SFO with more extensive powers where: “..the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”
The SFO’s Statement of Intent 2010-2012 sets out the SFO’s three year strategy and goals for contributing towards the Government’s Justice and Economic Development goals. It is available online at http://www.sfo.govt.nz/f56,555/SFO_Statement_of_Intent_2010.pdf(external link)(external link)
Current SFO Investigations & Prosecutions
The SFO is currently investigating 22 matters, two of which involve assistance with international law enforcement agencies. Cases under investigation include:
- Nathans Finance
- Lane Walker Rudkin
- B’On Financial Services
- Capital + Merchant Finance
- Aorangi Securities
- Belgrave Finance
- South Canterbury Finance
It is also bringing 31 prosecutions, including proceedings against persons involved with National Finance; Bridgecorp Ltd; and Five Star Company Group.