Five Star directors receive custodial sentences

Five Star directors receive custodial sentences

Two former directors of Five Star Consumer Finance Limited, were today sentenced to prison terms.  The sentences related to charges under the Crimes Act brought by the Serious Fraud Office (SFO). 

Nicholas Kirk was sentenced to two years and eight months, and Marcus McDonald to two years and three months. 

The Crimes Act charges relate to the theft of $50.1 million by a person in a special relationship (section 220, Crimes Act 1961). 

Separate sentences were given for charges under the Securities Act brought by the National Enforcement Unit of the Ministry of Economic Development. 

Anthony Bowden was also sentenced on Securities Act charges today.

SFO Chief Executive, Adam Feeley, said “SFO is pleased with the delivery of a custodial sentence.  This is the first sentencing in relation to a major finance company collapse, and continues the clear message from the Courts as to the seriousness of white collar crime.”

The charges arose out of the operation of Five Star Consumer Finance Limited, which was placed into receivership on 29 August 2007 owing investors approximately $46 million.

Anthony Bowden and Neill Williams also face charges under the Crimes Act in relation to Five Star Consumer Finance.  A trial date has yet to be set for them.

For further information

Adam Feeley
Chief Executive
Serious Fraud Office
Phone 021 333 539

Note to editors

Background to Five Star Finance

Five Star Consumer Finance Limited traded as a finance company accepting deposits from the public and investing those deposits in consumer and commercial lending.  The directors were Marcus Macdonald, Nicholas Kirk and Anthony Bowden.  Neill Williams was not appointed as a director of the company but the SFO allege that he was heavily involved in the management of the company.  Five Star was placed into receivership on 29 August 2007 owing investors approximately $46 million. 

Five Star Finance Limited, Five Star Debenture Nominees Limited and Antares Finance Holdings Limited were related companies, and formed the wider Five Star group.  The SFO investigation has concentrated on transactions entered into between members of the Five Star group and entities related to or controlled by the directors.

Role of SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Act in response to the collapse of financial markets in New Zealand at that time.

The SFO operates three investigative teams:

• Fraud Detection & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.

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 strategic goals and performance standards.  It is available online at: www.sfo.govt.nz(external link)

Crimes Act 1961 offences

Section 220: Theft by person in special relationship

(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—
(a) to account to any other person for the property, or for any proceeds arising from the property; or
(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.
(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.
(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.
(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.