Guilty plea in Gisborne finance company investigation

Guilty plea in Gisborne finance company investigation

Former director of Rockforte Finance Limited (Rockforte), Colin Mark Simpson (52) has entered guilty pleas in the Gisborne High Court to nine counts of fraud laid by the Serious Fraud Office (SFO).

SFO laid a number of criminal charges against the three directors of the failed Gisborne finance company in January 2012.

Mr Simpson has pleaded guilty to charges of theft by person in special relationship, false accounting, obtaining by deception, and false statement by promoter. The charges carry maximum sentences of between seven and ten years imprisonment.

SFO allege that a significant portion of investors' money was used as a source of funding for the directors' personal business interests in two companies - Gisborne Haulage and Michael Ward 1969 Ltd, which operated the Jean Jones label throughout New Zealand.

Investor losses amounted to $3.86 million.

SFO General Manager of Evaluation and Intelligence, Graham Gill said, "Although people have attempted to make prudent investments, Mr Simpson's actions have led to the consequential failure of several businesses. This has had a significant impact on the Gisborne community and resulted in the loss of financial investments and jobs."

The two remaining defendants, Nigel Brent O'Leary (31 counts) and John Patrick Gardner (22 counts) will face trial on 30 September. Mr Simpson has been remanded on bail for sentencing on 26 September.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Background to investigation

Rockforte Finance Limited was incorporated on 20 June 2003 and placed into receivership on 10 May 2010.

The SFO opened its investigation into Rockforte on 6 December 2010, following discussions with its Receivers, Indepth Forensic Limited. Rockforte was placed into liquidation on 15 February 2011. The Official Assignee was appointed liquidator.

The MED's National Enforcement Unit and Financial Markets Authority also provided support and assistance to SFO on this case.

Rockforte was established in 2003 as a provider of consumer and commercial financial services. The majority of its investors were from the Poverty Bay region. It operated under a trust deed that prohibited it from using investors' funds to make loans to related parties in excess of 2% of its total tangible assets without the consent of the trustees.

Its predominant activity was financing the purchase of second-hand motor vehicles (primarily Japanese imports) with loans secured against the vehicles.

In February 2009, Rockforte obtained approval for acceptance into the CRDGS for a period of two years. However, the Crown Deed of Guarantee was withdrawn effective from 1 January 2010.

Crimes Act 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) Everyone 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.

Section 240 Obtaining by deception or causing loss by deception
(1) Everyone is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right -
(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or
(b) in incurring any debt or liability, obtains credit; or
(c) induces or causes any other person to deliver over, execute, make, accept, endorse, destroy, or alter any document or thing capable of being used to derive a pecuniary advantage; or
(d) causes loss to any other person.

(2) In this section, deception means -
(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and -
  (i) knows that it is false in a material particular; or
  (ii) is reckless as to whether it is false in a material particular; or
(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or
(c) a fraudulent device, trick, or stratagem used with intent to deceive any person.

Section 242 False statement by promoter, etc.
(1) Everyone is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent -
(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or
(b) to deceive or cause loss to any person, whether ascertained or not; or
(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.

(2) In this section, false statement means any statement in respect of which the person making or publishing the statement-
(a) knows the statement is false in a material particular; or
(b) is reckless as to the whether the statement is false in a material particular.

Section 260 False accounting
Everyone is liable to imprisonment for a term not exceeding 10 years who, with intent to obtain by deception any property, privilege, service, pecuniary advantage, benefit, or valuable consideration, or to deceive or cause loss to any other person,-
(a) makes or causes to be made, or concurs in the making of, any false entry in any book or account or other document required or used for accounting purposes; or
(b) omits or causes to be omitted, or concurs in the omission of, any material particular from any such book or account or other document; or
(c) makes any transfer of any interest in a stock, debenture, or debt in the name of any person other than the owner of that interest.

About SFO

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

SFO's role is the detection, investigation and prosecution of serious or complex financial crime. SFO's focus is on investigating and prosecuting criminal cases that will have a real effect on:

• business and investor confidence in our financial markets and economy
• public confidence in our justice system and public service
• New Zealand's international business reputation.

SFO operates three investigative teams:

• Evaluation and Intelligence;
• Financial Markets and Corporate Fraud; and
• Fraud and Corruption.

SFO operates under two sets of investigative powers.

Part I 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 II 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..."

SFO's Annual Report 2012 sets out its achievements for the past year, while the Statement of Intent 2013-2016 sets out the SFO's three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz(external link)