South Canterbury Finance verdicts released

South Canterbury Finance verdicts released

Verdicts have been handed down by the High Court at Timaru today by His Honour Justice Heath following the conclusion of the South Canterbury Finance Limited (South Canterbury) trial.

Former South Canterbury Chief Executive Lachie McLeod has been acquitted on all charges.

Former South Canterbury Director Robert Alexander White has been acquitted on all charges.

Former South Canterbury Director Edward Oral Sullivan has been found guilty of five charges and acquitted on the remaining four charges.

All defendants were acquitted on the charge relating to the Crown Retail Deposit Guarantee Scheme (Guarantee Scheme).

Charges were laid by the Serious Fraud Office (SFO) against Messrs McLeod, White and Sullivan in respect to South Canterbury in December 2011 after a 14 month-long investigation.

The majority of the charges related to specific transactions entered into by South Canterbury involving allegedly undisclosed, related party lending.

The SFO further alleged that persons associated with South Canterbury unlawfully obtained the benefit of the Guarantee Scheme for South Canterbury by failing to disclose to the Crown that the company had entered into related party lending.

The SFO estimated the total value of the allegedly fraudulent transactions at $1.7 billion, which included an estimated $1.58 billion from entering the Guarantee Scheme.

The five month-long SCF trial concluded in August this year.

SFO Director, Julie Read referred to the difficulties in bringing a case of this nature before the Court. "This was a difficult and complex prosecution. While the SFO was unsuccessful in part, given the scale of the collapse and the impact it had on investors, it was clearly in the public interest to put all matters before the Court. I am also satisfied that there was sufficient evidence to warrant bringing this prosecution - the Court, not the SFO, is the ultimate arbiter of whether or not that evidence is sufficient to prove the charges beyond reasonable doubt. In this case, we have failed to satisfy the Court to the required standard in relation to Mr McLeod and Mr White but I consider that the case was investigated thoroughly and that our counsel presented the best possible case to the Court."

The SFO are considering the Judge's reasons for the decisions today.

Mr Sullivan has been remanded on bail and will be sentenced on 12 December 2014.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

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) 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.
  
Section 240: Obtaining by deception or causing loss by deception
(1) Every one 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) Every one 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
Every one 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 the 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.

The SFO's role is the detection, investigation and prosecution of serious or complex financial crime. The 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.

The SFO operates three operational teams; the Evaluation and Intelligence team along with two investigative teams.

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..."

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:

• the suspected nature and consequences of the fraud and/or;
• the suspected scale of the fraud and/or;
• the legal, factual and evidential complexity of the matter and/or;
• any relevant public interest considerations.

The SFO's Annual Report 2013 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO's strategic goals and performance standards. Both are available online at www.sfo.govt.nz