The Serious Fraud Office announced today that charges had been laid in the Auckland District Court against two men for their roles in their operation of a failed finance company, National Finance 2000 Ltd. National Finance collapsed in 2006 owing investors over $21 million.
National Finance operated to provide finance for motor vehicle purchases.
One of the two men is Allan Ludlow, director of National Finance. The other has interim name suppression.
The charges allege that Ludlow deliberately applied investors’ money contrary to the terms of the trust deed or other requirements imposed by law and thereby committed theft. In particular, he applied over $800,000 of investors’ money for investments in an audio company, for the purchase of property in Fiji, and to invest in a land purchase for another company he owned. The defendant whose name is suppressed is charged with wrongly recording the payments for the purchase of the property in Fiji and by making false entries in a statement to the company’s auditors. The two men face a joint charge of lending $1.3 million to related parties in breach of the requirements of the company’s trust deed. They also jointly face 2 charges of lending money, more than $2.6 million, to related parties in amounts that exceeded the prescribed ratio of 2% of the company’s total tangible assets.
National Finance operated under the terms of a trust deed, as required under the Securities Act and Regulations. Such trust deeds are common to all finance companies. The trust deed imposed restrictions on what investors’ money could be used for, to whom it could be lent, and how much could be lent to parties related to the directors, such as spouses and relatives.
The Director of the Serious Fraud Office, Grant Liddell, said that the Serious Fraud Office has several investigations under way concerning failed finance companies. “Where offending is disclosed, the Serious Fraud Office is determined that such offending will be prosecuted with the full force of the law. Dishonestly using investors’ funds contrary to terms of the trust deed is a criminal offence and it will be prosecuted where available evidence exists.”
“The Serious Fraud Office has already successfully prosecuted Mr Brian Pickett, director of Waipawa Finance and Waipawa Holdings, for misusing investors’ money. Other investigations are well progressed and where they disclose offending, prosecutions will follow. The investigations are complicated and difficult. The Serious Fraud Office has been working closely with the Securities Commission and the National Enforcement Unit of the Ministry of Economic Development on these cases, and that cooperation will continue in the interests of efficient and effective enforcement of the law.”
Mr Ludlow has been remanded on bail to 13 November and the defendant whose name is suppressed to 20 November, also on bail.