PricewaterhouseCoopers out for damages

Provincial Finance receiver PricewaterhouseCoopers is chasing credit guarantor Veda Advantage for damages over an alleged multimillion-dollar fraud conspiracy that, if successful, could return more cash to investors.

Though progress was made during hours of negotiations in the High Court at Auckland on Thursday, no agreement could be reached.

Receiver Maurice Noone says Veda, formerly Baycorp Advantage, faced the prospect of a February trial if the matter remained unsettled.

The case centres on a former female Baycorp employee, who PricewaterhouseCoopers claims falsified credit reports on which failed finance company Provincial relied when assessing whether to approve loans for potential car buyers.

Mr Noone says the alleged conspiracy involved a South Auckland family that ran a used car yard in the area.

Together they arranged loans that were never likely to be repaid.

Legal action to recover more than $17 million in damages from the Osman family - brothers Abdul Kareem, Abubakr, Mohammed Imran and their father Mohammed Farook - was dropped in April after they were declared bankrupt.

Both the family and former Baycorp employee have since left the country.

‘‘We remain of the view we have a very strong case [against Veda],'' Mr Noone said.

‘‘The thrust of the case alleges that the information searches provided to us [as receiver] by Veda had been tampered with.'' Though the employee at the heart of the case has ‘‘vanished without a trace'', Mr Noone said proceedings had been brought against Veda because it was ultimately responsible for its employees' actions.

The South Auckland car market was a target for expansion for Provincial, but it is understood the company opened itself up to fraud by relying too heavily on third parties, like Baycorp, to assess the risk of loans, and on information provided by dealerships and loan brokers.

Christchurch-based Provincial went into receivership in May 2006 owing around 14,000 mum and dad investors around $296 million. To date, debenture holders have received 90.5c back for each dollar invested, and that could be about to rise further.

"The outcome may have further bearing on repayments. We'll have to wait and see,'' said Mr Noone.

Further repayments could soon be forthcoming to investors, he said, with the receivers nearing collections of outstanding loans.

- © Fairfax NZ News