Capital + verdict appeal considered

Prosecutors are mulling an appeal after two Capital + Merchant finance company directors were found not guilty of charges alleging hidden related party lending.

This month Neal Nicholls and Wayne Douglas, directors of failed finance company Capital + Merchant Finance, were acquitted of Crimes Act charges over loans totalling $16.2 million for a property development project in Palmerston North.

The pair, along with fellow director Owen Tallentire, were found guilty of theft charges relating to a separate transaction and await sentence on August 31.

Simon McArley, general manager of financial markets and corporate fraud for the Serious Fraud Office, said the acquittals were disappointing.

''The initial euphoria of the guilty [verdicts] is tempered with the realisation that some of it's not quite as positive as we thought.''

In particular, there were concerns that the ruling required related party interests to be fully documented, even where it was alleged they were intended to be concealed.

''What in effect it's saying is you can structure your way around the Crimes Act,'' said McArley.

With other finance company cases likely to cover similar allegations, including South Canterbury Finance, the Capital + Merchant ruling could be significant.

In particular, the court's ruling that different reporting standards applied to prospectuses was likely to be an issue in subsequent cases.

''On the basis that it's stood up once you've got to expect it will be followed,'' said McArley. ''If that is the law then that is the law. The focus will then shift clearly back onto legislators. Is this right? Is this the protection people get?''

McCarley said the SFO was considering an appeal.

''It's definitely something we've got to think about,'' he said. ''We're in the process of working our way through it.''

After consultation with counsel the decision would ultimately belong to Crown Law, said McArley.

Nicholls, Douglas and Tallentire were remanded in custody pending sentencing on August 31.

The three, as well as former directors Colin Ryan and Robert Sutherland, also face criminal charges laid by the Financial Markets Authority alleging they made untrue prospectus statements. Trial is set down for February 11, 2013.