Five Star Finance hearing finally underway
A hearing to decide Five Star Finance "shadow director" Neill Williams' culpability in the company's collapse is finally under way in the Auckland District Court today, with convicted former director Marcus Macdonald giving evidence.
Five Star Finance and its subsidiary Five Star Consumer Finance went into receivership in 2007 owing $54 million to investors who have since received only 22.5 cents in the dollar back.
The company's three recorded directors have already pleaded guilty to charges laid by the Financial Markets Authority and have fulfilled their punishments - Macdonald and Nicholas Kirk having served prison sentences and Anthony Bowden given home detention.
Williams initially pleaded guilty alongside Five Star's directors in late 2010 to the charges relating to untrue statements made in the company's investment prospectus.
However, he has since sought to dispute the facts he pleaded guilty to and then tried to withdraw his plea altogether.
His attempt to vacate the guilty plea was declined twice with Judge Roderick Joyce referring to Williams as a "shadow" director and the "mastermind" behind the finance companies.
The current hearing, which is set down for eight days, will decide the facts on which Williams will be convicted.
In court Macdonald outlined the history of Five Star Finance, saying Williams approached him in 1992 with an idea to start up a business in the finance company sector.
However, when the company was eventually established Williams did not want to be a director because of his involvement in a legal dispute through a separate company.
He, Macdonald and fellow director Nicholas Kirk, felt Williams' presence at the business might cause negative publicity.
"Mr Williams said that he did not wish to be a director and did not wish to be in charge of managing funds . th. th. as he felt that would derogate from the credibility of Five Star Finance and that was accepted," Macdonald said.
"How I took it . th. th. he was saying that whether he was guilty or innocent [on the separate company dispute] it could derogate on the credibility of Five Star and that confidence in these sort of companies is everything."
Williams' partner and future wife was a shareholder alongside Macdonald and Kirk in the company, although Macdonald said she did not attend shareholder meetings.
Williams usually stood in as her proxy, Macdonald said.
From 1995 to 2000 Williams was bankrupt which meant he could not legally be a director or do work other than as an employee.
Macdonald said Williams was employed by managing director Kirk to work at Five Star Finance and attended board meetings as a secretary and note-taker.
In 2001 Macdonald said he and Kirk had given the Companies Office a written undertaking that Williams would not have any involvement in subsidiary company, Five Star Consumer Finance, which was established to grow the group's consumer lending business.
He said Williams introduced several customers for Five Star Finance's lending business.
Williams is also due to stand trial in the High Court in June on Crimes Act charges filed by the Serious Fraud Office which Macdonald and Bowden have already pleaded guilty to.
Do you feel better off than you were this time last year?