Secrecy surrounds Strategic settlement
The auditors and former directors of Strategic Finance have settled civil action brought by the receivers of the failed finance company and agreed to pay $22 million.
But the Financial Management Authority is refusing to say exactly who will be making the payment.
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"It was a confidential settlement, I am not able to get into the details of that," said FMA director of enforcement Belinda Moffat, when asked whether Strategic's auditor, BDO Spicers or its insurer would be making a contribution.
Receiver John Fisk, of PwC, said the payment, equivalent to 5 cents in the dollar for investors owed $368m, added to realisations from Strategic's loanbook, would mean investors should be repaid 15c in the dollar by the end of the year.
The settlement will see former directors Kerry Finnigan, Graham Edward Jackson, Marcel Aubrey Lindale, Timothy John Rich, Denis Grenville Thom and David John Wolfenden barred from directing finance companies for five years.
"The terms of the settlement deliver a strong deterrence message and include enforceable undertakings from the directors of Strategic not to act as a director of an issuer of securities to the public for five years," Moffat said.
Fisk said the result was the best outcome for investors.
"We have conscientiously weighed the negotiated settlement we have been able to achieve against the risks and benefits of litigation," he said.
The agreement settles civil claims made by the receivers against Strategic's directors for alleged breaches under the Companies Act and claims against the auditors, BDO Spicers, for the December 31, 2007, audit.
It also settles claims made by the FMA against Strategic's directors for alleged breaches of the Securities Act.
The authority alleged in February last year that Strategic directors had made untrue statements in a registered prospectus, investment statement and in an advertisement between March 2008 and August 2008.
"While the directors do not admit liability, FMA remains of the view that they are likely to have breached their disclosure obligations under the Securities Act," Moffat said.
"However, given the limited personal assets of the directors, this settlement represents the best outcome for investors in the circumstances."
Strategic stopped trading in early August 2008 and entered into a moratorium with its investors in December 2008. It was placed in receivership on March 10, 2010.
Fisk said the receivers continued to work on realising Strategic's remaining loanbook assets and concluding the receivership.
A revised estimate of the final outcome for secured debenture investors would be provided in the receivers' next update, he said.
The FMA said the settlement sum would be paid over the next six months to the receivers, who would distribute funds to investors.