SCF accused turned 'blind eye' to Hubbard
The three men accused of the country's largest fraud ignored regulations and turned a blind eye to their chairman's activities, a court has heard.
The Crown started presenting its closing arguments in the South Canterbury Finance (SCF) trial in the High Court in Timaru this morning.
The trial, which began on March 12, has entered its final phase with this week set aside for the Crown's closing arguments, followed by the defence next week.
Former SCF directors Ed Sullivan and Robert White, and former chief executive Lachie McLeod, face 18 charges brought by the Serious Fraud Office following SCF's $1.58 billion collapse. The trial is being heard by Justice Paul Heath alone.
Crown counsel Colin Carruthers QC said today that the "defendants ignored or overrode the controls that should have regulated how South Canterbury [Finance] operated".
"That remains the essence of the Crown position," he said.
"The major shareholder and chairman [the late Allan Hubbard] had little interest in the various accounting and legal regulations upon him. Mr Hubbard's attitude was memorably described in evidence as 'trust me I know what I'm doing'."
Hubbard was described as "window dressing" the accounts.
"He had a disdain for disclosing related-party transactions, a peculiar view of what constituted one, a penchant for swapping cheques to cleanse the accounts and took assets off the balance sheet if they were impaired," Carruthers said.
The evidence was also that the defendants "well knew that", he said.
"On July 25, 2007 the directors even went so far as to write to Mr Hubbard expressing their concerns. That is an extraordinary document, setting out a long list of issues directly relevant to these charges, from related-party advances, the single-entity exposures limit, advances made without security, loan and drawdown authorisation and so on.
"But critically nothing changed. And more importantly, these defendants did not just turn a blind eye. This case is about the affirmative statements they made and affirmative actions they took."
It was not a case of simply failing to act, Carruthers said.
"These three men affirmatively facilitated the improper way the company was run, by saying that the true position was what it was in the company's prospectuses or accounts, and personally approving transactions that breached the Trust Deed or Crown Guarantee. In doing so, the Crown says they broke the law."
The hearing continues.
- The Timaru Herald