Split verdict for Dominion Finance trio
Former Dominion Finance chief executive Paul Cropp has been remanded on bail until he is sentenced in May after being found guilty on four theft charges.
Fellow director Robert Barry Whale has been found not guilty on five counts of theft and another man, who has name suppression, was found not guilty of three charges.
Whale walked out the front door of the High Court at Auckland this morning saying he was happy and relieved at the result.
An extension of the third man's name suppression is now being considered by the judge.
Dominion founder and majority shareholder Terry Butler was also supposed to stand trial on similar charges but died of cancer on March 28.
The charges relate to breaches of Dominion Finance's trust deed which prohibited related-party lending without prior approval from the company's trustee.
The breaches stemmed from loans and security-sharing agreements from Dominion Finance and its subsidiary North South Finance to related parties and between each other.
Justice Graham Lang said Cropp had been the "architect" of transactions which had not been signed off by Dominion Finance's credit committee or its board of directors.
Cropp's lawyers had argued that he believed he could ask for approval from the trustee after the loan had been made.
"I do not consider for a moment that Mr Cropp believed he was able to obtain retrospective consent to any transaction - in any event he didn't do so," the judge said.
Justice Lang said he believed Whale had no knowledge of the trust deed rules relating to related-party lending, but that Cropp did and he acted to keep the transactions secret from directors who did know.
The transactions, including a loan on a Remuera property development started by former Kiwi rugby league star Matthew Ridge but which Butler and Whale became involved in, were imprudent and would not have been entered into, were they at arms-length, the judge said.
"Related-party transactions are a particular threat because if two entities are governed by the same people then the interests of one can be subjugated to the other," he said.
However Justice Lang said Cropp's actions were not taken to line his own pockets.
"They never acted out of a desire to obtain personal gain from these transactions, rather the transactions were designed to enable Dominion to survive in what were very difficult and challenging times for a finance company," he said.
Justice Lang said there was a reasonable possibility that Whale could have relied on his staff to administer such lending according to the rules.
Acting Serious Fraud Office (SFO) chief executive Simon McArley said outside the court that his office was pleased to have brought another finance company case to an end.
"These prosecutions deliver a strong deterrent to future offending," McArley said.
"The finance company experience has also taught us valuable lessons. A key to reducing the cost and impact of economic crime is early detection and intervention.
"SFO can only achieve this with strong inter-agency collaboration and the support of the community in reporting suspect and unethical behaviour."
The SFO opened its investigation into Dominion and North South following a referral from the Securities Commission (now FMA).
Dominion Finance collapsed into receivership on September 9, 2008, owing more than 5900 public debenture investors $176.9 million, and a further $56m to ASB and Bank of Scotland International.
Receivers estimate investors could receive between 10 cents and 25c in each dollar they invested but with no prospect of recovery of any interest owed.