A business owner has recalled being "moved aside" within a company he formed, by South Canterbury Finance (SCF) directors, to be replaced by Edward Sullivan's nephew.
Another company involving Sullivan's brother-in-law also became involved, to ease cashflow issues via a loan from SCF.
Former SCF director Sullivan, along with another former director, Robert White, and former chief executive Lachie McLeod are on trial before Justice Heath in the High Court at Timaru, facing charges laid by the Serious Fraud Office (SFO).
Murray Reid formed the company Specialised Sales and Marketing (SSM) in 1997 and was the general manager.
The heating appliance importing company has become central to one of nine key transactions which have given rise to the 18 SFO charges.
Reid gave evidence yesterday that SCF chairman Allan Hubbard invested in SSM in 2000.
The company's customers included chainstores Briscoes and Farmers.
SCF became more involved with SSM and appointed common directors.
Reid gave evidence his shareholding was reduced and he was removed from the role of general manager in 2003.
"One could take the view I was being moved aside," Reid said.
"Edward introduced his nephew, who was coming back from overseas."
Geoffrey Sullivan was appointed as general manager and noticed SSM had a funding problem.
Reid was relegated to focusing on marketing and sales.
Edward Sullivan proposed that SCF subsidiary Hornchurch would buy the stock off SSM, which would then buy it back in the "heating season".
White emailed Edward Sullivan and said a new company should be formed to buy and resell the stock to SSM.
Geoffrey Sullivan gave evidence the next agreement he saw proposed Shark Wholesalers would purchase the stock, then sell it back.
Edward Sullivan's brother-in-law, Peter Symes, was the sole director, however he had no contact with Reid or Geoffrey Sullivan. The Crown contends Shark was a related party as Edward Sullivan exercised all control over it and Symes had nothing to do with the company.
Shark was advanced $5.2 million by SCF to purchase the stock in November 2003.
"We needed to pay a 30 per cent deposit for goods to be imported for the 2004 heating season," Geoffrey Sullivan said.
White and Sullivan each face a charge of a false statement by a promoter for allegedly failing to disclose, as SCF directors, the related party lending to SSM through Shark in the SCF prospectus.
The trial continues today.
- The Timaru Herald