Memo reveals Viaduct's alleged misdeeds

Viaduct Capital allegedly breached rules regarding related party transactions, due diligence and providing false and misleading information to the Crown, according to an internal Treasury memo.

In April Treasury rescinded Viaduct's entitlement to have any new funds covered by the Government's deposit guarantee scheme but has consistently refused to state the reasons why.

Now, however, the finance company has included in its own paperwork, filed with the Company's Office, an internal memo from Treasury, which outlines its concerns.

The Treasury memo alleges Viaduct breached rules regarding related party lending and general business conduct.

There are also allegations it failed to conduct proper due diligence, provided false and misleading information to the Crown, failed to provide information regarding transactions, and conducted transactions inconsistent with its prospectus.

The company, the only finance company to have had the guarantee rescinded under the Government scheme, commented in its third prospectus filed with the Company's Office, that it "strongly disagrees'' with the accusations. And despite falling foul of Treasury and being ejected from the deposit guarantee scheme, it is seeking to retie its government apron strings.

Viaduct will, assures chief executive Nick Wevers, soon launch a new prospectus, its fourth since March. Wevers, one of two directors along with Bruce McKay, will not discuss plans to regain its government-guaranteed status but concedes "we've made approaches to the Crown''.

In its amended prospectus, filed on June 8 but withdrawn on June 30, the company states it "is presently investigating avenues to get the Crown guarantee reinstated''.

Treasury spokesman Bryan McDaniel has previously said that Viaduct can reapply for a guarantee and "we would consider that''.

The new prospectus, promises Wevers, will be issued once an audit is completed and the paperwork processed by the Companies Office. "It's about four to five weeks away,'' he says. It will feature updated financial information but "there won't be many material changes'' to the fourth prospectus.

It initially launched its prospectus on March 3 seeking $50 million, but on April 20 Treasury withdrew its guarantee, citing the likelihood of the guarantee extending the benefit to people "who are not intended to receive that benefit''.

One such person, according to the Treasury memo, is Paul Bublitz, managing director of Hunter Capital Group, which provided Wevers with the funding to buy Viaduct.

Bublitz told The Independent in April that his sole involvement was providing funding for purchase. But Treasury sees it differently.

"We consider that it is reasonable to take the view that the transactions surrounding the purchase of Viaduct appear to have been designed primarily to advance the interests of Mr Bublitz.''

 Viaduct withdrew its March prospectus and then published a revised document on 24 April. This was withdrawn and replaced by a second amended prospectus last month.

In its third prospectus, Viaduct denies former directors Noel and Kent Gillman, who resigned on February 13, improperly obtained the benefit of the guarantee in relation to deposits placed with Viaduct.

"The Gillmans obtained the benefit of the Crown guarantee in relation to these deposits [and] this is simply a feature of the Crown guarantee and not controlled by the company,'' it says.

Viaduct contends it did conduct proper due diligence on loans involving Phoenix Finance (Wever's holding company), Hunter Capital Property Trust and Hunter Capital Group.

Viaduct also believes it was not required to advise the Crown about transactions involving it and the two Hunter entities. It also says a PricewaterhouseCoopers report is mistaken when it says transactions were inconsistent with the company's own prospectus.

Viaduct, according to the memo, paid too much for some assets and loans it bought from the Hunter entities.  Treasury also questions the management fee of $210,000 paid to Wevers, who, for his part, maintains it is normal commercial practice for a chief executive to receive a fee.

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