Fiji meetings for failed finance company

Last updated 14:05 18/07/2012

Relevant offers


No laws broken by KiwiSaver schemes, expert says Rainbow's End, Countdown and New World scams claim to offer freebies Rates cut and $200,000 business recovery package for gastro-hit Havelock North Call for minimum standards for sunglasses The biggest budgeting mistake people make when planning a vacation New Zealand Post reports $141m profit and parcel growth as letters decline Credit card debt cover is expensive and payouts are limited Money alone won't make you rich - the 7 habits of financially successful people What are Kiwi consumers' most common complaints to the Commerce Commission? Grey backlash to proposed Westpac closure in Waikanae where median age is 62

National Finance's corporate governance was so lax its managing director was approving loans to his own companies, the Auckland High Court heard today.

The finance company which collapsed in May 2006 owing investors $24.8 million had no regular board meetings or formal chairman, and had no audit or loan committees to oversee car dealer loans and related party lending thresholds, Crown prosecutor Steve Symon told the court.

Most of the company's board meetings were held in a café in Devonport on Auckland's North Shore and on one occasion was held in Fiji, Symon said.

No formal board minutes or board papers were kept beyond the first few months of 2004 and 2005.

Witness John Gray, the company's former accountant who was sentenced to 18 months' imprisonment in November 2010, told the court board minutes were not circulated, nor were they ever the subject of critical assessment by any of the board directors.

One of those directors, Carol Braithwaite, is on trial for a charge of making untrue statements in the company's September 2005 prospectus.

The Crown alleges she signed off the document knowing there were ten false or misleading statements in it.

Gray has told of how Trevor Ludlow, the company's founder and Braithwaite's former de facto husband, now in jail, would sanction related party lending at board meetings.

Without a chairman Ludlow would lead the meetings, Gray said.

The company's biggest exposure in late 2005 and early 2006 was to its Payless Cars group, the Crown said.

National Finance traded as a finance company and invested deposits from the public mainly into car loans through dealers or Payless Cars.

"Most of the money was going to Payless Cars owned by Mr Ludlow.

Who was approving those loans?" asked Symon.

"Mr Ludlow," Gray said.

Up to March 2006 the company was not even signing up new dealer loans.

The only loans were to Payless Cars which by that stage made up 20 per cent of all loans.

One of the charges Gray admitted to in his own trial was not referring to advances to Payless in a quarterly report.

The court also heard Gray was told by Ludlow not to report other related party transactions to the company's trustee, breaching the trust deed.

Related party lending to Payless alone reached $1.4m, breaching the 2 per cent threshold in the trust deed in December 2004, the Crown said.

Gray conceded neither Braithwaite nor another former director, Anthony Banbrook, had ever raised the matter of related party lending with him.

Banbrook last month admitted a charge of making untrue statements in the prospectus and will be sentenced on August 14.

Ad Feedback

The maximum penalty is five years' imprisonment or a fine of up to $300,000.

Ludlow was found guilty of Securities Act charges laid by the Serious Fraud Office a year ago and was jailed for five years and seven months.

In January he was jailed for an additional nine months on charges brought by the Financial Markets Authority.

Braithwaite's two-week trial before a jury is due to end next week.


Special offers

Featured Promotions

Sponsored Content