ASB admits mistake on bankruptcy claim

The ASB Bank admits it made a mistake by claiming it was not seeking to bankrupt two businessmen who lost their homes after their company was looted by a fraudster.

After The Dominion Post reported the bank's move to bankrupt John Gifford and Rob Elvidge, and their wives, an ASB spokeswoman claimed it had done no such thing.

But the businessmen said it seemed ASB did not know what the bank's credit team and lawyers were doing. Court documents show the bank's lawyers had served the paperwork two months before the newspaper's article appeared on October 10.

The businessmen blame the bank for a mix-up that gave Blair Fitzsimons, a former manager of their company Pioneer Insurance, access to a supposedly secure account.

He admitted stealing $3 million and was jailed for 4 1/2 years. The men lost an injunction aimed at stopping ASB from selling their homes and said they withdrew a claim against the bank for damages because they ran out of money.

ASB declined to comment before the October 10 article, citing client confidentiality, but after publication ASB executive Linley Wood took issue with the contents. "Firstly we note that bankruptcy notices have not been issued by ASB," she said. But bankruptcy notices were filed in the High Court at Napier by ASB's lawyers, Bell Gully, on August 14 and served on the Giffords and Elvidges on September 21.

When asked to clarify her comment Ms Wood was at first "absolutely sure" bankruptcy notices had not been issued, citing advice from the bank's "lawyers and our credit team".

Told that bankruptcy notices had been issued and served, she agreed that if that was the case, ASB had embarrassed itself. Later she said ASB worded its statement incorrectly and what the bank meant was that it had not filed a creditor's petition – the final act to bankrupt the men and their wives. ASB also suggested that the businessmen withdrew their damages claims against the bank, not because they ran out of money, but because the judge hearing the injunction had indicated they had a low chance of success.

The businessmen said the judge did say they faced formidable obstacles with a damages claim but that was because the claim was then being made by a shelf company guaranteeing their bank loans and not a Pioneer shareholder.

"The bank's affidavit was full of inaccuracies. None of it was tested, it won't stand up to scrutiny but it obviously influenced the judge," Mr Elvidge said.

ASB also challenged the businessmen's claims that the bank was "chasing interest charges of 22.5 per cent".

Ms Wood confirmed the bank was charging 22.5 per cent on a "very small portion of the outstanding debt".

Mr Gifford said the bank imposed the interest rate on about half of what the bank was now claiming from him "so it's hardly a very small portion".

ASB said considerable delays by the businessmen, including their failed injunction against the bank, had increased their ultimate losses. The businessmen said the main reason for that delay was that it took the Serious Fraud Office 16 months to investigate, charge and convict Fitzsimons after he had admitted his actions to The Dominion Post.

Ms Wood said the interest rate on the remaining amount owed by the pair was set at 13.59 per cent by the judge who heard the case.

ASB also challenged comments in the article by Massey University Centre for Banking Studies director David Tripe who said the bank was a newcomer to commercial banking. Ms Wood said ASB said it had been in business banking for more than 20 years.

BANKING ON A WIN

Earlier this year ASB had the Gifford family home sold for $2,010,000, the Elvidge family's home for $576,000 and its bach at Taupo for $400,000.

ASB obtained judgment for a further $746,000 from Mr Gifford and the same amount for his wife, Suellen. Of that amount, the bank charged 22.5 per cent on what it says was an "unarranged overdraft" of $387,000.

ASB says it mortgaged the men's homes because no mortgage payments were received for "over a year". The bank says it had given the pair extensive time to sell or refinance their properties.

ASB wants $416,856 from Mr Elvidge and $216,856 from his wife, Liz. The bank charged 22.5 per cent on $100,000 of that amount against Mr Elvidge for about two years.

The bank is now charging 13.59 per cent on all the money it wants from the Giffords and Elvidges.