Bridgecorp reach $18.9m deal
An investor in failed finance company Bridgecorp says a settlement between the receivers and Bridgecorp directors won't help ease the pain of many elderly investors.
The $18.9 million settlement was announced yesterday between receivers PricewaterhouseCoopers, the five Bridgecorp directors and their insurers.
In return, the Financial Markets Authority (FMA) has agreed to drop its civil suit against the directors after the money is paid.
FMA head of enforcement Belinda Moffat said the decision to drop the case was not taken lightly, but the fact was that the authority would not be able to achieve a greater recovery.
"Our claim would have gone after the same pool of funds that the receiver has reached a settlement on, so there was little, if any, money left to pursue."
PwC receiver Colin McCloy said the deal was a good result for investors given the delays and costs of a court case, and the assets available. It would mean secured debenture holders would get an extra 4 cents in the dollar, on top of the 8c they had so far been paid.
However, it is still a fraction of the $459m Bridgecorp owed to 14,500 investors when it failed in 2007.
Aucklander Kenneth Gilmour, who lost $100,000 in the company's collapse, said it was "better than a smack in the face with a wet fish".
Gilmour said he was luckier than most. After "four years of purgatory", he successfully sued his financial advisor who failed to activate his instructions to pull his money out of Bridgecorp and "came out ahead".
In dropping the case, Moffat said the FMA believed that the sentences handed down to Bridgecorp directors during their criminal trial had sent "a very strong deterrence message" to the market. Two directors, Rodney Petricevic and Robert Roest, were sentenced to 6 years prison in 2012, and a third, Gary Urwin, received a two-year sentence.
Two others, Bruce Davidson and Peter Steigrad, received nine months' home detention, community work and reparation orders of $500,000 and $350,000 respectively.
Moffat said the FMA was reviewing its other civil cases against directors of finance firms. It has active charges against Hanover Finance, Hanover Capital and United Finance, and has stayed its charges against Capital and Merchant Finance, Dominion Finance and North South Finance pending the outcome of criminal cases.
But two other finance companies have had their civil charges discontinued. A case against Nathans Finance was discontinued last year, and charges against the directors of Lombard Finance were dropped last month in return for a $10m settlement with PwC.