Investigator outlines alleged SCF deception

A Timaru law firm had documents seized during the South Canterbury Finance (SCF) investigation.

Serious Fraud Office (SFO) forensic accountant Anna Tierney gave evidence yesterday in the trial of former SCF chief executive Lachie McLeod, and former directors Edward Sullivan and Robert White.

The three are on trial before Justice Paul Heath, in the High Court at Timaru, on 18 charges laid by the SFO.

In August 2010, Tierney was assigned as the case manager for the SFO fraud team. SCF collapsed that month, with the SFO authorising an investigation into SCF in October. Tierney was the lead investigator.

The investigation focused on alleged non-disclosure of related party loans. Following the death of Allan Hubbard in September 2011, it was narrowed down to five key transactions; the Hyatt Hotel, Shark Wholesalers, Dairy Holdings, Woolpak and Kelt Finance. Tierney was tasked with looking into Woolpak and Dairy Holdings.

The court has previously been given the background to the creation of Woolpak, some of which Tierney covered yesterday.

Woolpak was set up by Sullivan's law firm, RSM Law. To investigate the transaction, all documents held on the matter were taken from RSM Law.

In 2006, Hubbard owned 44 per cent of Wool Services. He had been offered a further 19 per cent but buying it would have triggered takeover regulations.

Sullivan approached his friend and client, Ross Lund, about using his private investment fund, Carrick Park, to purchase the shares.

Lund agreed as long as Sullivan arranged the finance and he (Lund) did not have to personally guarantee the borrowings.

Woolpak Holdings was formed with Lund as the sole director. Sullivan sent a letter explaining that Woolpak had been set up so Lund owned the shareholding personally, rather than Carrick Park, which Sullivan had an interest in.

SCF then loaned Woolpak $6.9 million. Lund requested a document outlining his indemnity.

Tierney said in all the documents she had sought from RSM Law, none had contained instructions from Lund.

"I found no file notes recording any oral or written instructions from Mr Lund involving Woolpak," she said.

She found documents from the seller of the shares, asking Sullivan to confirm the buyer was not a related party, which he did.

SCF prospectuses signed by White and Sullivan failed to declare the lending to Woolpak, which the Crown argues is a related party, and that the lending should therefore have been declared. As a result both men face a charge of making a false statement as a promoter.

Sullivan also faces a charge of obtaining by deception, as he obtained the shareholding in Wool Services by stating Woolpak was not a related party. The Crown contends it was.

The Timaru Herald