Trial end in sight despite recess

19:44, Jun 27 2014

The end is in sight for the long-running South Canterbury Finance (SCF) trial, with verdicts to be handed down in October.

Yesterday was the 53rd day of the trial of former SCF directors Ed Sullivan and Robert White, and former chief executive Lachie McLeod. The trial is being heard by Justice Paul Heath in the High Court at Timaru.

McLeod has been relegated to the back of the court with a face mask and suspected whooping cough.

Yesterday former SCF chief financial officer Graeme Brown was on the stand for the fourth day, being cross-examined.

His evidence is likely to wrap up on Monday, with a three-week adjournment following, after which the last of the defence witnesses will be called.

Closings will then be heard, which could go into August, and Justice Heath has indicated if all goes to schedule, the verdicts will be delivered on October 7.


Yesterday Brown was questioned about the reporting of impaired loans, where loan values need to be cut, meaning the lender takes a hit. An email from White to Brown was shown to the court.

"Obviously there is a reluctance from the top to address the reality of an impaired loan in terms of accounting conventions. No wonder general managers appear to take a short view based on the impact on their bottom line.

"I can't see why the accounting staff are considered so stupid as to not be able to understand the issue (of impairment)."

Late SCF chairman Allan Hubbard was keen to get into the Crown deposit guarantee scheme, Brown said, but on his terms.

"He wanted input into the development of the scheme."

An email was shown to the court relating to the sale of Wool Services International shares. Hubbard needed to find an unrelated party to buy them so it would not trigger the Takeover Code due to his existing stake.

An email from White to McLeod showed his frustration with the deal.

"Does (auditor) Byron (Pearson) expect us or Allan Hubbard to find an individual party who is willing to take up the opportunity to purchase a holding? He would be better to take a couple of Valium to settle his nervousness."

Brown was asked if banks were nervous about lending to finance companies after a number had failed.

"No, I think the banks would have taken the opportunity to understand their credit risk better," he responded.

The Timaru Herald