Crown down to final witnesses

20:51, May 14 2014

A taste of the defence case in the South Canterbury Finance fraud trial has been heard.

A key transaction in the trial, a $25 million loan to buy the Auckland Hyatt Hotel, was being unravelled yesterday, with the defence arguing the loan to the hotel was declared as a related party loan to SCF's parent company, Southbury.

Former SCF directors Edward Sullivan and Robert White, and former chief executive Lachie McLeod, are on trial before Justice Paul Heath in the High Court at Timaru, facing a combined 18 charges laid by the Serious Fraud Office (SFO).

Yesterday Byron Pearson, a partner from Woodnorth Joyce, which audited SCF's books, was cross-examined by Sullivan's counsel, Marc Corlett. He was questioned about the book-keeping of the Hyatt Hotel loans.

The defence argue the hotel was owned by Southbury Group, SCF's parent company. The loans were declared as related party by Southbury. Pearson confirmed as auditors they were aware of the loan through Southbury.

The Crown has argued SCF owned the Hyatt and it was never disclosed as related party in prospectuses.


The issue arose in 2006 when SCF attempted to sell the Hyatt to Auckland property developer Neville Mahon.

An advance was made of $25m from SCF to Southbury, to be loaned to Mahon for the sale through the newly formed company Quadrant.

The sale never occurred. Quadrant remained the owner of the hotel with Sullivan's brother-in-law, Peter Symes, as sole director.

Written evidence from the now deceased Symes said he never realised he owned the hotel.

Pearson was also questioned on a loan to Kelt Finance. The Crown has said it was a paper loan that never existed, however Pearson confirmed the auditors were aware of it and had signed it off.

The Crown case against the SCF accused looks set to be wrapped up in two weeks as it now has only two, possibly three, witnesses to call.

Pearson is expected to finish his evidence today and then the case will be adjourned to Monday to hear evidence from Grant Graham. He is a partner from Korda Mentha and an expert witness engaged by the SFO to examine SCF.

He is expected to take close to a week, and will be followed by Brett Beattie, an investigator for the SFO who was tasked with searching through clones of South Canterbury Finance's and Hubbard and Churcher Partners' computers.

He is anticipated to take one or two days.

A third witness may be called but this will be determined by the judge, who has yet to rule if the witness will be able to give evidence.

Then the defence will open. No indications have been made as to whether the defendants will give evidence.

The Timaru Herald