Witness says not puppet director in deal
Prominent Timaru building contractor Ross Lund denies he was a puppet director of friend Edward Sullivan, saying he was aware of what was being asked of him.
Former South Canterbury Finance (SCF) director Sullivan, along with another former director, Robert White, and former chief executive Lachie McLeod, are on trial before Justice Paul Heath in the High Court at Timaru, facing charges laid by the Serious Fraud Office (SFO).
Lund gave evidence yesterday that he had been paid a director's fee for his role in a company which allowed former SCF chairman Allan Hubbard to obtain a majority stake in Wool Services International, a national wool scouring and export business.
In 2006 Hubbard owned 44 per cent of Wool Services. He had been offered a further 20 per cent but buying it would have triggered takeover regulations.
Sullivan approached his friend and client, Lund, about his company, Carrick Park.
"Carrick was my personal investment company, Ed and I were both directors," Lund said. "He approached me to purchase shares in Wool Services and I would have asked ‘why do you want me to purchase those shares?"'
He agreed to as long as Sullivan arranged the finance and he (Lund) did not have to personally guarantee the borrowings.
"I understood it was a very short-term arrangement and a takeover bid was going to be made in the very near future and there would be a small amount of profit I could benefit from."
Woolpak Holdings was formed and Lund was the sole director. Sullivan sent a letter explaining Woolpak had been set up so Lund owned the shareholding personally, rather than Carrick Park, which Sullivan had an interest in.
"I signed a lot of documents but the management of it was done by Edward Sullivan."
SCF then loaned Woolpak $6.9m. Lund requested a document outlining his indemnity.
"Verbal contracts, verbal discussions and verbal guarantees mean very little when the whatitsname hits the fan. If something happened I wanted it in writing.
"My idea of buying the shares and making a quick return disappeared out the window. It became obvious there was not going to be a takeover bid."
He was paid a dividend of $400,000, which he gave back to Sullivan to pay off interest.
"I was quite aware the interest was mounting and it was accruing at an amazing rate."
He said he requested a director's fee from Sullivan for all his "effort, time, worry and thinking," and was paid $3000.
SCF prospectuses signed by White and Sullivan failed to declare the lending to Woolpak, which the Crown argues is a related party, and therefore should be 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