SCF trial evidence reveals quirks
It has been an interesting fifth week of the South Canterbury Finance fraud trial, with evidence of former chairman Allan Hubbard roaming the halls late at night turning off the lights at the Auckland Hyatt Hotel, mystery $25 million loan agreements and warnings about bad loans falling on deaf ears.
The trial of former SCF chief executive Lachie McLeod, and former directors Edward Sullivan and Robert White, before Justice Paul Heath at the High Court in Timaru, adjourned at the end of Wednesday to Monday afternoon, because Justice Heath had previous commitments.
The trio face a combined 18 charges laid by the Serious Fraud Office.
On Monday, Auckland property developer Neville Mahon recalled a meeting in 2007 with Hubbard, McLeod, Sullivan and White, where they asked him to buy the embattled Auckland Hyatt Hotel, which ended up owing SCF $45m.
"Allan Hubbard had a towel hanging out of his briefcase because he didn't see the need to dirty a hotel towel. He said he had been up all night turning off all the lights at the hotel."
Auckland lawyer Gregory Shanahan was mystified to receive a letter seeking confirmation of a $25 million loan which had not been agreed to.
On August 15, 2006, Shanahan received a letter from SCF general manager Tim Underdown seeking confirmation that his client had a loan of $25m.
He emailed SCF's Nigel Davenport, who told him to disregard the letter.
The advance of $25m that was to be loaned to Mahon for the sale was then put through newly formed company Quadrant, which became 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.
This forms the basis of the charge of theft by a person in a special relationship.
The Crown also alleges that Quadrant was a related party transaction, breaching the deed of the Crown deposit guarantee scheme.
The court heard on Tuesday that warnings about bad debts at SCF fell on deaf ears, even as the finance company's assets ballooned to more than $1 billion.
SCF's then asset management general manager Ian Thompson gave evidence that when he arrived at the finance company on April 1, 2009, there was no recovery unit.
"Initially I was given 15 files to work with, which owed $35m. I was to establish a procedure for maximising return on these loans. Within a month it was 25 loans," he said.
By September 2009 he was overseeing 53 loans, which owed $257m.
"I got the feeling they thought my provisioning was too harsh. I didn't think we had scratched the surface."
The Timaru Herald