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More Charges over Belgrave Finance

September 14, 2011

More charges over Belgrave Finance

Business Day

14 September 2011

The Financial Markets Authority has laid 69 criminal charges against three people associated with failed Auckland finance company Belgrave Finance, alleging they made untrue statements when offering securities to investors.

Two of the three men – former Belgrave Finance director Stephen Smith and an associate Raymond Schofield – also appeared in the Auckland District Court today on Serious Fraud Office charges arising from the company collapse.

Belgrave was placed into receivership in May 2008, owing an estimated 1,000 investors about $22 million, and then went into liquidation in April 2010, the 20th finance company to collapse in a two-year period.

It provided loans for commercial and residential property development, and funds for lending were primarily sources from issuing debentures and convertible capital notes to the public.

The SFO has laid 60 charges against Smith, Schofield and another former director, Shane Buckley alleging they misrepresented investments and used investors’ funds in an unauthorised way.

Buckley is still to appear in court on the SFO charges.

Those charges related to more than $18 million of loans made by Belgrave Finance to various entities allegedly related to Schofield and the company, between June 2005 and March 2008.

Under the Crimes Act, the defendants face up to 10 years in jail, if convicted.

The FMA charges claim the three men breached section 58 of the Securities Act by making untrue statements in documents offering securities to the public. FMA alleges that in substance, Schofield acted as a director though he wasn’t formally named as one.

The alleged untrue statements run the gamut from related party lending, the quality of assets, lending practices, funding sources, connections with other financial institutions, the concentration of credit risk and liquidity.

If convicted, the three men face a maximum penalty of five years in jail or fines of up to $300,000 plus $10,000 for every day the offence continued.

The FMA also alleges the three men breached section 377 of the Companies Act by making a false or misleading statement to the trustee appointment to look after the interest of secured debenture holders. The maximum penalty of this breach is five years in jail or a $200,000 fine.

SFO chief executive Adam Feeley said the SFO and FMA had worked closely on the Belgrave case and other finance company investigations.

“Both agencies are acutely aware of the public interest in seeing these cases concluded. To that end we are committed to working in whatever manner will achieve the best outcome.”

Feeley said that both agencies would continue to share information and resources.

The decision on Belgrave was the 12th finance company investigation concluded by SFO, said Feeley.

The SFO had four remaining investigations into finance companies, that were less than a year old.

“We expect to conclude the majority of these cases shortly, but in every instance timing will be ultimately determined by evidence acquired and the issues arising.”

The Securities Commission (now FMA) made initial investigations into the company’s collapse before referring it to the SFO in June 2010.

Feeley said that the SFO would continue investigations into Belgrave Finance to see whether more people should be charged in relation to the allegations.

– BusinessDay.co.nz

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