Dominion Finance and North South Finance Executive guilty
Media Release
12 April
2013
Senior
Executive of failed Dominion Finance and North South Finance
guilty
Paul William Cropp
(49) has today been found guilty of four Crimes Act charges
laid by the Serious Fraud Office (SFO). The charges relate
to failed finance companies Dominion Finance Group Limited
(Dominion) and North South Finance Limited (North South).
Both companies were wholly owned subsidiaries of NZX listed
Dominion Finance Holdings Limited.
Former company director and lawyer Robert Barry Whale (65), former CEO Paul William Cropp (49), and one other associate, appeared in the Auckland High Court for a six week trial which took place in February and March 2013.
Mr Cropp has now been found guilty of charges relating to related party lending totaling approximately $13.57 million in breach of the companies trust deeds. Mr Whale and the other associate were found not guilty of five charges and three charges respectively.
Acting SFO Chief Executive, Simon McArley says, “SFO are pleased to have brought another finance company case to an end. These prosecutions deliver a strong deterrent to future offending. The finance company experience has also taught us valuable lessons. A key to reducing the cost and impact of economic crime is early detection and intervention. SFO can only achieve this with strong interagency collaboration and the support of the community in reporting suspect and unethical behaviour.”
SFO opened its investigation into Dominion and North South in October 2010, following a referral from the Securities Commission (now FMA).
ENDS
Notes for Editors
Background to investigation
Dominion Finance Group Limited (Dominion) and
North South Finance Limited (North South) were the operating
subsidiaries of NZX listed Dominion Finance Holdings Limited
(Dominion Holdings). Both companies traded as finance
companies offering commercial and property loans and
accepting deposits from the public.
Both companies
suspended performance of their obligations to investors in
July 2008 and proposed moratorium arrangements.
The
Trustee appointed for the Dominion depositors, Perpetual
Trust Limited, declined to support the proposal and the
company was put into receivership in September 2008. At the
time of the appointment of receivers Dominion owed 5,937
debenture holders approximately $177 million. Wholesale
lenders were owed approximately an additional $55 million.
The Trustee acting for the North South depositors,
Covenant Trustee Company Limited, accepted the proposal and
the moratorium continued until July 2010, at which time
receivers were appointed. Liquidators were subsequently
appointed on 17 September 2010. At the time of the
appointment of receivers, North South owed debenture holders
approximately $31 million. In addition, wholesale lenders
were owed approximately $15 million.
Parent company
Dominion Holdings entered voluntary administration on 15
October 2008. Following an administrators recommendation to
that effect, it was placed into liquidation on 3 February
2009. It has an estimated deficit owed to creditors of in
excess of $115 million.
In total the group is recorded as
having unpaid creditors in the region of $400
million.
Crimes Act
offences:
Section 220: Theft by person
in special relationship
(1) This section applies
to any person who has received or is in possession of, or
has control over, any property on terms or in circumstances
that the person knows require the person—
(a) to
account to any other person for the property, or for any
proceeds arising from the property; or
(b) to deal with
the property, or any proceeds arising from the property, in
accordance with the requirements of any other person.
(2)
Every one to whom subsection (1) applies commits theft who
intentionally fails to account to the other person as so
required or intentionally deals with the property, or any
proceeds of the property, otherwise than in accordance with
those requirements.
(3) This section applies whether or
not the person was required to deliver over the identical
property received or in the person's possession or
control.
(4) For the purposes of subsection (1), it is a
question of law whether the circumstances required any
person to account or to act in accordance with any
requirements.
Role of SFO
The Serious
Fraud Office (SFO) was established in 1990 under the Serious
Fraud Office Act in response to the collapse of financial
markets in New Zealand at that time.
The SFO
operates three investigative teams:
•
Evaluation & Intelligence;
• Financial
Markets & Corporate Fraud; and
• Fraud &
Corruption.
SFO operates under two sets of investigative powers.
Part I of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”
Part II of the
SFO Act provides the SFO with more extensive powers where:
“…the Director has reasonable grounds to believe that an
offence involving serious or complex fraud may have been
committed…”
The SFO’s Annual Report 2012 sets out
its achievements for the past year, while the Statement of
Intent 2012-2015 sets out the SFO’s three year strategic
goals and performance standards. Both are available online
at: www.sfo.govt.nz