FMA raps St Laurence directors over knuckles with warning
By Paul McBeth
May 29 (BusinessDesk) - The Financial Markets Authority has issued a warning to the directors of failed lender St
Laurence over potential breaches of the Securities Act, deciding against pursuing them in court as the breaches occurred
during a four-month period when reinvestment was low and that there was no evidence of dishonesty or personal gain in
the alleged misconduct.
The market watchdog has closed its investigation into the Wellington-based lender with formal warnings for Kevin
Podmore, James Sherwin, Geoffrey McWilliam, Keith Sutton, Barry Graham, Aeneas Edward (Mike) O'Sullivan, Andrew Walker
and Sandra Lee, it said in a statement. The FMA said St Laurence's September 2007 prospectus failed to properly disclose
information about the lender's loan quality and liquidity between March and June 2008, but decided minimal additional
benefit in terms of punishment, deterrence or redress for investors would be achieved by pursuing them in court. The
finance company attracted $4.5 million in secured debentures during the period, indicating total aggregate losses to
investors of $3.3 million.
"In balancing the cost of taking this case to court against the low level of recovery that might be achieved and also
considering the possibility of successful defences being argued, FMA has elected to issue formal warnings to the
directors," head of enforcement Belinda Moffat said. "A further relevant factor in deciding to issue a warning rather
than take the case to court was the absence of evidence of personal gain or dishonest conduct on the part of the
directors."
St Laurence was sent to the receivers in April 2010 after managing director Podmore, who put up a $20 million personal
guarantee at the time of the lender’s moratorium, went against the trustee’s wishes by making an offer to debenture
holders to swap their debt for equity in a new company that would hold the remaining assets.
Investors had previously agreed to a deferred repayment scheme, where 70 percent of the firm's debentures would be
repaid by 2013 and the remaining 30 percent by 2021. Under that moratorium arrangement, note holders would have
eventually been repaid by 2034.
Receivers Barry Jordan and David Vance of Deloitte wound up their administration in June last year, recovering 16.7
cents in the dollar, meaning about $35.4 million of the $212 million principal owed to about 9,400 debenture holders was
repaid.
The return to investors was at the lower end of the 15 cents to 22 cents range the receivers had originally expected,
and meant there wasn't any distribution for some $47.6 million of accrued interest or anything left over for unsecured
creditors including the capital note holders.
The FMA inherited 25 investigations into failed finance companies from its predecessor organisation, the Securities
Commission. The regulator is waiting for conditions to be met to allow a settlement with the board of Strategic Finance,
and is a party to the Serious Fraud Office’s prosecution of South Canterbury Finance. It has filed charges against OPI
Pacific Finance and Mutual Finance, and has civil proceedings pending against Hanover Finance.
(BusinessDesk)