Bridgecorp 'crippled' 3 months before end

Rod Petricevic. Photo / Richard Robinson

Rod Petricevic's Bridgecorp was a "crippled vessel" by March 2007 - three months before it collapsed - a fact Petricevic and fellow director Rob Roest worked to hide from investors, its trustee and authorities, a Companies Office report has found.

The report details loans and other transactions as well as a management-co-ordinated set of lies the company used to assuage investors' concerns about late interest and principal payments and reveals the rising desperation inside the finance company.

It subsequently went into receivership in July 2007 owing 14,500 investors $460 million.

The report, obtained by the Herald, served as the basis on which the Companies Office this week decided to ban Petricevic and Roest from acting as directors for any other company for five years.

The office said Bridgecorp faced a rapidly deteriorating financial position from July 2006 until its failure.

Its fundamental problems of declining investor funds, increasing impairment of current loans and its exposure to related party loans, including the ill-fated Momi Bay resort development in Fiji, accelerated from January 2007.

"However the board does not appear to have acknowledged urgent action was required and failed to implement any emergency strategy."

Instead Petricevic was "seeking to hide the crisis from the independent trustee in the hope that the company would be able to ride out the adverse liquidity situation".

"By March 2007 Bridgecorp was a crippled vessel hoping that funds from the beleaguered Fiji investments would avert the cash shortfall."

In banning Petricevic and Roest this week, the Companies Office said it had uncovered "mismanagement including: misleading information contained in the prospectus; defaults of the payment of principal and interest; misleading information provided to the trustee; and, in the case of Mr Petricevic, transactions involving personal interest". Any one of the failings alone "would have been enough to prohibit them from acting as company managers or directors".

The report found Bridgecorp failed to make repayments to investors on their due dates from February 7 onwards yet this was not disclosed in an amendment to its prospectus on March 21 or to its trustee or in declarations by way of directors' certificates.

As the March prospectus amendment was being prepared, an internal email from one staff member to another suggested: "Maybe we could tell them that we have no money, can't pay our bills, are holding back payments, lying to investors and brokers about why their money hasn't been paid, and I am not confident that we can meet the March interest payments to investors."

Some time during the same month Petricevic and Roest met two staff "to decide what to say to investors when they rang up asking why their interest payments had not been made".

It was decided investors would be told either that there was a computer glitch or that there was a bank error.

"This message was conveyed to the investor services team who would give these false explanations to investors."

One employee who refused to lie was given another job and replaced by staff who would.