Trial begins for finance company directors

Nathans Finance director Donald Young. Photo / Dean Purcell

A trial has begun of three directors of failed finance company Nathans Finance over alleged untrue statements about the company's financial health.

Kenneth Roger Moses, Donald Menzies Young and Mervyn Ian Doolan face charges under the Securities Act of distributing an advertisement with an untrue statement and of signing a prospectus including an untrue statement.

The trial is being heard in front of Judge Paul Heath, with no jury at the High Court in Auckland.

Lead Crown prosecutor Colin Carruthers said that Nathans' prospectus in December 2006 contained untrue statements, either overtly or by omission, about the nature of related party lending, bad debt, corporate governance and management of loans, diversification of its lending, and its liquidity.

Carruthers said an extension certificate to the prospectus in March 2007 contained a further untrue statement that Nathans' financial position had not materially and adversely changed since June 2006, when it had in fact deteriorated considerably.

He said three further letters, dated May 14, July 12 and August 6 2007, incorrectly made a number of glowing statements as to its financial worthiness.

"By August 6 2007 its financial position was on any objective measure quite hopeless. It was placed into receivership on August 20 2007," he said.

Carruthers said the interests of the accused in Nathans' parent company VTL seemed to have blinded them about the company's state, and their "unreasonable belief" in the business mode had meant they relied on the hope that the business might be saved until the point of receivership.

"What was said to Nathans' investors was completely divorced from what was actually happening. Their unreasonable belief clouded their judgment when acting as Nathans' directors, and was to the extreme detriment of Nathans' investors."

All three accused made firm not guilty pleas when the charges were put to them this morning.

When Nathans Finance went into receivership it owed about $174 million to about 7000 investors.

Another Nathans Finance director, John Hotchin, was earlier this month sentenced to 11 months home detention, ordered to do 200 hours community work and ordered to pay $200,000 to the receivers of Nathans Finance after admitting three charges under the Securities Act.

- NZPA