Tracking down firm's changes in Tranz Rail case

By FRAN O'SULLIVAN

The Securities Commission hired a Brussels law firm to check the "precise identity" of the Fay Richwhite company which held shares in Tranz Rail at the time it alleges insider trading occurred.

Midavia Rail Investments BVDA is one of five former Tranz Rail shareholders facing insider trading proceedings after a commission investigation.

Pacific Rail, the Fay Richwhite company which held a 14.5 per cent stake in Tranz Rail, was deregistered in New Zealand after the shares in the national rail company were sold in February 2002, months before large writedowns.

The search by Brussels firm Freshfields Bruckhaus Deringer revealed Pacific Rail changed its registered office on May 15 last year.

It later merged into the Belgian law-governed private liability company Midavia Rail Investments BVDA after a decision at extraordinary shareholders' meetings of both companies on November 28 last year.

Pacific Rail was dissolved on the same day.

Lawyer Michael Bonne advised the commission on August 31 this year that it was "not possible any more" to challenge the merger decisions.

"However, MRI [Midavia] is the legal successor of PRL [Pacific Rail] and may be held responsible for all liabilities of PRL."

The Bonne letter was included in documents presented to the High Court in Wellington last week to support the commission's successful application to serve the defendants outside New Zealand's jurisdiction.

The Bonne letter says the statute of limitations for actions against the previous shareholders of Pacific Rail is five years from the publication of the merger decisions in annexes to the Belgian Official Gazette.

The commission made inquiries in Europe, Australia and the US to secure evidence and ascertain the addresses of five defendants now facing insider trading proceedings, Midavia, Berkshire Funds III, former Tranz Rail managing director Michael Beard, former finance director Mark Bloomer, and Berkshire general partner Carl Ferenbach.

Fay Richwhite principal David Richwhite, with Ferenbach, faces a tipping claim.

Four of the defendants - Midavia, Berkshire, Richwhite and Ferenbach - have issued statements through their lawyers strongly denying the commission's allegations.

Another document attached to the court application by commission enforcement director Norman Miller discloses that Richwhite was earlier questioned about the identity and current registration details of Midavia by Robert Dobson, QC, in front of the commission.

Richwhite told the commission the affairs were complex and referred inquiries to his London-based group treasurer John Balgarnie because he did not want to rely on a guess.

The Bonne letter says Sir Michael Fay and Richwhite are Midavia's directors and that it "appeared" both were also directors of Pacific Rail.

The search showed Midavia's shareholders before the Pacific Rail merger were two Jersey-registered companies, Fay Richwhite Investments and Fay Richwhite Holdings.

Pacific Rail's shareholders were Midavia and Luxembourg-registered North & South Rail Investments.

The law firm said it appeared from a simplified balance sheet established at the time of the merger that Midavia Rail owed €32.63 million (NZ$59.2 million) to Fay Richwhite Investments as a short-term debt that was payable by August 31 this year.