Feltex was 'fully open' court told

Feltex's former chief financial officer Des Tolan denied the company deliberately hid disclosure details in an attempt to protect its share price, the Auckland District Court heard yesterday.

Tolan said the company's debt with ANZ should have been classified as current and the breach of its banking covenant should have been reported but at the time he and the directors believed Feltex's financial statements were compliant.

Prosecutor Brian Dickey asked Tolan whether Feltex was "scared to report the truth".

Tolan said: "We weren't scared. We were fully open with the market. We [Feltex] made ourselves available to the media and brokers."

Feltex directors Tim Saunders, John Feeney, Peter David Hunter, Peter Thomas and John Hagen are each charged with two breaches of the Financial Reporting Act.

The charges were laid by the Companies Office, which allege the company's half-year accounts to December 31, 2005 did not disclose it was in breach of its loan agreement with ANZ.

They have pleaded not guilty.

Tolan said at the time he believed the company's financial statements met the requirements of the newly adopted international financial reporting standards.

He said the company had paid Ernst & Young to conduct a review of its interim financial statements, and that the accounting firm had not alerted him or the board to the fact its statements were not compliant.

Tolan said the directors wanted Ernst & Young to review its statements to give them a sense of "comfort" around the new reporting standards.

Ernst & Young conducted a review on Feltex's interim financial statements to December 31, 2005, and not an audit.

A professional review of interim statements is voluntary.

If the directors are convicted they face fines of up to $100,000.