Nathans directors to answer charges

Nathans Finance director Donald Young. Photo / Dean Purcell

Directors of Nathans Finance are due to appear in court today to answer criminal charges that they breached the Securities Act.

Directors Donald Young, Roger Moses and Mervyn Doolan have pleaded not guilty to the charges, which were laid by the Securities Commission in 2008.

Another director, John Hotchin - the younger brother to Hanover Finance director Mark Hotchin - pleaded guilty to similar charges last month and was sentenced on March 4.

The commission alleges that statements Nathans issued concerning related party lending, the quality of its loan book, its loan management practices and its management of liquidity were untrue.

It claims the directors made untrue statements in the company's registered prospectus and investment statement of December 13, 2006.

The statements concerned related party lending to Nathans' parent company VTL and said Nathans had no bad debts, had adequate liquidity, its lending was diversified and all relevant matters had been disclosed in the prospectus.

The commission further alleges the directors made untrue statements when they signed a prospectus extension certificate on March 30, 2007.

These stated the company's financial position had not materially and adversely changed since its last balance date, and that the December 13, 2006 prospectus was not false or misleading.

Hotchin's sentence was discounted from a three-year prison term because he agreed to co-operate with the Crown in its prosecution.

Justice Graham Lang sentenced Hotchin, 51, to 11 months' home detention, 200 hours' community work and ordered him to pay $200,000 in reparations to Nathans receivers PricewaterhouseCoopers.

The Securities Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the directors.

Its main reason for this is to take steps towards compensating investors who invested under the December 13, 2006, prospectus.

The criminal charges carry a maximum penalty of five years' imprisonment or fines of up to $300,000. The civil proceedings are pending the outcome of the trial.

Nathans was placed into receivership in August, 2007. The company owed $174 million to 7000 investors when it collapsed. According to the receivers, less than 10 per cent is likely to be recovered.