Govt may get 10c in the dollar on Rockforte payout

Photo / Richard Robinson. Rockforte Finance was the lender to failed retailer Jean Jones.

The government will have to write-off the majority of the $3.5 million of guaranteed deposits in Rockforte Finance, the lender to failed retailer Jean Jones.

Receivers Dennis Parsons and Katherine Kenealy of Indepth Forensic expect the Treasury won't get more than 10 cents in the dollar, and that will be subject to its ability to claw back $4.8 million worth of loans and the successful resolution of legal action already underway, according to their latest report.

Parsons said a further $610,000 invested in the company was identified during their investigations, "whose funds appear to have been transferred to third parties without their knowledge or consent."

When the firm called in the receiver in May last year, it said some $3.25 million was owed to 77 investors, though the government subsequently paid out $3.5 million to 66 depositors.

Rockforte was the fourth lender to call on the guarantee. All up, eight failed finance companies have drawn some $1.8 billion from the guarantee with Equitable Mortgages, which owes $178 million in deposits, still pending.

The receiver filed complaints with the Serious Fraud Office, Securities Commission and the Companies Office's National Enforcement Office.

"These complaints cover the receivers' concerns of the apparent misappropriation of investor funds; the accuracy of the registered prospectus and the accuracy of the books and records of the company,"
the report said.

Gisborne-based Rockforte is under investigation by the Serious Fraud Office over a series of partially disclosed events involving the firm's principals, accountant Nigel O'Leary and John Gardiner, who was also a close business adviser to Jean Jones'owner Michael Ward.

The retailer accounted for about a quarter of Rockforte's loan book.

Parsons said the lender's loan book, which had $1.1 million classed as overdue, had poor, and in some cases non-existent, security over the loans, with 35 files of the 318 still missing.

"Our initial review of the loan book indicated that this overdue figure was materially inaccurate as the company regularly refinanced non-performing loans into new loans, creating a new and current liability and by doing so had the effect of removing the non-performing loan from its records," Parsons said.

Given their concerns, the receivers undertook detailed investigations, which "revealed that a significant proportion of the loan book had been underperforming for over 12 months, and that there was material undisclosed related party lending" of $2 million, he said.

The receivers recovered $290,000 from loans between May 7 and December 3 last year.