Securities Commission charges Capital + Merchant directors

Photo / Jason Dorday

The Securities Commission says it has laid criminal charges and issued civil proceedings against directors of the collapsed Capital+Merchant finance company.

Directors Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland, were named by the commission in a press release this morning, which says criminal charges have also been laid against Wayne Douglas, who resigned as a director in February 2007.

Capital+Merchant Finance went into receivership on 23 November 2007 owing approximately $167 million to some 7,000 investors.

According to the receivers it is likely that none of this will be recovered.

Announcement of the charges comes just one day after the Serious Fraud Office said it had launched a probe into the company.

"The Commission alleges that Capital+Merchant Finance's offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to related party lending, insurance cover and liquidity," Commission chairman Jane Diplock said.

The Commission says that the directors made untrue statements in the registered prospectus and investment statement dated 15 August 2006, mainly in respect of related party lending and loan management.

It also says the current four directors made similar untrue statements in the registered prospectus and investment statement dated 10 September 2007, as well as untrue statements about liquidity and cashflow.

The Capital+Merchant prospectus also incorrectly stated that no loans were impaired and the company's financial position had not materially and adversely changed since its last balance date, says the Securities Commission.

The Commission also alleges that five advertisements distributed during 2007 contained untrue statements about insurance cover for capital secured debenture stock and some of the matters referred to above.

These claims do not apply to Douglas who had resigned his directorship by then. The Commission further alleges that Nicholls and Ryan knowingly misled the Commission.

Most of the criminal charges have been laid under section 58 of the Securities Act and carry a maximum penalty of five years imprisonment or fines of up to $300,000. Criminal charges are also laid against Nicholls and Ryan under section 59A of the Securities Act and carry a maximum fine of $300,000.

The men are due to appear in court on April 8.

The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the current four directors. Under the Securities Act these applications must be made together.

The Securities Commission's news release said that as these proceedings were now before the Court it would not be appropriate for it to comment further.

- NZ HERALD