SFO lays 92 charges against Rockforte Finance directors

The Serious Fraud Office has laid a total of 92 criminal charges against the three directors of failed Gisborne finance company Rockforte Finance, which collapsed with deposits guaranteed by the Crown retail deposit guarantee scheme and whose receivership is likely to cost the taxpayer the thick end of $3.5 million.

The SFO said ex-directors Nigel Brent O'Leary and Colin Mark Simpson each face 34 charges, and John Patrick Gardner faces 24 charges under the Crimes Act.

Their alleged offences include theft by a person in a special relationship, false accounting, obtaining by deception, and false statements by a promoter.

The charges carry maximum sentences of between seven and ten years imprisonment.

Rockforte Finance was established in 2003 and was primarily a second hand car financier. Most of its investors were from the Poverty Bay area. Rockforte operated under a trust deed that prohibited it from using investors' funds to make loans to related parties in excess of 2 per cent of its total tangible assets without the consent of the trustees.

But the SFO alleges the directors allowed a significant portion of investors' money to be used as a source of funding for their personal business interests in two companies - Gisborne Haulage and Michael Ward 1969 Ltd, which operated the "Jean Jones" retail clothing label throughout New Zealand.

"Rockforte Finance is yet another finance company where people have endeavoured to make prudent investments in a company they believed made arms-length commercial loans and operated under the watchful eye of an independent trustee, but the reality has been something very different," SFO CEO Adam Feeley said.

At $3.86 million investors' losses were small compared to other finance companies and the majority were ultimately covered by the Crown Retail Deposit Guarantee Scheme but Feeley said there was still significant public interest in the prosecution.

"The failure of Rockforte Finance, and the consequential failure of several other businesses, had a significant impact on the Gisborne community. It is important for investor and business confidence that the persons responsible for that failure are held to account," Feeley added.

Rockforte's receiver's Dennis Parsons and Katherine Kenealy of Indepth Forensic Ltd, said in their most recent report that given the likelihood of recovery against Rockforte's directors - O'Leary, Gardner and Simpson - was low, the expected the return to the taxpayer, via Treasury, was less than 5 cents in the dollar.

The receivers said Rockforte's records showed 77 investors with $3.25 million invested in secured debentures. However, they also identified additional investors with $610,000 of funds that appear to have been transferred to third parties without the investors' knowledge or consent.

Treasury has reimbursed 66 Rockforte investors to the tune of $3.5 million.

Meanwhile, Feeley said the Rockforte case was the penultimate finance company investigation to be concluded by the SFO, with only Mark Hotchin and Eric Watson's Hanover Finance still being probed.

"We are pleased that there is now some clarity around this and most other finance company failures. We will be putting all necessary resources into managing our eight current finance company prosecutions through to an appropriate conclusion this year," Feeley said.

Separately he said the SFO was dealing with a significant number of new cases, including 21 new investigations in the first half of the financial year, and has a further 31 cases under prosecution.

INTEREST.CO.NZ