Here's why Sullivan, who is due to be sentenced in December, went down.
Charge
That Sullivan knowingly made false statements in a September 2006-October 2007 prospectus to induce people to invest in SCF.
This alleged Sullivan made a false statement by not revealing SCF's related-party lending to a company called Woolpak Holdings. The Serious Fraud Office also alleged that Sullivan had not made reference to related-party lending linked to the Hyatt Hotel in Auckland, but this was not proven.
Woolpak borrowed $6.9 million from SCF in 2006 in order to purchase shares in a firm called New Zealand Wool Services International, which an entity associated with Allan Hubbard had a 39 per cent stake in.
When this Hubbard-linked entity purchased its WSI shares from Hellaby Holdings in 2001, Hellaby agreed that if it wanted to sell its remaining 20 per cent stake it would offer it to the Timaru financier first.
This offer was made by Hellaby in March 2006, but there was concern that this transaction could trigger takeover regulations.
Woolpak was set up in 2006 and was to be the vehicle which would buy the shares. It was directed by one of Sullivan's long-time friends, South Island businessman Ross Lund.
The shares were purchased, and according to evidence from Lund, they were transferred to Woolpak as a "short-term expedient", pending a full takeover by Hubbard.
According to Justice Heath, the underlying purpose of the loan from SCF to Woolpak was to fund the purchase of shares on behalf of Hubbard in order to "circumvent" the takeover code.
By October 2008, Woolpak owed SCF $8.97 million and by the next March it was seen as a problem for the finance company's auditors. By August 2009, another $7 million was advanced to the company, with $6.4 million of this used to clear the original debt.
In his decision on this charge, Justice Heath said he was satisfied beyond reasonable doubt that the Woolpak lending ought to have been disclosed as a related-party advance in the September 2006 prospectus.
"Mr Sullivan was an experienced commercial lawyer and a longstanding director of South Canterbury. He was aware of the essential facts that made Woolpak related to Mr Hubbard. I infer that Mr Sullivan would have appreciated that Woolpak was a related company for the purposes of disclosure in [the prospectus]. He knew that both he and Mr Hubbard had the ability to exercise control (or, at least, significant influence) over Woolpak," the judge said.
"There was a motive for Mr Hubbard and Mr Sullivan not to disclose the debt. The true reason for the transaction could not have been put into the marketplace without serious repercussions," he said.
As a result of the "material non-disclosure of the Woolpak transaction" the judge found Sullivan guilty on this charge.
Charge
Deception - that Sullivan deliberately made misrepresentations to Hellaby Holdings.
The SFO alleged that Sullivan falsely represented to Hellaby that Woolpak was unrelated to any other principal shareholder of Wool Services, which in turn induced the company to transfer the 19 per cent shareholding. One of Hellaby's conditions of the sale of the Wool Services shares was that Sullivan confirm the buyer was an unrelated party, which he did in May 2006.
"Knowing that Hellaby required the representation sought, Mr Sullivan intentionally provided it so that the transaction could be completed," Justice Heath said in finding Sullivan guilty of this charge.
The judge said he was satisfied that Sullivan, in establishing Woolpak, was doing Hubbard's bidding.
Charge
That Sullivan knowingly made false statements in an October 2007-October 2008 prospectus to induce people to invest in SCF.
This charge also related to the Woolpak lending being kept out of offer documents. Justice Heath said that, during the time when this prospectus was in the market, Sullivan remained aware of the Woolpak advance. "If anything the need for disclosure had grown more acute," the judge said.
"Given the circumstances in which the loan had been made and what had occurred since it had been entered into, I have no doubt that Mr Sullivan knew that the omission of the transaction was materially false in the sense that disclosure of it would have added significantly to the mix of information available to investors," said the judge, who found Sullivan guilty on this charge.
As with the charge associated with the earlier prospectus, the SFO also alleged that Sullivan had not made reference to related-party lending associated with the Hyatt but again this was not proven.
Charge
That Sullivan knowingly made false statements in an October 2008-September 2009 prospectus to induce people to invest in SCF.
In Justice Heath's view, Sullivan remained culpable for the omission of Woolpak in this prospectus. According to evidence from former SCF director Stuart Nattrass, he and fellow board member Robert White asked if the Woolpak shares were held beneficially for Mr Hubbard and were told they weren't.
"Mr Sullivan did not demur when Mr Hubbard denied beneficial ownership. In not speaking out, he deliberately misled his co-directors," the judge said.
While finding Sullivan guilty on that part of the charge, Justice Heath was again not convinced regarding allegations of the omission of the Hyatt lending.
The SFO also claimed Sullivan had knowingly made a false statement in this prospectus by referring to $150 million of banking facilities as "committed".
However, Justice Heath was not satisfied beyond reasonable doubt that directors who signed the prospectus knew the statements about the facility were materially untrue.
Charge
That Sullivan knowingly made false statements in an October 2009-September 2010 prospectus to induce people to invest in SCF.
Given the difficult financial circumstances which SCF was in during 2009, the judge inferred that, once again, Sullivan knowingly failed to disclose the Woolpak loan, on which $6.32 million was still owed at one point that year.
The SFO also alleged the director knowingly omitted from these offer documents two loans worth $39 million made in May 2009 to a company called Quadrant Holdings, which was directed by Sullivan's brother-in-law.
These loans are part of SCF's quagmire over Auckland's Hyatt Hotel.
In 2004, the Hyatt's owner owed SCF $65 million but to pay it back it needed to sell the hotel. The SCF directors devised a strategy so some of this debt could be cleared without alerting the market to a forced sale. A company called Regency Auckland was set up, with Sullivan and SCF chief executive Lachie McLeod as its initial directors. Regency bought the Hyatt for $48 million, borrowing $23.5 million from SCF and the rest from ASB.
Because attempts to sell the hotel were unsuccessful, two transactions took place.
The first was designed to offload the hotel to Hilltop Holdings -- linked to Auckland property developer Neville Mahon -- through the sale of Regency shares. This was intended to help SCF reduce the impairment of the remaining $17 million debt from the hotel's original owner.
But disputes arose and legal proceedings ensued.
When the disputes were settled in 2008, the Quadrant transaction was thought up so another party could sell the hotel and the outstanding debt to SCF could come back in.
Justice Heath said Sullivan had been instrumental in arranging his brother-in-law to be "inserted" as a director and shareholder of Quadrant.
"I consider that had been done to avoid market perception that the company was linked to South Canterbury ... it would have been disastrous for South Canterbury if members of the investing community had known that South Canterbury effectively owned a hotel in Auckland and that money was being advanced to a related company to avoid the need to disclose that," the judge said.
Justice Heath found Sullivan knowingly concurred in making a false statement by omitting the Quadrant lending.
The judge also found Sullivan culpable over omissions in this prospectus around a $10 million transaction that was designed to ensure Hubbard-controlled Southbury's didn't breach exposure limits in SCF's trust deed.
In this transaction, SCF lent $10 million to Sullivan-directed Kelt Finance, which loaned the money on to Southbury.
Southbury then repaid $10 million to SCF, reducing the overall debt it owed.
The judge said he was satisfied that the Crown had proved beyond reasonable doubt that Sullivan knew the Kelt transaction should have been disclosed as a related-party loan.
