Former lawyer denies knowledge of deficits

Gerald McKay says he didn't know about missing trust funds.

Former long-time Napier lawyer Gerald McKay has told a jury he knew nothing of his firm's years of financial deficits until just months before an inquiry which led to him being charged with over half-a-million dollars worth of thefts.

Giving evidence on the sixth day of his trial in Napier District Court, McKay, 74, said he learned of the McKay Hill discrepancies in October 2009 from the firm's trust account manager, whom he yesterday claimed was "dipping her fingers in the till".

After an inquiry which started the following May, the firm closed as McKay surrendered his practising certificate. Law Society investigators alleged McKay had taken $566,900 from the firm's lawyer's trust account without required authority from clients.

In court he denies five charges of theft by failing to account, involving alleged misappropriation of funds from five estates and family trusts. One charge represents 15 transactions involving one of the trusts.

McKay, a lawyer in Napier for more than 40 years, also denies a representative charge of criminal breach of trust and five charges of dishonestly using documents with intent to obtain pecuniary advantage, over $1.015 million worth of invoices allegedly created as the inquiry was about to start in 2010 and backdated to the previous year.

The Crown alleges funds were used to prop-up shortfalls in law firm accounts, and monthly trust fund reports required to be filed with the Law Society concealed discrepancies.

Crown prosecutor Chris Lange yesterday called the last three of the 20 prosecution witnesses, including Napier man Anthony Johnston and sister Leigh, who lives in Australia, relating to sums of $30,000 and $60,000 which were removed from their family trust's interest-bearing deposits with the law firm in September 2009.

Their parents had established a trust with McKay Hill in 1999 and Mr Johnston said that when $100,000 from the sale of their father's retirement unit was placed with the firm's trust account in 2008 it was with the instruction it was to be on interest-bearing deposit "not to be used on an loan, mortgage or risky venture".

Opening the defence case yesterday, barrister Scott Jefferson told the jury of eight women and three men the issue was whether McKay knew of and authorised such payments. It was his position that he didn't know, only became aware when trust account manager and long-time employee Anne McAllister "came clean" in 2009.

Last week, Ms McAllister told the court she warned McKay of the position many times and anything she did was with his authority.

McKay said he knew nothing of regular overdrafts in the firm's interest in trust account until 2009, when it had soared over $600,000.

He hadn't been presented with the information, he claimed: "Had we known about it (earlier), then, the stupid thing is, it wouldn't have been too difficult to address."

He said he set about a refinance plan, which included starting to move to draw-in fees from long-time clients, and thinking about remortgaging his home.

McKay claimed he had authorities to place client funds in mortgages, despite their contention in evidence that they hadn't approved.

Asked if he was saying he never looked at the bank statements of his business, McKay said "there were other people to look after those matters".

The trial continues.