Bridgecorp trial: Covert ties to $90m loan client revealed

(L- R) Former Bridgecorp directors Rod Petricevic and Robert Roest. Photo / Brett Phibbs

Failed finance company Bridgecorp paid out more than $90 million to a company it allegedly had covert ties with in a deal that didn't comply with standard business rules, a court heard today.

The trial for three former Bridgecorp directors - Rod Petricevic, Rob Roest and Peter Steigrad -continued today in the High Court in Auckland.

Bridgecorp was a finance company offering property loans and folded in 2007, owing 14,500 investors $459 million.

The trio on trial face 10 Securities Act charges brought by the Financial Markets Authority (FMA) for allegedly making untrue statements in the investment statements, registered prospectuses and extension certificates of Bridgecorp and Bridgecorp Investments.

The three directors deny charges, while two fellow directors Gary Urwin and Bruce Davidson have pleaded guilty to the charges.

The company's internal audit and risk manager Indra Kumar continued to be questioned as a Crown witness today, on a confidential report he wrote dated November 30 2006.

The report detailed a number of uncertainties around a loan paid by Bridgecorp to Barcroft Holdings Ltd totalling $90,475,966, which was the first of a series, he said.

Barcroft had covert ties with Bridgecorp director Gary Urwin through trusts, and through parent company BHL, a company which Bridgecorp exercised considerable control over, the Crown alleges.

Kumar was concerned about the deal and called for more "basic information" which was missing.

Parts of the deal did not comply to standard business practices, and left Bridgecorp in an uncertain position, he said.

He said a formal exit strategy was normally prepared by the borrower, but one "was not available" in this instance.

Kumar also told the court how Bridgecorp could, and would have, accessed funds borrowed by other subsidiary companies Monice Properties and Bristol Securities Ltd.

Throughout earlier questioning in the morning, Kumar pointed out abnormal accounting practices in Bridgecorp business statements and transactions.

He said over 2006 and 2007, Bridgecorp faced "cash flow difficulties" and was lending out cash it did not have.

The trial continues tomorrow and is expected to last until March next year.