Financier's fall to earth

Allan Ludlow. Photo / Supplied

The boss of collapsed National Finance used investor money to pay for a personal property deal - an apartment development in Fiji.

Managing director Allan Ludlow used $225,000 of company money to invest in the three-apartment complex and registered it in his name and that of his wife at the time, fellow director Carol Braithwaite.

The interest-free deal is explained in papers released to the Herald on Sunday through the Official Information Act. The papers reveal the background to the decision by the Deputy Registrar of Companies, Peter Barker, in October to ban Ludlow and Braithwaite from running or managing a company for four years and six months.

Peter Barker considers, in his decision, whether his finding would interfere with charges faced by the directors, which will be heard in the Auckland District Court this week. He stated: "There is no good reason to delay my considerations" and "the legal provisions I must consider are separate and distinct from the criminal charges".

He said the defendants were "not prejudiced" by the banning process.

Tomorrow, Ludlow, Braithwaite and another director appear for a depositions hearing in respect of charges under the Securities Act and Financial Reporting Act related to the collapse of National Finance 2000 Ltd.

It is the first proceeding involving directors of a finance company from the string of 30 failures that began with National Finance.

The company went into receivership in May 2006 owing $25.5 million to 2026 investors. Subsequent industry collapses were estimated to cost investors as much as $6 billion.

Barker relied on a report from the Ministry of Economic Development's National Enforcement Unit.

It includes details of how investors were promised interest rates as high as 12.15 per cent for investing their money with the finance company, which would then be used to make "high quality" loans that were secured by assets.

Yet, in some cases, money was lent interest-free to Ludlow's family and friends, and used for property deals of the sort the company had promised would not happen. Other cash was invested in Ludlow's chain of used-car businesses, Paylesscars, and lent to unreliable creditors.

Ludlow, who has run a fish and chip shop and worked as a used-car salesman, told the Herald on Sunday he had gone from running a finance company to working as a handyman. "And I work really hard."

The $1.5m Devonport property he once shared with Braithwaite has been replaced by a $300,000 home in Kelston. The marriage is in ruins - the couple, who have two children, separated a year ago. Ludlow blames the stress of the business failure for the split. "These things are a hard thing to get through on a personal level. It's really abrupt. It turns your life completely inside-out."

The National Enforcement Unit reported that the Fiji loan "did not appear documented, nor was it disclosed in the financial statements". It was interest free, and Ludlow offered no assets as security.

The investigation also highlighted a $375,000 loan from National Finance to a property company that Ludlow owned and operated, again with no paperwork. Other interest-free loans listed in the report included $132,000 lent to a company part-owned by Ludlow's stepdaughter, $28,000 to Ludlow's brother Peter, and $176,000 to Ludlow's brother Robert.

Those who placed their savings with National Finance were told their investment was being placed in "high quality finance contracts", yet the National Enforcement Unit found that in many cases no protection had been arranged for the money being lent.

One report considered by the National Enforcement Unit found that the cash was being lent to a high percentage of beneficiaries and "breadline" borrowers.

The investigators, who reviewed the collapsed Paylesscars group of companies, also noted they could not find 26 cars listed as belonging to South Auckland Wholesale Ltd, owned and run by Ludlow.

Ludlow said he wasn't looking for sympathy, but people needed to be "a little bit more understanding".

He and Braithwaite had been "stalked" while with their children, and had received threats of "physical violence".

Ludlow compared himself with the directors of other failed finance companies, who lived in expensive houses and still enjoyed jetset lifestyles. In contrast, he said he had lost "a couple of million dollars" and now had no assets and a bank account with "a few hundred dollars in it".

While running National Finance, he said he never took dividends from the company, and was paid a maximum $83,000 salary.

Ludlow admitted the loan for the Fiji apartments, but said it had been repaid with interest. He also described the loan to buy property in South Auckland as "unauthorised" but said it was for the benefit of the group of companies.

"I've had to face some pretty harsh realities. Things could have turned out better for everybody. "