Bridgecorp chairman & remaining directors charged
23 December 2008
Bridgecorp chairman and remaining directors charged
The Securities Commission has laid criminal charges against the chairman of Bridgecorp Bruce Davidson and non-executive directors Gary Urwin and Peter Steigrad.
Criminal charges were laid by the Registrar of Companies earlier this year against the executive directors, Rodney Petricevic and Robert Roest. These new charges follow further investigations by the Commission.
The Commission has also issued civil proceedings against all five directors.
“All the directors are responsible for Bridgecorp’s offer documents. The Commission believes that the offer documents misled investors by misrepresenting the overall financial position of those companies and the risk of investing in them,” Commission Chairman Jane Diplock says.
The proceedings relate to Bridgecorp Limited (in receivership and liquidation) (Bridgecorp) and Bridgecorp Investments Limited (in liquidation) (BIL). When Bridgecorp went into receivership in July 2007 it owed approximately $459 million of debenture stock to some 14,300 investors. The receivers estimate the likely recovery for investors to be 13-44%. BIL was placed in liquidation also in July 2007. On that date it owed approximately $29 million to investors. Almost all of the money raised by BIL was on-lent to Bridgecorp and is unlikely to be recovered.
The Commission alleges the directors made untrue statements in the investment statements and registered prospectuses of Bridgecorp and BIL dated 21 December 2006. These statements concerned Bridgecorp’s overall financial position, solvency, and liquidity which the Commission believes had been substantially deteriorating since 30 June 2006. BIL was affected by this because it depended on Bridgecorp to be able to repay its own investors. Other alleged untrue statements concern related party lending, lending policies and procedures, that Bridgecorp had never missed an interest or principal repayment, and that all material information had been disclosed in the prospectus.
The Commission also alleges that the directors made further untrue statements when they signed prospectus extension certificates for Bridgecorp and BIL on 30 March 2007. These stated that the companies’ financial position had not materially and adversely changed since the last balance date, and that the 21 December 2006 prospectuses were not false or misleading.
The criminal charges are laid under section 58 of the Securities Act and carry a maximum penalty of five years imprisonment or fines of up to $300,000. They were filed at the District Court at Auckland on 17 December 2008. The defendants have been summonsed to appear on 24 February 2009.
The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the five directors. Under the Securities Act these applications must be made together.
The Commission’s main purpose in making them is to take the first step towards compensation for investors who invested under the 21 December 2006 prospectuses. A declaration of civil liability is conclusive evidence that can be relied upon by either the Commission or investors themselves in any subsequent claims against the directors for compensation. The Commission will consider pursuing compensation claims in due course should it be in the public interest to do so.
The Commission has power to take civil proceedings only in respect of a prospectus registered after October 2006 or an investment statement or other advertisement distributed after that date. Investors can take their own civil compensation proceedings whether or not the Commission also has power to do so.
The civil proceedings are issued under section 55C and related sections of the Securities Act. They were filed on 12 December 2008 at the High Court at Auckland.
The Commission acknowledges the assistance of the receivers of Bridgecorp, the National Enforcement Unit of the Companies Office, and the Serious Fraud Office with this investigation. The Serious Fraud Office is continuing its investigations into Bridgecorp.
The Registrar of Companies has previously laid charges against Mr Petricevic and Mr Roest. The Commission and the Registrar will continue to work together to progress the cases against all five directors as promptly and efficiently as possible.
As these proceedings are now before the Court it would not be appropriate for the Commission to comment further.