Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Feltex defendants' laywers question witness's gloomy spin

Lawyers for Feltex defendants question gloomy spin, credentials of key witness

April 1 (BusinessDesk) – Lawyers for defendants in the Feltex Carpets shareholder lawsuit have questioned whether a key witness selectively chose to include gloomy data in his evidence and whether he had sufficient experience with initial public offerings.

Greg Meredith, head of Ferrier Hodgson Forensics in Melbourne, had given evidence in support of plaintiff Eric Houghton, who is suing former Feltex directors, owners and sale managers for $185 million in a representative action on behalf of 3,639 former shareholders who say they were misled by the company’s 2004 prospectus.

David Cooper, representing most of the former directors, asked Meredith why he had changed the formatting of a company graph in his evidence so that it no longer started at zero, which had the effect of exaggerating differences in the data.

“As a forensic accountant you would have some knowledge of what’s regarded as misleading,” Cooper said. “The way in which you chose to present them created quite a different opinion.”

Meredith replied that his version was a better graph. He’d made the changes “to fit in the page” and his graphs were clearly marked, he said.

Cooper also asked why Meredith why he’d relied on submissions from carpet makers including Feltex to the Australian Productivity Commission inquiry into the impact of tariff cuts, given that it would have been in the manufacturers’ interests to have “painted a slightly gloomy picture when lobbying for tariffs.”

Cooper then cited evidence from former directors Peter Thomas and Sam Magill that lower tariffs weren’t such a direct threat to Feltex because it mainly led to an increase in imported carpet tiles and rugs, rather than broadloom and the company had an agreement with US-based Shaw Industries, the world’s biggest carpet maker to import carpet itself at favourable prices.

“You do not have the knowledge or expertise to question their judgement, do you?” Cooper said.

Meredith replied: “Clearly company insiders, industry participants, have better knowledge than me.”

Justin Smith QC, appearing for Credit Suisse Private Equity and Credit Suisse First Boston Asian Merchant Partners, asked Meredith why he selectively chose negative monthly manufacturing data from the 12 months preceding the May 2004 IPO in a table but didn’t include March, April and May figures that showed positive variances.

“If you were looking for information the board had on its plate at the time of the IPO, wouldn’t it have been more apt to refer to information current at that time as opposed to months before?” Smith said.

Meredith replied that the table had been to identify where there had been issues prior to the prospectus rather than provide a thorough analysis of the whole time.

Asked how many valuations of companies for the purposes of IPOs he had carried out in his career, Meredith said he’d done more for litigation related to trade sales of businesses.

Both Cooper and Smith quizzed Meredith on whether he had read all of the evidence provided on behalf of the defendants, with Cooper asking if what he’d read was a subset of the documents.

Houghton, the plaintiff, bought 11,755 Feltex shares at $1.70 apiece, or $20,000, in the IPO, drawn to an investment that offered a gross dividend yield of 9.6 percent. All up, vendor Credit Suisse First Boston Asian Merchant Partners raised $193 million, selling 113.5 million shares, and Feltex raised a further $50 million to repay bondholders.

Within a year the stock was virtually worthless, thanks to a series of warnings that the company would miss its prospectus forecasts, and receivers were appointed in September 2006. Australian carpet maker Godfrey Hirst ended up buying the assets.

First NZ Capital and Forsyth Barr, which managed the IPO, are fourth and fifth defendants in the suit.

The case is continuing.

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Economic Update: RBNZ Says Rate Cut Seems Likely

The Reserve Bank will likely cut interest rates further as a persistently strong kiwi dollar makes it difficult for the bank to meet its inflation target, it said. The local currency fell. More>>

ALSO:

House Price Action Plan: RBNZ Signals National Lending Restrictions

The central bank wants to cap bank lending to property investors with a deposit of less than 40 percent at 5 percent and restore the 10 percent limit for owner-occupiers wanting to take out a mortgage with a deposit of less than 20 percent, according to a consultation paper released today. More>>

ALSO:

Sparks Fly: Gordon Campbell On China Steel Dumping Allegations

No doubt, officials on the China desk at MFAT have prided themselves on fashioning a niche position for New Zealand right in between the US and China – and leveraging off both of them! Well, as the Aussies would say, of MFAT: tell ‘em they’re dreaming. More>>

ALSO:

Loan Sharks: Finance Companies Found Guilty Of Breaching Fair Trading Act

Finance companies Budget Loans and Evolution Finance, run by former 1980s corporate high-flyer Allan Hawkins, have been found guilty of 106 charges of breaching the Fair Trading Act for misleading 21 borrowers while enforcing loan contracts. More>>

ALSO:

Post Panama Papers: Govt To Adopt Shewan's Foreign Trust Recommendations

The government will adopt all of the recommendations from former PwC chairman John Shewan to increase disclosure and introduce a register for foreign trusts with new legislation to be introduced next month. More>>

ALSO:

The Price Of Cheese: Cheddar At Eight-Year Low

Food prices decreased 0.5 percent in the year to June 2016, influenced by lower grocery food prices (down 2.3 percent), Statistics New Zealand said today. Compared with June 2015, cheese prices were down 9.5 percent, fresh milk was down 3.9 percent, and yoghurt was down 9.2 percent. More>>

ALSO:

Financial Advisers: New 'Customer-First' Obligations

Goldsmith plans to do away with the current adviser designations which he says have been "unsatisfactory" in that some advisers are obliged to disclose potential conflicts of interest and act in their customers' best interests, but others are not. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news