Three former heads of South Canterbury Finance "went
beyond cavalier" and contributed directly to the company's
collapse, the Crown alleged on the opening day of what has been
described as New Zealand's biggest ever fraud trial.
Former SCF chief executive Lachie McLeod, 50, and two of the
company's former directors, lawyer Edward Sullivan, 72, and
accountant Robert White, 70, deny a $1.6 billion fraud.
They pleaded not guilty in Timaru today at the start of their
High Court trial, which is set down for 3-4 months.
In the Crown's opening submissions, Colin Carruthers QC
outlined the case against the trio.
He said the directors "evaded or ignored" controls of how the
company should operate.
"The hallmark was related party lending highly structured to
hide it," Mr Carruthers said.
They "moved beyond cavalier and contributed directly" to the
collapse on August 31, 2010.
Because of the company's participation in the Crown retail
deposits scheme, 35,000 investors were bailed out by the
taxpayer to the tune of $1.6b.
The court was shown a February 2008 email chain between
McLeod and accountant Terry Hutton, which said: "Obviously
trying to hide my loan as a related party and now need to
flesh out fully ... [this] will avoid my name being directly
on the prospectus which will be wise in this environment."
SCF failed to keep proper accounting records under its legal
obligations and industry rules, which amounted to serious and
widespread offending, Mr Carruthers said.
The trial, before Justice Paul Heath alone, is a document
heavy case, with the Crown relying heavily on the evidence of
A total of 40 Crown witnesses, including former SCF
employees, people involved in transactions with various
companies, and forensic or expert witnesses, are expected to
The start of the trial was delayed for an hour this morning
over concerns that a comment made last week by the boss of
the Serious Fraud Office could have led to a perception that
Justice Heath was based towards the Crown.
SFO director Julie Read referred to Justice Heath as "our
judge" while speaking at the 13th Annual Corporate Insolvency
and Restructuring Conference in Auckland last week.
Lawyers for the three accused, Pip Hall QC, Bruce Squire QC,
and Jonathan Eaton QC wanted a delay to the start of the
trial in order to look more closely at the issue and to see
if the judge should consider stepping down from presiding
over the trial.
Justice Heath said it was "extraordinary" to think anyone
would possibly think he would be anything other than
He declined to recuse himself, saying proceedings should
continue, and if defence counsel wished, they would be given
time to formally pursue the matter further next week.
The trial continues, with the Crown's opening address
expected to last all week.
- By Kurt Bayer of APNZ