Allan Hubbard, the late boss of South Canterbury Finance,
which collapsed and required a $1.6 billion government bailout,
"had little interest" in meeting accounting or legal
requirements, and three of his most trusted colleagues went
along with the massive fraud, a court has been told today.
New Zealand's biggest ever fraud case is finally coming to a
conclusion after 61 days of evidence spanning five months.
Former South Canterbury Finance (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.
In the High Court at Timaru today, the Crown began its
Long-time SCF chairman, Timaru financier Mr Hubbard, who died
in a September 2011 car crash, aged 83, ignored various
accounting and legal regulations that he was bound to adhere
to, the court was told.
One witness described Mr Hubbard's attitude as being, "Trust
me, I know what I am doing".
"The evidence has been that he had a disdain for disclosing
related party transactions, a peculiar view of what
constituted one, a penchant for swapping cheques to cleanse
the accounts ... and took assets off the balance sheet if
they were impaired," Crown lawyer Colin Carruthers QC said.
The Crown says the defendants' actions "contributed directly"
to SCF's collapse on August 31, 2010.
Because of the company's participation in the Crown retail
deposit guarantee scheme, 35,000 investors were bailed out by
the taxpayer to the tune of $1.6 billion.
The trial, before Justice Paul Heath, was told that the
defendants well knew what was going on in the years leading
up to the collapse.
The Crown says that on July 25, 2007, the defendants prepared
a letter to Mr Hubbard expressing their concerns with the
"That is an extraordinary document, setting out a long list
of issues directly relevant to these charges, from related
party advances, the single entity exposure limit, advances
being made without security, loan and drawdown authorisation,
and so on," Mr Carruthers said.
But despite the concerns, nothing changed, Mr Carruthers
The defendants "did not just turn a blind eye" but took
affirmative actions that breached the controls on the
"It is not a case of simply failing to act," Mr Carruthers
"These three men affirmatively facilitated the improper way
the company was run, by saying that the true position was
what it was not in the company's prospectuses or accounts,
and personally approving transactions that breached the Trust
Deed or Crown Guarantee.
"In doing so, the Crown says that they broke the law." The
Crown closing is expected to take all week.
Defence closing submissions are expected to begin next
After closing submissions, Justice Heath will reserve his
decision, which is expected to be released in October.
- By Kurt Bayer of APNZ