Hubbard had 'little interest' in rules

Allan Hubbard.
Allan Hubbard.
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 closing address.

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 business practices.

"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 said.

The defendants "did not just turn a blind eye" but took affirmative actions that breached the controls on the company.

"It is not a case of simply failing to act," Mr Carruthers said.

"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 Tuesday.

After closing submissions, Justice Heath will reserve his decision, which is expected to be released in October.

- By Kurt Bayer of APNZ