A prominent Northland GP and horse breeder has been ordered to pay around $300,000 to three investors who lost money in a foreign exchange company of which he was a director.
In making the order against Dr Dirk Oberholster, Justice Geoffrey Venning said in a reserved decision from the High Court at Whangarei that the case should serve as a salutary warning to company directors and investors not to get involved in businesses they did not understand.
"This case highlights the risk of a director becoming involved in a company whose business is outside the director's expertise," Justice Venning said.
"It also highlights the risk to investors who pursue high returns in speculative investments such as foreign exchange." Altogether some $1.5 million invested in FXHT Fund Managers was lost.
A co-director of Dr Oberholster has been charged by the Serious Fraud Office with fraud in relations to three investors' funds totalling $US342,736 ($NZ598,600) and faces trial August.
Justice Venning found that Dr Oberholster should pay roughly half the sum allegedly defrauded towards the investors' losses.
The judge said that Dr Oberholster did not adequately control the activities of his co-director, which allowed the frauds to take place.
Dr Oberholster, a prominent figure in the racing community with interests in Totara Park Thoroughbred Stud, joined FXHT as a director in December 2005.
Justice Venning said that his co-director and fellow South African was the driving force behind the FXHT foreign exchange business.
A number of local investors placed more than $US900,000 with FXHT in the hope of a 2 percent return per month, but the money was lost.
Justice Venning said that without Dr Oberholster's knowledge, his co-director had been taking money from some investors to pay the returns to others to keep the company going.
The judge said that a decision was then made to switch from the Swiss trading platform it was using to one in South Africa called FX Active to obtain better returns.
But that move was unsuccessful too.
Justice Venning said that after being told by an employee that investors' funds were missing, Dr Oberholster confronted his co-director before reporting the matter to the police.
The court heard that company money was spent on a BMW, a motorcycle, and the co-director's pet.
FXHT's liquidators were unsuccessful in recovering any money from FX Active in South Africa, which is no longer trading.
They then turned their sights on Dr Oberholster to recover some of the lost investors' funds.
His former co-director is bankrupt.
