SCF director sentenced to home detention

South Canterbury Finance accused Edward Sullivan arrives with family members. Photo NZ Herald
South Canterbury Finance accused Edward Sullivan arrives with family members. Photo NZ Herald
A judge has today taken mercy on former South Canterbury Finance director Edward Sullivan, who was found guilty of a long-running and high-profile fraud, and sentenced him to 12 months of home detention.

After a lengthy and complex trial that spanned five months, a High Court judge earlier found 73-year-old Sullivan guilty on five charges of making false statements in offer documents and obtaining by deception.

In what had been billed as the "biggest fraud in New Zealand's history", co-accused, former South Canterbury Finance (SCF) chief executive Lachie McLeod, 50, and accountant Robert White, 70, were acquitted on all the charges they faced.

Sullivan was acquitted on the most serious charges - that he was complicit in deceiving the Crown into allowing SCF into the retail deposit guarantee scheme.

Mr McLeod and Mr White were at the sentencing in the High Court at Timaru today, along with Sullivan's wife of 49 years, Jennifer and four children, in a show of support.

Crown lawyer Colin Carruthers, QC, said Sullivan continued to minimise his conduct between September 2006 and February 2010, pointing to a probation report where he continued to maintain his not guilty stance.

Justice Paul Heath today agreed that he lacked remorse and remained in denial.

The offending involved three factors, the Crown argued: that it was serious dishonesty, sustained over a significant period of time, and that it was committed to induce the payment of significant sums.

Defence submissions that Sullivan's conduct was "decisive enthusiasm gone wrong" and not any deliberate fraud of investors money, was contrary to Justice Heath's findings, Mr Carruthers said.

He highlighted the judge's findings that Sullivan misled and duped investors.

Mr Carruthers denied that the Crown was making Sullivan a scapegoat.

"The Crown case was that he facilitated the improper way South Canterbury Finance was run and therefore contributed to its demise," he said.

The fact that there was no loss to investors occurred only because of the Crown's retail deposit guarantee scheme, which was "purely fortuituous from Mr Sullivan's perspective".

Long-time SCF chairman Timaru financier Allan Hubbard died after a September 2011 car crash, aged 83 - just months after the SFO laid 50 fraud charges against him.

The Crown alleged Hubbard "had little interest" in meeting accounting or legal requirements, and that Mr McLeod, Sullivan and Mr White "did not just turn a blind eye" but took affirmative actions that breached the controls on the company.

SCF grew from $75 million in 2004 to nearly $2 billion in 2008, the court heard.

Justice Paul Heath earlier said that as the global financial crisis began to bite, SCF reacted in a "knee-jerk fashion" rather than through a coherent fashion.

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 - of which $800 million was recovered - when the company collapsed on August 31, 2010.

Defence lawyer Pip Hall, QC, stressed it was important to remember that Sullivan was acquitted on the most serious charge of a $1.6bn fraud.

Sullivan "should have said no" to Mr Hubbard, and tried to, the defence said, but instead "went out of his way to fix the unfixable".

A sentence of home detention was appropriate in what was a unique case, Mr Hall argued.

"No loss was caused by Mr Sullivan's offending... Mr Sullivan did not take one cent of investors' money."

No reparation has been sought by the Crown.

Sullivan had spent $2 million on legal bills, the court heard.

Justice Heath said Sullivan had already settled one civil claim against him for a "substantial sum of money".

Sullivan was described as a hard-working, family man, "widely-regarded as a man of honesty and integrity" who made enormous legal and charity contribution to the South Canterbury region. A total of 76 letters of reference were provided to the court, which Justice Heath said was "the most impressive array" he had ever seen for a sentencing.

Mr Hall said matters have taken an "enormous toll" on Sullivan and his family.

"He is not the man he was four years ago. Some would say he is a broken man," Mr Hall said.

"The fall from grace has been massive."

Justice Heath described Sullivan's offending as being "head in the sand" behaviour.

He accepted that Sullivan was not what his probation officer called "an inherently dishonest person", adding that his conduct was completely out of character.

He further accepted that Sullivan did not intend to cause any loss or emotional harm to any potential investor, and that in the end, there was no loss caused to the public as any investor was paid out under the guarantee scheme.

The judge was particularly touched by the good Sullivan has done for his community over the years, as a lawyer, but also through his "extensive work" with Order of St John.

While Justice Heath found that Sullivan had acted dishonestly, he did so out of a "misguided loyalty" to Mr Hubbard, coupled with a "misguided desire to keep South Canterbury afloat".

Mr Hubbard was the most culpable offender in relation to all the non disclosures made, the judge said.

Justice Heath said sentencing was a difficult exercise, but concluded that it was a rare case where home detention was appropriate.

He pointed to his prior good character and service to community, his age and effect jail would have had on him, his lack of assets and ability to earn an income, as well as calling on a degree of mercy.

He said he saw no benefit to society in jailing him.

Justice Heath sentenced Sullivan to 12 months' home detention plus 400 hours of community work.

Sullivan refused to comment as he left court flanked by two of his sons.

SFO director Julie Read acknowledged that it was a difficult and complex prosecution.

"We are presently considering the sentence and have no further comment at this stage." 

- By Kurt Bayer of NZME. News Service