Ignorance is not a reasonable defence for directors of failed Feltex Carpets accused of neglecting to disclose information in the company's interim financial statements, a prosecutor said today.
Five directors, Peter Hunter, Peter Thomas, Michael Feeney, John Hagen and former chairman Tim Saunders, are charged with failing to publish a
breach of Feltex's banking covenants and not properly classifying its A$119.5 million ($157m) ANZ Bank debt facility.
They could face fines of up to $100,000 each.
The directors claim they did not understand what was required under the newly introduced International Financial Reporting Standards and that they had been assured by accounting firm Ernst & Young that the reports were adequate.
In his closing address to the Auckland District Court today, prosecutor Brian Dickey said there had been no scrutiny of Ernst & Young's review by the company and it was unacceptable for the directors to shift responsibility to a third party.
"Ignorance of that detail of law could not be said to be a reasonable defence," he said.
A listed company should always be transparent and the failure to disclose the information could have been costly to shareholders, he said.
"An investor does not know what is happening behind closed doors, they must take the report at face value. They could have and should have categorised the liability and reported breaches," he said.
When Feltex was floated on the sharemarket in 2004, more than $250 million was raised from mostly New Zealand investors. It went into liquidation in 2006.
Defence lawyers will give their closing addresses tomorrow.
- NZPA
