Fran O'Sullivan on business

Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Public still needs protection from Petricevic

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There will be plenty more investor angst when the Serious Fraud Office rolls out its criminal fraud case against Rod Petricevic. Photo / Paul Estcourt
There will be plenty more investor angst when the Serious Fraud Office rolls out its criminal fraud case against Rod Petricevic. Photo / Paul Estcourt

Justice Geoffrey Venning's decision to knock three months off Rod Petricevic's intended jail term as a warning against vigilante justice should spark controversy.

Petricevic was "roughed up" at a St Heliers bar and restaurant in November 2009.

It's not surprising that the St Heliers patrons wanted him out of their bar.

Many were disgusted at the way Petricevic flaunted his wealth about the eastern suburbs.

They would have observed the fight the by-then bankrupt Bridgecorp boss waged to try to keep his Porsche 911 in his family trust. This was symbolic of Petricevic's contemptuous attitude to the feelings of his company's investors.

But in his sentencing notes, Justice Venning said that while he "can understand the strong feelings that victims of your offending might feel, such actions cannot be condoned ...

In New Zealand we have the rule of law, not the rule of the mob."

Petricevic should count himself lucky that the judge also knocked another nine months off the intended seven-and-a-half-year sentence because the 62-year old hadn't previously been up on a criminal charge.

But surely the appropriate way to stop angry people from administering a "rough justice" is to charge the vigilantes with assault. And for the police to round up those people that Petricevic claimed had issued death threats against him and harassed his family.

Not go easy on him. The Bridgecorp saga still has some months to run.

There will be plenty more investor angst when the Serious Fraud Office rolls out its criminal fraud case against Petricevic. If proven, this will inevitably result in more jail time.

Already Petricevic faces an automatic five-year ban from being a company director.

But to my mind the pressing urgency is to make abundantly clear that this proven commercial hazard is never again in the position to bilk investors.

Financial Markets Authority boss Sean Hughes could do this by seeking permanent banning orders to ensure Petricevic cannot be a promoter or director of any company seeking funds from the public.

That's the least the FMA can do to underline the damage suffered by individual investors. Particularly as the judge believed that Petricevic has shown no remorse to them.

And the investors' plight does matter.

It's recently become fashionable to demonise "greedy" investors for plunging their cash into finance companies which paid them a good margin over bank rates to attract them to invest in debentures.

And for various commentators to proclaim that out-of-pocket investors should underwrite their own court actions against finance company directors instead of expecting the state to pick up the tab.

In Petricevic's case, Justice Venning says he is not in a position to pay any reparations.

The sentencing notes disclose that a trust associated with Petricevic sold a house to pay debts and that the family had since been living in rented accommodation.

But public confidence would be strengthened if a full and public investigation was launched to ensure that assets paid for by Petricevic's various business endeavours over the years he ran Bridgecorp are not squirrelled away in family or other trusts associated with him.

This may seem harsh on Petricevic and his family.

But it's nothing compared to the suffering of some of his investors.

Justice Venning points to two particular cases.

One involved a 79-year-old investor and his wife who worked all their lives to retirement. They took $250,000 out of a bank (on financial advice) and, after considering the Bridgecorp prospectus, invested in the company.

The financial loss had been devastating on them as they had little else to supplement their pensions.

In the other case, a retired professional man of 69 had invested $150,000 with Bridgecorp in January 2007, following this with the approximately $1 million net proceeds of a house sale four months later. He has gone back to work full-time (up to 160 hours a week on call). His wife has had a nervous breakdown.

Cynical commentators will say, "What did they expect? They should have known finance company investments were risky."

Even Petricevic's elderly mother has attacked the investors and cried out on radio that her son is the "biggest loser of all".

The investors may well be guilty of stupidity by putting all their eggs in one basket.

But they are entitled to put their trust in prospectus statements. That their trust has been abused is not their fault.

But the authorities should also look in the mirror.

The Australian Securities and Investment Commission suspended Bridgecorp's Australian arm from raising money a year before the New Zealand company failed.

Considerable investor cash would have been saved if the NZ Securities Commission had followed suit. That it didn't speaks volumes.

- NZ Herald

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