A trustee company caught in an alleged loan scam advanced $21 million to a property developer or his associates after concerns with a set of borrowers were discussed by staff, a court heard yesterday.
Trustees Executors Ltd (TEL), chaired by former Prime Minister Jim Bolger, owned a $242 million mortgage fund that closed in 2008 in the tumult of the global financial crisis.
Before being wound up, the fund gave loans to Malcolm Duncan Mayer - a property developer now on trial in Auckland District Court.
Mayer, 55, is accused by the Serious Fraud Office of dishonestly using documents to obtain almost $50 million of loans from TEL in a scheme involving 26 Auckland properties.
TEL were allegedly sent documents during the loan application process which gave the impression someone unconnected to Mayer was buying a property when, in reality, the defendant or his alleged co-conspirator Simon Turnbull was the purchaser.
By disguising who was really behind the purchase, Mayer was able to sidestep TEL's $4 million limit on what one individual person or connected set of people could borrow, the SFO has alleged.
Turnbull, also a property developer, is no longer living in New Zealand and his whereabouts are unknown.
Giving evidence for the Crown, TEL's executive director Rob Russell said yesterday loans associated with Turnbull went into default towards the end of the 2007 and were the first to do so since its mortgage business had begun operating. Loans on properties bought by Mayer also went into default but not until March or April in 2009, Russell said.
When problems with interest payments on these advances first began, Russell said TEL's lawyers analysed around 450 mortgages on its books, discovering 29 were associated with Mayer or Turnbull.
Mayer's lawyer Greg Bradford took Russell to an email between TEL employees in February 2007, which voiced concerns that a series of loans brokered by Mayer may not have been at arms-length and that the parties involved could be connected.
Despite this email, Bradford said TEL advanced a further $21 million to Turnbull or his associates.
"There were a lot of situations where TEL made advances that breached TEL's own lending policies. Do you agree or not?" Bradford asked the witness.
"In hindsight, yes it did," replied Russell, who also pointed out the company gave the loans based on the information available to it at the time.
Bradford said TEL had advanced a $1.87 million loan to a 64-year-old associate of Turnbull who had only been in the country for a month.
The proceedings are set down for eight weeks.