S. Canterbury Finance head wins costs, but also comes in for criticism

Acquitted South Canterbury Finance boss Lachie McLeod has won back $240,000 of his legal bills, with a judge calling the Serious Fraud Office's probe into the failed company "deficient".

But the award is only a fraction of the $1.4 million sought by McLeod for defending the case, with the judge concluding some behaviour at the finance company was "commercially unacceptable".

McLeod was cleared of any criminal wrongdoing after a five-month High Court trial in Timaru brought by the Serious Fraud Office. The acquittals were a huge blow for the SFO, particularly because former boss Adam Feeley trumpeted the case in 2011, saying the value of the alleged fraud "exceeds anything in the history of white-collar crime in New Zealand".

After being found not guilty, McLeod made a bid to get the Crown to pay some of his legal bills.

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The major charge in the case was that alleged misrepresentations enabled South Canterbury Finance's entry into the Crown's retail deposit guarantee scheme, which led to a $1.5 billion taxpayer bail-out of the company when it failed in 2011.

Justice Paul Heath, in his decision on whether costs should be paid, said the standard of investigation around this charge was poor.

No documents were obtained from Treasury or the Reserve Bank, nor were interviews done to ascertain whether or not the guarantee document would have been signed if material misrepresentations had been discovered, the judge said.

"In the context of what the director [Feeley] announced publicly to be the 'biggest fraud in New Zealand's history' and one that was the 'most resource intensive and time consuming in recent history' the standard of investigation on this charge fell well below that which the public is entitled to expect," Justice Heath said.

The judge said an order for costs should be made in respect of this charge. He decided on $225,000.

On another of the charges - alleging theft by a person in a special relationship - Justice Heath said the Crown did not take adequate steps to investigate the transaction at the heart of the allegations, and too much weight was "put on the appearance of the arrangement".

He ordered that McLeod should get a further $15,000 of costs for this charge.

But despite McLeod being acquitted on a further three charges, Justice Heath did not think it appropriate to award him costs for them.

In referring to a transaction associated with two of these charges, Justice Heath said it was complex and designed to keep information that might have affected market perception of South Canterbury Finance "away from the eyes of potential investors and business press".

"While that conduct did not give rise to a criminal charge, it was commercially unacceptable, and designed to mislead the market. Conduct of that type militates against an award of costs," the judge said.

The judge acknowledged the Crown had sufficient grounds to prosecute McLeod on these charges, although the allegations did not end up being proven.