Dominion Finance staffer considered whistleblowing

Paul Cropp and Robert Whale in court yesterday. Photo / Brett Phibbs
Paul Cropp and Robert Whale in court yesterday. Photo / Brett Phibbs

A former Dominion Finance manager has told a court he considered being a "whistleblower" on some of the activities that allegedly went on at the firm but instead left the company just months before its receivership.

Dominion risk manager Martin Sweetapple gave evidence for the Crown in the second day of the trial of three men associated with the collapsed firm.

Dominion Finance director Robert Barry Whale, former chief executive Paul William Cropp and an accused with name suppression pleaded not guilty to theft by a person with a special relationship.

In the case brought by the Serious Fraud Office, the accused allegedly entered into a number of related-party transactions and knowingly breached requirements of the debenture trust deeds of Dominion Finance and sister company North South Finance.

In the witness box this morning, Sweetapple told the High Court at Auckland of instances where $3 million had gone from North South's bank account to Dominion's when funds were dwindling over the 2007/08 Christmas period.

"On one particular day over a million dollars was paid out [to debenture holders] and it left very little in Dominion Finance's bank account," Sweetapple said.

Another million dollars was due to be paid out the next day and Sweetapple said there wasn't enough money in the account.

He noticed the next day that "perhaps $3 million" had been come over from North South's account to Dominion's.

According to the Crown, $11.9 million was transferred from North South to Dominion over time "under the auspices of security sharing agreements".

In exchange for the funds, North South through the agreements acquired an interest in already defaulting or problem loans, the Crown argues.

Around the time of one of these security sharing arrangements in early 2008 Sweetapple said someone from his office told him Dominion was "funding its bad loans" through North South Finance.

Sweetapple said he had considered turning whistleblower.

"I contemplated whether I should speak to some external party about what was going there, be it the trustee, I don't know. In other words: should I be a whistleblower?" he told the court.

The risk manager said he had made up his mind to leave the company.

He moved to ASB Bank in May 2008, just months before the Dominion Finance went into receivership that September.

During his testimony, Sweetapple said in April 2008 that Dominion Finance's liquidity position was "touch and go".

When Crown prosecutor Brian Dickey asked the witness about the picture of the company's liquidity, he replied:

"Well the funds were dwindling and they were heavily reliant on some exposures that should have been repaid, matured loans, expired loans, that should have been paid that weren't being paid as they fell due."

Earlier, the Crown witness said that he didn't believe issues with related-party loans were raised with the credit committee, which was the body responsible for approving or declining the loans which Dominion or North South gave out.

"Was the issue of whether an entity was or wasn't a related-party a concern of the credit committee? And if so, how?" Dickey asked Sweetapple.

"It should have been a concern but I don't ever remember it being raised," the witness replied.

Dominion owed almost 6000 investors a total of $176.9 million when it went into receivership. Receivers estimate that debenture holders will recover between 10c and 25c in the dollar.

North South went into receivership in July 2010 owing 3900 debenture holders a total of $31 million, who are estimated to get back between 65c and 70c in the dollar.

- NZ Herald

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