Members of the Otago Bowling Club are being held accountable for more than $200,000 from the sale of its grounds, which was split among members instead of being given to community interests.
A six-month report by liquidator Trevor Laing and Associates found the $350,000 gained from the sale was distributed among the 14 remaining members of the club - going against its constitution, which stated it should have been given to community interests.
Following the sale of the club, payments of $16,552 were made to each member and an $85,000 payment was made to a company owned by former club president Lester Nash, the liquidator reported.
Mr Laing had been successful in retrieving payments made to seven members, totalling $115,864, but was preparing to go to court to retrieve the remaining $200,864 - including the $85,000 payment.
In his report, Mr Laing said he was concerned to find that, on three occasions from 2007 to 2011, the club received legal advice saying it could not distribute funds to members.
On top of that, the lawyer who acted for the club during the property sale had also referred to how proceeds should be distributed.
"This letter, dated only six days before the payments to members were made, goes as far as quoting in full the actual section of the club's constitution relating to distribution of funds on liquidation.
"Anyone reading that letter would be left in no doubt as to the intent of the constitution," Mr Laing said.
"Instead, proceeds were distributed among members after a meeting held at a church hall in November 2011, with 10 members choosing to take cheques and four choosing to have the money paid into a trust.
"My view is that the establishment of the trust was simply a sham to make the distribution from the club appear to have some validity and disguise the fact that members were going to benefit."
Mr Laing's impression was members were erroneously told at the meeting that legal advice approved of their getting the proceeds.
"Disappointingly, no one at that meeting asked any specific questions and importantly no one asked to see the legal opinion.
"On a matter of such import, and given this was the sole purpose of the meeting, I find this surprising."
Mr Laing's concerns about the $85,000 payment to Lester Nash for all shares in Southern Pearl Ltd related to the assessment of the shares' value.
The payment was made as a result of an agreement giving the company a 10-year licence to take spring water from the club's grounds beginning in 2007.
Speaking to the Otago Daily Times, Mr Laing said he was"surprised" by the actions of the club's members and the difficulty he had recovering money from some. The members may have been"blinded by the money", he said.
Member and former green keeper Dave Cameron, who was among those who received proceeds from the sale, said he and other members were under the impression everything was above board.
He had paid back his share, but believed some members may not be able to afford to pay theirs back.
"There is one guy I know that lived from month to month, pension day to pension day," he said.
Mr Nash said members were given the option of giving money to charity.
"No one was forced to take the money," he said.
Mr Nash was unaware the club had received legal advice saying it could not distribute funds to members, or that the constitution said funds should be distributed to community interests. He accepted that, as president, he should have read that part of the constitution.
There was"nothing wrong" with the $85,000 payment made to Southern Pearl Ltd, he said.
"In actual fact, the company was valued at a lot more than $85,000 and ... I actually took less."
He said he did not receive a payment of $16,552 like other members.
He regretted the club did not change its constitution to allow members to receive the funds.