In some of these transactions, funds were transferred from North South to Dominion when the latter was struggling with liquidity issues.
In the end, both companies collapsed as part of the wave of finance firms that folded after 2007.
At Cropp's sentencing this afternoon in the High Court at Auckland, Crown lawyer Brian Dickey said the former chief executive's offending related to transactions worth $13.4 million.
Dickey said Cropp had breached the trust which investors placed with him to deal with their funds lawfully.
The Crown lawyer called the offending "premeditated".
"Mr Cropp acted in quite a deliberate manner...this was not spur or the moment or opportunistic fraud," Dickey said.
Although Cropp did not stand to personally gain from the transactions, Dickey said the 50-year-old had an interest in keeping the companies afloat because of the salary he was receiving.
The Crown pushed for a sentencing starting point of more than five years in jail during its submissions to Justice Graham Lang.
Cropp's lawyer, John Billington QC, said his client's offending was not one of fraud and rejected that description.
"Dishonesty did not form any part of the Crown case", he said.
Billington read out a letter Cropp had written, which said he had apologised unreservedly to Dominion's and North South's out-of-pocket investors.
"Not a day or night goes by where I don't think about my decisions with overwhelming remorse...I can't stand the fact the people lost their hard earned money because of something I did," the letter said.
Cropp had engaged in voluntary work, was devoted to his family and had an "impeccable background", Billington said.
Cropp was the secretary of the North Shore Swimming Club for a number of years and Billington read out a letter from the former president of NSS:
"He [Cropp] is one of the most decent people I have had the pleasure to work with," the letter said.
Billington said the Cropp's convictions, despite carrying no dishonesty component, would create problems for his employment in the future.
The defence lawyer pushed for a sentence of home detention and said that to imprison Cropp would "itself create a major injustice".
In sentencing Cropp, Justice Lang said he was required to issue a deterrent for this type of offending:
"Investors entrust their monies to finance companies on the strict understanding that the finance companies will deal with those funds in accordance with the governing trust deeds. When that does not occur and when those responsible for controlling investors' funds ignore their contractual obligations as you did here the court must make it plain that a deterrent sentence must be imposed," Justice Lang said.
Justice Lang also said the offending had caused harm, particularly to elderly investors.
That being said, the judge said Cropp's actions were not motivated by personal gain.
"I am satisfied and indeed the Crown accepted you did not seek to line your own pockets with investors' funds," he said.
"I am satisfied your motivation was aimed at having Dominion remain afloat."
The judge said an appropriate sentencing starting point was 3 years 4 months in prison.
In discussing mitigating factors, Lang said was clear Cropp had an "impeccable record".
"I have no doubt your fall from grace is going to have catastrophic effects for your future,"
He gave Cropp a discount of 6 months for his previous good character and 3 months for remorse.
In the end, Justice Lang sentenced Cropp to two years and seven months in jail.
Dominion Finance director Robert Barry Whale was facing charges alongside Cropp but was acquitted last month and defended the proceedings with the argument he had never read the trust deed.
In reaching his verdict Justice Lang said he was left in a state of reasonable doubt as to whether, between 2004 and 2007, Whale knew of the prohibition on lending to related parties without prior trustee consent.
But Cropp's situation was different. The former chief executive said he was aware of the limits of related-party transactions in the trust deed but that it would be sufficient to retrospectively apply for trustee consent.
This was not accepted by the judge, who in finding Cropp guilty last month, said it "flied in the face of plain wording of the trust deed" and "would prove completely unworkable in practice".
Dominion Finance and North South Finance:
* Dominion Finance Group and North South Finance were sister companies and operating subsidiaries of the NZX-listed Dominion Finance Holdings.
* Both offered property and commercial loans.
* North South went into receivership in July 2010 owing $31 million to 3900 debenture holders, who are expected to get back between 65c and 70c in the dollar.
* DFG went into receivership in September 2008 owing almost 6000 investors a total of $176.9 million.
* Receivers estimate that debenture holders will recover between 10c and 25c in the dollar.
