An Auckland roofing contractor abused his elderly and vulnerable customers and creditors and made racist, sexual and homophobic threats towards a liquidator.
Sam Oliver Spence, a roofing contractor who operated predominantly in the Auckland region, was yesterday sentenced in the Auckland District Court to five years and six months in jail on 11 charges filed under the Companies Act 1993 and Insolvency Act 2006.
The Ministry of Business, Innovation and Employment filed the charges and outlined what he did.
"His abusive behaviour continued throughout 2018, with threats being directed towards elderly and vulnerable customers, creditors and other people who he came into contact with during the course of his management of Compass Roofing. His non-compliance was further aggravated by the racist, sexual and homophobic abuse which he directed towards the liquidator," MBIE said.
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Spence threatened Digby Noyce, a liquidator of Old Compass Rainwater Solutions, referring to his country of origin, making sexual references to a family member, saying he would come over to his place for dinner and describing what he planned to do there in colourful language.
Noyce, of RES Corporate Recovery Insolvency, said today: "When you are a liquidator, people make these comments but in the end we have a job to do and just don't go into the emotion of it. He was just lashing out. We made MBIE aware of it but we didn't persue it in any way.
"Some of his customers had it far forse than me - elderly people who he drilled holes in their roof and others who he made a fire on their deck," Noyce said.
This is the first New Zealand prosecution for serious breach of director's duties under the Companies Act and includes breaches of the Companies Act phoenix trading provisions.
Judge David Sharp said a sentence below the maximum five years imprisonment available for any one charge would not reflect the seriousness of his offending, which he described as prolonged and systemic and with a calculated criminal aspect.
Between 2011 and 2018, Spence was the director of, or involved in the management of, several roofing companies that operated under the trade name Compass Roofing, including Compass Roofing Ltd, Compass Group Ltd and Caspian Engineering Ltd.
"Through his mismanagement of these companies, Spence caused significant losses to the companies themselves, totalling over $1m. He also caused losses of over $1m to creditors, including the Inland Revenue Department through unpaid tax, as well as to customers, some of whom paid thousands of dollars for work which was never done or done in a defective manner," MBIE said.
Spence managed the various Compass Roofing entities until they incurred significant debt and became insolvent.
He would then place the company into liquidation, but before the liquidator took control, he would transfer the assets to a new company at a significant undervalue and divert money the company received to continue trading under the Compass Roofing brand, a process known as phoenix offending.
Spence was declared bankrupt in February 2018, meaning that he could not be a director of, or take part in, the management of a company without the consent of the Official Assignee.
To avoid this restriction Spence's de facto partner Jessica Brechelt became the named director and the face of the various Compass Roofing entities. However, she permitted him to continue managing the business under the guise of being employed as a quantity surveyor.
For her role in this offending, Brechelt was sentenced in the Auckland District Court on January 16 to six months community detention, 150 hours community work and 12 months supervision on charges of being a director of a phoenix company.
This included for aiding or abetting Spence to take part in the management of a phoenix company, and aiding or abetting him to take part in the management of a business while bankrupt, MBIE said.
"Once his financial mismanagement had come to light, Spence refused to comply with the liquidators and the Official Assignee. He failed to provide the liquidators with the books and records of the liquidated companies, failed to provide a statement of affairs setting out his financial position to the Official Assignee, and misled the Official Assignee. His non-compliance was further aggravated by the racist, sexual and homophobic abuse which he directed towards the liquidator," MBIE said.
Registrar of Companies and Official Assignee Ross van der Schyff said: "Spence has persistently breached his obligations and responsibilities as a director, and then as a bankrupt. He has caused real harm in the community, including to vulnerable consumers. The sentence he has received, which follows a thorough investigation by MBIE's integrity and enforcement team, provides an emphatic message that this type of financial mismanagement and fraudulent conduct will not be tolerated."
Spence is still to be sentenced on charges of attempting to pervert the course of justice and forgery. These charges arose from a fraudulent statement he filed with the court in an attempt to secure his continued bail while the Companies and Insolvency Act charges were before the court, MBIE said.
Spence remains an undischarged bankrupt, and after his conviction is automatically disqualified from being a director or promoter of, or taking part in the management of a company for five years.