A sixth finance company is now under investigation by the Serious Fraud Office.
SFO director Grant Liddell said yesterday it had begun an investigation into Clegg & Co Finance over the amount of money the company was lending to related parties. Clegg & Co Finance went into receivership in October last year, owing about 500 investors $15 million.
At the heart of the matter is a 5 per cent limit on related party lending imposed by the company's trust deed. The SFO said it appeared at the time of receivership that about three times that amount was lent to related parties, which included its holding company, Clegg & Co, and an associated company, Classic Finance.
Lending in breach of those requirements could constitute an offence under section 220 of the Crimes Act, which is punishable by up to seven years imprisonment.
"These investigations are complex, and this one, like the others, is likely to take a substantial amount of time," said Liddell.
Clegg & Co Finance's collapse a year ago made it the 10th finance company at the time to strike trouble.
Receivers Brian Mayo-Smith and Shaun Adams, of BDO Spicers, expected at the time investors would receive between 70c and 85c in the dollar of the principal back.
But that forecast has been downgraded to between 56c and 69c, due to the state of the economy, the housing downturn and credit markets slump. To date, investors have received 32.5 cents in the dollar.
Finance/investment companies being examined by the Serious Fraud Office:
* Clegg & Co Finance.
* National Finance.
* Five Star Finance.
* Waipawa Finance.
* Blue Chip.