Bridgecorp 4 well aware of cash-flow problems, says Crown

(L- R) Rodney Michael Petricevic, Cornelis Robert Roest, Gary Kenneth Urwin and Peter David Steigrad, stand in the dock at the Auckland High Court this morning. Photo / Brett Phibbs

Bridgecorp directors were well aware the company was experiencing financial woes but continued to accept investors' money without informing them of these problems, prosecutors argue.

The High Court trial of Rod Petricevic, Rob Roest, Gary Urwin and Peter Steigrad for allegedly misleading investors continued in Auckland yesterday with the Crown laying out its case against the company bosses.

The four deny the charges against them and their trial has been adjourned until mid-November when the defence will present its opening arguments.

The directors face 10 Securities Act charges brought by the Financial Markets Authority for allegedly making untrue statements in the investment statements, registered prospectuses and extension certificates of Bridgecorp and Bridgecorp Investments.

The prospectuses, dated December 21, 2006, reported Bridgecorp's financial position for the year ended June 30, 2006, but claimed no circumstances had arisen affecting the company's profitability over the six months.

An extension certificate, dated March 30, 2007, said the company's financial position had not adversely changed from the statement in the prospectuses.

However, Crown prosecutor Brian Dickey said this was far from the case - and yesterday he alleged that the directors knew it.

He claimed the company's liquidity had declined and it had repeatedly failed to meet its cash flow forecasts.

For instance, Bridgecorp had forecast a cash balance of $4.53 million for the week ending October 27. The actual cash balance was $533,000.

This information was emailed to all directors between September 2006 and January 2007 and Mr Dickey said it "ought to have been apparent to the directors that Bridgecorp had insufficient cash flows to continue operating as a finance company." The company's performance continued to decline in the early months of 2007, the court heard.

Board meeting documents from January, two months before the extension certificate was signed, revealed more than $91 million of loans due in 2006 had not been repaid to Bridgecorp, Mr Dickey said.

"This illustrates the serious cash flow issues faced by Bridgecorp and which the directors were well aware of," he alleged.

In April, an email sent to Roest advised that Bridgecorp had available funds of $45,000 to pay investors a due amount of around $1,924,000 and staff salaries of $267,000.

Petricevic and Roest face a further eight charges under the Crimes Act and Companies Act of knowingly making false statements that Bridgecorp had never missed interest payments to investors, or repayments of principal in offer documents.

Investors were misled because they were not informed payments were missed from February 7, 2007, the Crown said. "Disclosures of such defaults should have been advised to the investing public. It would have accurately forecast to the public that the companies were facing imminent failure," Mr Dickey said.

The court also heard yesterday that Bridgecorp staff were instructed by senior management, including either Petricevic or Roest, to lie if investors contacted them asking where the payments were.

If Urwin and Steigrad were not aware that the company was missing payments, Mr Dickey said they should have been.

After the defence's opening statement in November, the Crown is to present nearly 40 witnesses.