Fraud office defends difficult prosecution as SCF chiefs acquitted

Edward Sullivan.

The Serious Fraud Office is defending its decision to bring charges against three former South Canterbury Finance heads after two of the trio were acquitted yesterday.

Former South Canterbury Finance (SCF) chief executive Lachie McLeod, 50, and former director, accountant Robert White, 70, were found not guilty on all charges by Justice Paul Heath after a long and complex trial.

The pair are now considering legal action against the Serious Fraud Office (SFO) for bringing the charges.

Former director, lawyer Edward Sullivan, 72, was found guilty on five of nine charges, including making false statements and misuse of a document for pecuniary advantage.

The SFO's director, Julie Read, referred to the difficulties in bringing a case of this nature before the court. "This was a difficult and complex prosecution," she said.

"While the SFO was unsuccessful in part, given the scale of the collapse and the impact it had on investors, it was clearly in the public interest to put all matters before the court."

Mr McLeod's defence counsel, Jonathan Eaton, hinted at the possibility of legal action against the SFO for bringing the charges. He said they would first study the lengthy judgment and dissect the transactions.

"We've always said there were serious failings in the investigation and the quality of the evidence, and no doubt that will be formally visited at some later stage," Mr Eaton said.

"At the heart of the allegations was this suggestion there was this culture of concealment at South Canterbury, allegations of dishonesty, which are very serious allegations to make against anybody, and the judge as you've heard has roundly rejected those allegations."

Mr White said he held "no animosity at all" to anyone involved but refused to comment on whether the charges should have been laid in the first place.

Justice Heath said that as the global financial crisis began to bite, SCF reacted in a "knee-jerk fashion" rather than a coherent fashion. The firm showed a "less than orthodox approach" to debt impairment, the judge said.

SCF grew from $75 million in 2004 to nearly $2 billion in 2008, the court was told. But the judge said its governance structure proved "inadequate" to cope with the growth.

"It was common practice ... to acquire loans that were not performing before balance date then sell them back. As a result, the true state of the accounts was not properly reported back to investors," Justice Heath said in his summary.

Sullivan will be sentenced on December 12.

As he left the courthouse yesterday, he was determined to make no comment to waiting reporters. Clearly angered, he put his head down and charged towards a Herald photographer. After being advised to calm down by his wife and son, a red-faced Sullivan tried to rush the photographer again -- only to be held back by his son. He crossed the road and was bundled into a car and left.

Justice Heath said he would call for home detention reports but told Sullivan that was not an indication that he would avoid jail.

Mr White and Mr McLeod shook Sullivan's hand as they were free to leave the dock. APNZ