High Court hears of $100m Bridgecorp loan

(L- R) Former Bridgecorp directors Rod Petricevic, Robert Roest and Gary Urwin. Photo / Brett Phibbs

A $100 million transaction between Bridgecorp and a company described as its "piggybank" was at worst "a concerted effort" to mislead investors and at best "appallingly poor management", the High Court heard yesterday.

The trial of three Bridgecorp directors - Rod Petricevic, Rob Roest and Peter Steigrad - continued in Auckland yesterday with forensic accountant David Crichton appearing as an expert witness for the Crown.

The trio face 10 Securities Act charges and are accused of misleading investors in Bridgecorp prospectuses dated December 21, 2006. Chrichton told the court that Bridgecorp's failure to disclose the "Barcroft transaction" as a related-party deal represented "a material misstatement in the prospectus".

The transaction involved the sale of loans from Bridgecorp to Barcroft Holdings on June 30, 2006.

The amount Barcroft owed Bridgecorp was originally around $80 million but grew to more than $100 million before the latter company collapsed, owing 14,500 investors $459 million.

Barcroft was listed as an unrelated company in the Bridgecorp prospectus.

Crichton said presenting the transaction as such made Bridgecorp "a more attractive option for potential investors" but concluded it "was definitely a related-party transaction and has therefore been inadequately disclosed within the financial statements". "In my view, at worst the [Barcroft] loan is a concerted effort by the directors to mislead investors and the trustees, at best the loan represents appallingly poor management. Either way there is clear evidence of a substantial misleading statement," Crichton said.

The Crown argues Bridgecorp used Barcroft as its "treasury or piggybank" and said the companies were closely linked.

Barcroft is alleged to have had covert ties with Bridgecorp director Gary Urwin through trusts, and through parent company BHL, a company which Bridgecorp exercised considerable control over.

Urwin originally pleaded not guilty and appeared in court with Petricevic, Roest and Steigrad.

But he changed his plea in November last year and is awaiting sentencing in April.

The charges carry a maximum penalty of five years in jail or a fine of up to $300,000.

As well as the Securities Act counts, Petricevic and Roest face eight charges of knowingly making false statements in offer documents that Bridgecorp had never missed interest payments to investors, or repayments of principal.

The directors on trial deny all the charges against them.