Two Dominion Finance bosses appeared in the High Court at Auckland yesterday, with one being sentenced to two years and seven months in prison and the other pleading guilty to misleading investors.
Former Dominion chief executive Paul William Cropp, 50, was found guilty last month on four charges of theft by a person in a special relationship.
The Serious Fraud Office, which brought the proceedings against Cropp, argued he knowingly and deliberately breached the requirements of Dominion's debenture trust deed or that of its sister company, North South Finance.
A debenture trust deed dictates the terms and conditions between debenture holders (investors) and the company accepting the funds.
The SFO said Cropp caused or assisted Dominion or North South to make loans worth millions of dollars - without trustee consent - to related parties.
In some of these transactions, funds were transferred from North South to Dominion when the latter was struggling with liquidity issues. In the end, both companies collapsed as part of the wave of finance firms that folded after 2007.
When sentencing Cropp yesterday, Justice Graham Lang said he was required to issue a deterrent for this type of offending.
That being said, the judge said Cropp's actions were not motivated by personal gain.
"I am satisfied and indeed the Crown accepted you did not seek to line your own pockets with investors' funds," he said.
"I am satisfied your motivation was aimed at having Dominion remain afloat."
The judge said an appropriate sentencing starting point was three years and four months in prison. In mitigation, he said it was clear Cropp had an "impeccable record" and gave him a discount of six months for his previous good character and three months for remorse.
Earlier yesterday, Dominion Finance director Robert Barry Whale pleaded guilty to misleading investors in a separate case brought by the Financial Markets Authority.
Whale, 65, had faced SFO charges alongside Cropp but was found not guilty in that case.
Justice Sarah Katz yesterday convicted Whale on seven Securities Act charges brought by the FMA that related to untrue statements in Dominion and North South offer documents.
He is due to be sentenced on June 14.
• Dominion Finance Group and North South Finance were sister companies and operating subsidiaries of the NZX-listed Dominion Finance Holdings.
• Both offered property and commercial loans.
• North South went into receivership in July 2010 owing $31 million to 3900 debenture holders, who are expected to get back between 65c and 70c in the dollar.
• DFG went into receivership in September 2008 owing almost 6000 investors a total of $176.9 million.
• Receivers estimate that debenture holders will recover between 10c and 25c in the dollar.