Glenda Wynyard's company was caught in a commercial tug of war between lender Marac and another media agency on "the doorstep of Christmas in the middle of the global financial crisis", her lawyer has told the Auckland District Court.
"What she did was right and she never considered she was acting dishonestly," Wynyard's lawyer Rachael Reed said today.
Wynyard this morning pleaded not guilty to 2 counts of causing loss by deception, 7 counts of theft by a person in a special relationship, and 4 counts of dishonestly using a document.
Wynyard is a former director of The Media Counsel, an agency set up in 2005 that provided media placement, planning, public relations and event management services.
It was placed into liquidation in 2010 and before this employed 24 staff.
Her Serious Fraud Office trial, before Judge Brooke Gibson without a jury in the Auckland District Court, is expected to take around four weeks.
Wynyard, according to the Crown, deceived a company she had an agreement with and diverted $2.2 million due to it to pay another firm owed money.
This was allegedly done to save her failing business, which the Crown claims she relied on drawings from to support her lifestyle.
The Media Counsel (TMC) was paid by clients to place ads with organisations like TVNZ.
These placement companies can be accredited and to receive such a designation with the likes of the Print Media Accreditation Authority, an ad company needs to meet certain financial requirements, Crown lawyer Dale La Hood said this morning.
One such requirement was that tangible assets were 25 per cent more than liabilities, he said.
In March 2008 TMC applied for a $1.3 million short term overdraft to achieve that ratio but the funds showed up in the media organisation's books as being an asset without a corresponding liability, La Hood said.
The facility was repaid on the first of April and without it, the company would not meet the ratio required for accreditation and maintain it, La Hood said.
TMC's application that said it met the asset to liability ratio and it would be maintained is "simply untrue", the Crown said in opening.
When the firm lost its accreditation due to its inability to meet PMAA's rules in mid 2009, it order to keep operating it entered into a "place-through" agreement with another placement organisation, Aegis.
La Hood said that TMC would get client instructions to place the ads, Aegis would place the ad and TMC would get a cut after everything was paid for.
But the Crown says that TMC did not inform Aegis of a pre-existing arrangement it had with Marac Finance.
This arrangement, La Hood said, involved Marac lending money to TMC based on invoices issued to ad clients that the financier considered to be of good credit risk. Under the deal, TMC would get cash and the amounts in the invoices would be payable to Marac.
La Hood said that from November 2009 to January 2010, about $2.2 million of the amount invoiced by Aegis was paid to Marac instead of the placement firm.
The Crown alleges that Wynyard provide untrue explanations as to why some clients were to pay Marac and not Aegis.
"The accused deliberately hid from, and lied to, Aegis about the fact she was taking those steps...the Crown case is that was all done in a desperate attempt to save her failing business," the Crown lawyer said in his opening.
Wynyard relied on drawings from TMC to support her lifestyle, La Hood said.
"The demise of the business was going to have substantial personal consequences for her," he said.
The Crown argues those consequences motivated the accused to mislead Aegis about her relationship with Marac.
In her defence opening today, Reed said TMC's informal relationship was with Carat, an ad company owned by Aegis.
TMC did all the work for booking clients ads and Carat took a one per cent fee of total media costs, Reed said.
Carat knew TMC was under financial pressure, Reed said, and about the agreement with Marac.
Reed said a cash flow crisis emerged on the eve of Christmas 2009 with TMC's debtors seeking to delay payment until after the New Year.
Marac calling up a security agreement in mid-December of that year prompted a "commercial tug of war between Marac and Carat with TMC and its clients stuck in the middle".
Reed said money was flowing in all directions and in a confused and pressured environment, her client did not intend to deceive Carat as the Crown alleged.
"She did what she thought was right," said Reed, who added that Wynyard lost everything when the company collapsed and was bankrupted.
Reed rubbished the suggestion that Wynyard was motivated by her drawing down funds from the company when it was in financial trouble.
"That suggestion is unreliable," Reed said,
The Crown was seeking to elevate this case to one where s Wynyard paid one creditor instead of another into "something more sinister indeed".