An Auckland company director created a fictitious accountant to liquidate his business to avoid paying $60,000 owed to its lawyer.

Terry Hay has fled the country but his business partner, Lynne Pryor, 45, has pleaded guilty to one charge of carrying on business fraudulently after an investigation by the national enforcement unit of the Ministry of Economic Development.

The hoax dates back to May 2006 when Fresh Prepared - the company Pryor was the sole shareholder of - won a civil court case but ended up owing a legal bill of $63,661 to barristers Clayton Luke and Richard Harrison.

After not being paid for several months, solicitor Mr Hickson filed a notice to the High Court at Auckland to put the company into liquidation.

To stop the court action, Fresh Prepared director Terry Hay removed Pryor as a shareholder on the Companies Office register and replaced her with "Sanjay Patel".

Before the liquidation hearing could occur, "Babubhai Patel" and Mr Hay filed for voluntary liquidation with the Companies Office. The letter was signed by a liquidator called "B. Patel" of Patel and Patel, appointed by a special meeting of shareholders in January 2007.

Unable to track down this mysterious liquidator "Babubhai Patel" to stake his claim for the debt, Mr Hickson hired a private investigator, who was also unable to locate him.

The barrister then filed civil action against Fresh Prepared in the High Court in May 2007, claiming the appointment of Patel was a sham.

In his ruling, Associate Judge Jeremy Doogue said there was "a serious question as to whether or not Mr B. Patel actually exists and whether the entity 'Patel and Patel' to which he belongs is a fictitious organisation".

Two months later, an affidavit filed to the High Court in the name of "Babubhai Patel" affirmed he was the liquidator for Fresh Prepared - this affidavit was later found by ministry investigators on the computer of Mr Hay.

Pryor and Hay continued operating Fresh Prepared under the name Salad Foods so a complaint was then lodged with the Serious Fraud Office. The file was forwarded to the Ministry of Economic Development, where investigator Phil Day picked up the case.

Now the head of the ministry's national enforcement unit, Mr Day visited the Pukekohe address listed for Babubhai Patel but no one there had heard of him.

He then checked Companies Office records, which showed Pryor had resigned as director in November 2006, replaced that same day by Sanjay Patel of Onehunga. No one at that address had heard of him.

Babubhai Patel filed a final liquidator report in November 2007 - purportedly from Shanghai, China - saying creditors would receive none of the $100,000 owed to them. The China address is listed on Google as a shopping mall and Patel and Patel is listed at an address in Mumbai, India.

The ministry seized hundreds of documents and several computer hard drives from Pryor and Hay. Charges were laid against Pryor and an arrest warrant issued for Hay. He fled overseas and is believed to be in Hawaii.

Pryor faces a maximum sentence of five years in prison or a maximum fine of $200,000.

* A company owed a lawyer more than $60,000 for a legal bill.
* It arranged for its own liquidation through a mystery liquidator called "Babubhai Patel".
* Investigators could find no trace of "Babubhai Patel" and suspected there was no such person.
* The last letter from "Babubhai Patel" saying the company had no funds left was supposedly sent from a shopping mall in China.