Two directors of the failed Nathans Finance company are seeking bail pending an appeal of their prison sentences handed down by the High Court in Auckland today.

Kenneth (Roger) Moses and Mervyn Doolan were both sentenced to terms of imprisonment by Justice Heath, while one of their colleagues will serve a term of home detention.

The case is due in court next week.

Company chairman Moses was sent to jail for two years and two months and ordered to pay $425,000 in reparations while director Doolan was sentenced to two years and four months jail time, with reparations of $150,000.


Donald Young, considered by Justice Heath to have been the least culpable of the four directors, was sentenced to nine months home detention, plus 300 hours of community work and ordered to pay reparations of $310,000.

Moses, Doolan and Donald Young were found guilty on five charges of breaching the Securities Act in July after a marathon 12 week High Court trial in the High Court at Auckland earlier this year.

Financial Markets Authority chief executive Sean Hughes said the sentencings sent a clear message that the courts regarded untrue statements in issuers' offer documents as a serious breach of the law.

"The guilty verdict in this case, and the penalties imposed, show financial markets participants can expect to be held accountable for their conduct," Mr Hughes said.

Nathans was placed into receivership in August 2007, owing more than 7000 investors $174 million.

While found guilty on five charges, the men were acquitted on one other.

In sentencing the men today, Justice Heath said their offending did not involve any element of dishonesty, rather the performance of directors was inept.

It was far below the standard any investor would expect, he said.

Justice Heath said it directly caused massive financial loss to investors with consequences for their health.


Speaking about the reparations, he said it should be regarded as a sentence in itself. He said it should not be seen "as a way to buy someone out of a prison sentence".

Crown lawyer Colin Carruthers, QC, this morning argued that the starting point for sentencing should be four-year jail terms. Lawyers for the directors told the court that sentences of home detention would be more appropriate.

Carrithers said the directors had painted a picture of a finance company in good financial health but there was "a stark contrast between what was said and what the true picture was."

Roger Moses earlier offered reparation of $425,000, while his lawyer acknowledged that this was "a small sum" in contrast to the extent of losses suffered. Mervyn Doolan offered reparation of $150,000, which his lawyer Nathan Gedye said had been borrowed from family and friends. Bankruptcy was now "virtually inevitable", said Gedye.

During the trial, the directors defended allegations that the statements they issued concerning related party lending (to VTL), the quality of Nathans loan book, its loan management practices and its management of liquidity were untrue.

Nathans Finance was set up as an investment vehicle for VTL, a vending machine business.

Justice Heath earlier said the combination of statements and material omissions conveyed a false impression to investors about the true nature of Nathans' business, the actual state of its financial health and the risks of investment.

Former Nathans Finance director John Hotchin was excused from the trial after pleading guilty to breaching the Securities Act in February.

He avoided a jail sentence in part because he agreed to cooperate with the Crown and testify against his former colleagues.

He received 11 months home detention, a $200,000 fine and 200 hours of community service.

Nathans acquired funds from the public by offering debt security in the form of debenture stock.

Nathans was primarily set up as a subsidiary and funding vehicle for its parent company VTL - a vending machine business with operations in New Zealand, Australia, the United States and Europe.

When Nathans was placed into receivership in August 2007, owing more than 7000 investors $174 million. VTL suffered the same fate in November 2008.

The Crown said this case demonstrated the risks associated with related party lending from a subsidiary to its parent and its parent's interests.