Ministry's solicitor noted suspicions in email ahead of document's registration
An email sent by a solicitor to a staff member of the Ministry of Economic Development referred to Bridgecorp's prospectus as "Enronish" before it was approved for registration, the Auckland District Court heard yesterday.
The reference to the failed US energy company came on the final day of a long-running
depositions hearing to determine whether Bridgecorp's directors will stand trial.
After weeks of hearings and intervals, the company's five former directors, Bruce Davidson, Rod Petricevic, Rob Roest, Gary Urwin and Peter Steigrad have been committed to trial.
All the directors entered not guilty pleas.
Their trial will begin at the end of June in the High Court at Auckland.
The directors each face 10 Securities Act charges relating to their roles in issuing a prospectus.
The prosecution alleges the directors lied to prospective investors in Bridgecorp's term investment prospectus, registered on December 21, 2006, in an investment statement and advertisement.
It is alleged Bridgecorp said it would only lend in accordance with good commercial practice and that it had never missed an interest payment.
MED manager of securities and corporate compliance John McPherson said he had "flicked" through Bridgecorp's end-of-year prospectus of 2006 but did not sit down in detail to examine its content or whether the document complied with the disclosure requirements of the Securities Act.
Instead, that job was passed down to a less senior member of staff.
McPherson said he did take an interest in Bridgecorp's accounts, as the company was one of the first (in New Zealand) to adopt the International Financial Reporting Standards.
He said the MED's solicitor Ian Ramsay raised "residual suspicions" about whether Barcroft - a company Bridgecorp loaned money to - should be disclosed as a related party in the company's prospectus.
In an email to McPherson he referred to the relationship between the two entities as "it seems all very Enronish" in reference to the collapse of the US electricity giant Enron and the cover-up of debts in its financial statements.
Ramsay also wrote to McPherson saying the registration of the prospectus "will come back to bite us in the bum".
Petricevic's lawyer Paul Davison, QC, questioned why, if such suspicion had been raised, the prospectus was registered.
Davison said under the Securities Act a prospectus must not be registered if it contains false or misleading information.
McPherson said apart from those residual suspicions there was not enough evidence not to register the prospectus, and documents that have been reviewed by major firms received less attention than documents from "Tauranga and Nelson".
Davison questioned McPherson where "suspicion sat on the hierarchy of concern" and whether prospectuses were rejected if they did not meet the compliance standards.
McPherson said that had happened with another company last week, and that in theory every prospectus is rejected if the information contained in it is not correct.
When Bridgecorp collapsed in July 2007 it owed $459 million to 14,500 debenture holders.
The company was placed into receivership by Covenant Trustee following a breach of its trust deed.
The directors told PricewaterhouseCoopers it was in the debenture holders' best interest that Bridgecorp be placed into receivership.
If the directors are convicted they face a maximum penalty of five years imprisonment or fines of up to $300,000.
Petricevic and Roest have been banned from directing or managing a company for five years from May 29, 2009.