Finance company directors swear they will defend charges

Terry and Ann Butler and their fellow directors face up to five years' jail or fines of up to $300,000. Photo / Amos Chapple

Major shareholder and director Terry Butler says he and the five other directors of Dominion Finance Group and sister company North South Finance will "strenuously" defend criminal and civil charges laid against them by the Securities Commission.

The commission yesterday announced it had taken proceedings against Butler, his wife, Ann, former chairman Richard (Rick) Bettle, Paul Forsyth, Robert Barry Whale and Vance Arkinstall over allegations both companies' offer documents and advertisements misled investors.

Dominion was placed into receivership in September 2008 owing $176.9 million to around 5900 investors. Receivers expect less than 25c in the dollar to be paid back. North South Finance went into moratorium in December 2008.

So far, the company has paid back about $54 million of the $102 million owed to investors.

Chairwoman Jane Diplock said the commission alleged Dominion misled investors by misrepresenting the investment risks, especially in relation to related party transactions, lending standards, loan quality and impairment, liquidity and the overall financial position.

It also alleges North South Finance's offer documents and advertisements misled investors in relation to related party transactions, liquidity and the company's overall financial position.

More specifically, the commission alleges the directors made false statements in Dominion's prospectus dated September 13, 2007, and amended by an extension certificate on December 20, 2007, and a North South Finance prospectus dated September 11, 2007, and amended by an extension certificate on December 20, 2007.

Both extension certificates stated the company's financial positions had not materially and adversely changed since the company's last balance date and that the prospectus was not misleading by failing to properly refer to adverse circumstances. However, the commission alleges this was false and that the directors' statements misled investors.

In addition, the commission alleges a quarterly newsletter of Dominion and a letter to the investors of both Dominion and North South Finance distributed during 2008 contained similar untrue statements about the financial position of the companies.

Butler, a fomer chief executive and a major shareholder of parent company Dominion Finance Holdings, said all the directors felt the same way about the charges. "It will be strenuously defended."

He said he would not comment further because it was before the court.

No date had been set for the case and Butler said he expected it to be some time away.

The directors face up to five years' imprisonment or fines of up to $300,000 for the criminal charges which the commission laid under section 58 of the Securities Act on June 4 at the Auckland District Court.

Under the civil proceedings the commission has applied for declarations of civil liability and civil pecuniary penalty orders of up to $500,000 against each of the directors.

Diplock said its main purpose for making the applications was to allow compensation to be claimed by either the commission or investors for those who invested under the September 2007 prospectuses. "The commission will consider pursuing compensation claims in due course should it be in the public interest to do so."

Investors can also take their own civil compensation proceedings whether the commission does so or not. The civil proceedings were filed on June 3 in the High Court at Auckland and were issued under section 55C of the Securities Act.

Investigations were also continuing into Dominion Finance Group, North South Finance and their parent company Dominion Finance Holdings, which remains on the New Zealand stock exchange but is in liquidation.

Terry and Ann Butler took over running Dominion Finance Holdings in 1987 and 1990 respectively.

The couple floated the company in June 2004 and listed it on the New Zealand stock exchange.

Dominion bought North South in 2005 for around $40 million. All directors bar Arkinstall and Bettle own large shares in the holding company.

Arkinstall is the chief executive of industry body the Investment Savings and Insurance Association, while Bettle is a past president of the Institute of Directors and a current director of the listed Goodman Property Trust and Diligent Board Member Services.

Shareholders in Dominion Finance Holdings also include South Canterbury Finance, Allan Hubbard's investment company Hubbard Churcher Trust Management and the Accident Compensation Corporation.