Kelt hit' by alleged SCF fraud

Hawke's Bay merchant banker Sam Kelt says keeping quiet about an alleged $10 million fraud committed against Kelt Finance by South Canterbury Finance (SCF) damaged his business.

The Serious Fraud Office (SFO) this week laid 21 charges involving $1.7 billion against five people involved in SCF, including charges relating to Kelt Finance.

"It has been extraordinarily damaging, and keeping quiet didn't help me but it helped them [SFO] and in the greater scheme of things that's more important," Mr Kelt said.

Kelt Finance was 75 per cent owned by Southbury Group, a subsidiary of SCF.

Mr Kelt said a loan for $10 million from Kelt Finance to Southbury Group appeared on Kelt Finance's books in October 2009. "The documents effectively transferred a loan that he [Alan Hubbard, SCF chairman] had himself with Southbury Group and turned it into a loan with Kelt Finance and put it on the Kelt Finance books."

The loan was a surprise to, and a violation of, the good relationship Mr Kelt had enjoyed with SCF up to that time, he said.

No money changed hands and no such loan ever took place, he said. "SCF was attempting to hide related-party loans."

Such loans are limited by the Crown retail deposit guarantee scheme.

The loan was authorised by Mr Hubbard, who claimed he had signed the documents without reading them.

Mr Kelt ended the venture with SCF's Southbury Group.

"When the SFO announced it was investigating SCF, I immediately contacted the SFO and informed them of this transaction and provided information around it. I have been working with them for most of this year to try and sort it out."

The $1.7 billion fraud charges involving SFC are expected to allege the company duped Treasury when it applied for admission to the Crown retail deposit guarantee scheme, the Serious Fraud Office has indicated.

When SFC collapsed last year, the Government was left with a $1.7 billion bill under the scheme.

An SFO spokesman said Kelt Finance was regarded as the victim of the alleged fraud.

Mr Kelt said his core business, Kelt Capital, was doing "extraordinarily well" and he had moved on.

"I'm not bitter and twisted - I try to be balanced." patrick.osullivan@hbtoday.co.nz