Fraudster Pickett faces jail term

A quarter-century of business failures costing tens of millions of dollars was uncovered after a meltdown in the finance industry forced Waipawa accountant Warren Pickett to reveal his fraud.
Pickett, 63, appeared in the Napier District Court yesterday and pleaded guilty to eight charges of fraud with the most serious charges dating back as far as 1987 and carrying sentences of up to 10 years.
Judge Bridget Mackintosh rejected an application for bail on health and family grounds by defence counsel Jonathan Krebs and remanded Pickett in custody for sentencing on May 29.
Charges relate to his role as sole director and principal in Waipawa Holdings and Waipawa Finance, with three charges he had misappropriated funds totalling more than $3.7 million.
The two companies went into liquidation last August, owing 220 investors about $20 million, including accumulated interest of about $12 million.
According to a summary of facts, Pickett never advertised the services of his financial companies but relied on friends and acquaintances who heard about them through word of mouth.
Those people trusted Pickett as a respected member of the Waipawa community, a marriage celebrant and justice of the peace as well as a trustee of a number of family trusts.
His fraud started after a business venture in the foreign currency market failed in 1984.
The Serious Fraud Office said: "The defendant has stated that he began to take money from the finance companies to cover losses in business ventures that ultimately failed many years ago.
"He also admitted taking money to fund personal expenditure."
Pickett used some of the money to buy two properties, and for home renovations, repayment of loans, purchase of vehicles, life insurance premiums and general living expenses.
He operated his companies by paying investors their interest and withdrawals using new deposits received.
He admitted to the SFO he used deceptive accounting practices such as creating advance accounts under fictitious entities to conceal the funds he was stealing. He also said he never gave any specific information to investors.
"Some people did ask and I would be quite vague," he told the SFO. "I'd just say that it was in a wide range of investments, primarily to people that I've come across in my business career who I believed would be in a position to repay the funds."
He never provided investors with a prospectus or any investment statements as required under the Securities Act.
In a March 2008 letter to investors, he offered an interest rate increase from 10 per cent to 11 per cent to retain current deposits and attract more money.
Investors, nervous about problems in the finance industry with several finance companies failing, were increasingly asking to withdraw their funds.
"He increased the interest rate to retain current deposits and to attract more money into the finance companies because he could see that he would not be able to fund the amount of withdrawals if they continued," the SFO said.
In August 2008, he admitted the fraud to the SFO.
Mr Krebs applied for bail for his client, opposed by SFO prosecutor Anita Killeen, and said Pickett's daughter was coming from Australia for a family reunion over Easter. Pickett also had a medical condition, reactive depressive disorder, that would be better treated with him staying in the community.
But Judge Mackintosh rejected the application and said Pickett had pleaded guilty to serious charges and faced a term of imprisonment.