Bridgecorp heads 'discussed default excuses'

(L- R) Former Bridgecorp directors Rod Petricevic and Robert Roest. Photo / Brett Phibbs

Meeting held to decide what to tell investors after first payments missed, says former general manager.

When failed finance firm Bridgecorp first began missing investor payments a meeting discussing possible excuses was held in Rod Petricevic's office, a court heard yesterday.

Petricevic and fellow Bridgecorp directors Rob Roest and Peter Steigrad are standing trial in the High Court at Auckland after pleading not guilty to making untrue statements in company prospectuses and offer documents.

Former Bridgecorp general manager Mike Jeffcoat, appearing as a Crown witness yesterday, said the firm was suffering cashflow problems in February 2007 - the month it began missing investor payments.

The cashflow issues meant it was a problem "to pay depositors their interest and principal because [the company] didn't have sufficient funds in the bank to do so", he said.

After the company first missed payments on February 7, a meeting was held to discuss what to tell investors, Jeffcoat said.

"There was a meeting in Rod Petricevic's office between myself, Rob Roest, Chris Todd regarding what we would tell investors.

"If an investor rang looking for their repayments, the explanation would have been that it was a computer glitch or a delay in the system."

Another Crown witness and a former Bridgecorp employee, Kevin Stephens, gave testimony in November that Petricevic and Roest were present at meetings from May 2007 discussing late investor payments.

Petricevic's lawyer, Charles Cato, said in his opening statements last year that his client was not aware of the defaults until a board meeting shortly before the Bridgecorp companies went into receivership in July 2007, owing $459 million to investors.

In evidence given earlier this week, former Bridgecorp counsel Jo Wong claimed she talked to both Petricevic and Roest in April 2007 about Bridgecorp missing a run of interest payments. Wong was concerned because Bridgecorp's public offer documents, which she had helped to prepare, said the company had never missed a payment.

"It was after the [March 2007] payment run was not made, I can't remember the exact date ... we generally discussed that there was a statement in the prospectus that payments had never been missed," she said.

Roest expressed the view that because Bridgecorp caught up on the payments, they were delayed rather than missed, she said.

In cross-examination yesterday, Cato suggested Wong could have discussed the matter with Petricevic in June of that year.

"No my memory is clear on that, in that it [was] in April," Wong replied.

She said she remembered the situation clearly because it made her so uncomfortable she "couldn't sleep at night".

Although Cato asserted there was no discussion about the wording of the Bridgecorp prospectus, Wong stuck to her guns and said she recalled the conversation.

The three directors on trial face 10 Securities Act charges while Petricevic and Roest face an additional eight charges of knowingly making false statements in offer documents that Bridgecorp had never missed interest payments to investors, or repayments of principal.

Former Bridgecorp director Gary Urwin originally pleaded not guilty and appeared in court, but he changed his plea in November and is awaiting sentencing in April.

The charges carry a maximum penalty of five years in jail or a fine of up to $300,000.

Former Bridgecorp chairman Bruce Davidson was sentenced to nine months' home detention in October after he changed his plea to guilty.

He was also ordered to pay reparations of $500,000 and perform 200 hours' community work.