A former staff member of failed finance company Bridgecorp has told the court she and her colleagues were told to lie to angry investors who had not been paid.
Katie Greengrass told the Auckland District Court that it was clear "investors were not being paid".
She said staff were told
to blame the lack of payment on a "banking glitch".
Greengrass was giving evidence at the depositions hearing against Bridgecorp directors, who each face 10 charges brought by the Securities Commission relating to issuing false prospectuses for the finance company that still owes 14,500 debenture holders $459 million.
Non-executive director Peter Steigard has already accepted there is a prima-facie case to answer.
Bridgecorp chairman Bruce Davidson, directors Cornelius Rob Roest, Rod Petricevic and non-executive director Gary Urwin are facing charges relating to their roles in the issuing of the prospectus.
Greengrass told the court this afternoon that when staff arrived back from their Christmas break in 2007, the phones were ringing.
She said her supervisor went into a meeting with Petricevic before addressing her and her colleagues saying: "OK, ladies, here's the line."
Greengrass said she told the colleague: "No more lies" and was sat down in a corner and given another job to do.
Under cross-examination by Petricevic's lawyer, Paul Davison QC, Greengrass confirmed that she had never seen her supervisor meet with Petricevic.
Securities Commission prosecutor Brian Dickey earlier told the court that Bridgecorp was "in a freefall of deteriorating circumstances" when it issued a prospectus containing false information.
He said Bridgecorp's bank balance fell from $13.3m in June 2006 to just $16,000 by May the following year.
Dickey said that had the prospectus contained an accurate picture of the financial situation of Bridgecorp, then it is unlikely they would have invested in the company.
Dickey outlined the dates where Bridgecorp missed payments totalling millions of dollars.
He said the Commission alleged that staff were lying to investors if investors called to complain about payments not being met.
He said investors were told about bank errors, computer errors and even company account errors if they complained when they did not receive due payment.
"There was preferential treatment given to those who complained the most," Dickey told the court.
"In February [2007], if you made a big fuss you might have gotten paid, if you didn't than you didn't [get paid]," he said.
Dickey said one staff member, in an email, wrote: "Maybe we could tell them we don't have any money".
He said the directors must have known that payments were not being met with the relatively small size of the company.
"It should have been red alert," Dickey said.
Dickey also outlined details surrounding a $100m loan that was included as a third party loan in the company's prospectus.
He said the loan was actually a "conduit", through a series of trusts, that lead back to Bridgecorp non-executive director Gary Urwin.
Dickey said the loan had no supporting documents including valuation and security documents and no credit review.
"The temptation when one is lending money to oneself is not to apply the rules," Dickey said.
He said the Bridgecorp model of business relied on the rollover of money. He said in July 2006 there was $13.9m re-invested but by December 2006, there was just $5.8m.
Dickey also compared the bank balance of Bridgecorp which at June, 2006, was $13.3m but by May the following year it had dropped to just $16,000.
"How a director could believe that it could continue when there is $16,000 in the bank is difficult to believe," Dickey said.
He said Bridgecorp at one point was borrowing money at 30 per cent interest to pay back money to investors who were expecting a 10 or 11 per cent return on their money. Dickey described the model as "profoundly uneconomic".
The Companies Office has banned Petricevic and Roest from running any company in New Zealand for five years.
Petricevic was bankrupted last year.
Bridgecorp directors Rod Petricevic (L) and Rob Roest at an earlier court appearance. Photo / Richard Robinson.
A former staff member of failed finance company Bridgecorp has told the court she and her colleagues were told to lie to angry investors who had not been paid.
Katie Greengrass told the Auckland District Court that it was clear "investors were not being paid".
She said staff were told
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