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Five Star Finance directors are being taking to court by the Companies Office, in the second criminal prosecution related to collapsed finance companies.
The Office today said it has laid criminal charges in the Auckland District Court against Marcus Macdonald, Anthony Bowden, Nicholas Kirk, the Directors of Five
Star Finance Limited and Five Star Debenture Nominee Limited.
"The charges relate to securities being offered and allotted to members of the public without there being a registered prospectus, investment statement or trustee appointed," said Registrar of Companies Neville Harris.
The men are due to appear in the Auckland District Court on August 4th 2008.
Their case will be the second cab off the rank of finance company criminal cases, as Bridgecorp founder Rod Petricevic and his fellow director Robert Roest are due to appear in the same court on July 29.
Those charges also relate to statements made in a prospectus, and in a directors' certificate," Bridgecorp's prospectus and its directors claimed the company had never missed an interest or principal payment.
If convicted on the Securities Act charges they face, Bridgecorp, Petricevic and Roest may be fined up to $300,000 while the Companies Act charges faced by Petricevic and Roest carry maximum fines of $200,000 or jail terms of up to five years.
Five Star Finance Limited went into receivership on the 5th of September 2007. Five Star Debenture Nominee Limited went into liquidation on the 5th of November 2007.
In December last year it was revealed that many of failed finance company Five Star Consumer Finance's large commercial loans were either improperly secured or completely unsecured, the company's receivers have found.
In his third report on the company, receiver Richard Agnew of PricewaterhouseCoopers confirmed that most loans in Five Star's commercial book, which accounted for $41 million of the company's $65 million in lending, were made "outside normal commercial lending practices".
"Furthermore, as a result of now having analysed each loan, we can confirm that many of the loans were made without security, or were made without satisfactory security."
Agnew said that many of the loans were made to parties related to Five Star Consumer Finance by way of common directors.
Five Star Consumer Finance's last prospectus indicated to investors that its main area of lending was secured consumer finance. Agnew found the company's 9200 consumer loans made up less than a third of its total book.
Furthermore the prospectus indicates that all the company's loans were secured. In December Agnew said that was clearly at odds with what he'd found.
"We are conscious of not only what we have discovered in relation to the commercial loan book, but also of a number of concerns raised by investors and other parties in respect of the activities of the companies prior to the receiverships."
The charges
The Directors of Five Star Finance Limited (in receivership and liquidation), and the Directors of Five Star Debenture Nominee Limited (in liquidation) are charged with offering and allotting debenture stock to members of the public without having a registered prospectus or investment statement.
Penalties
If convicted on these Securities Act charges, the Five Star directors and promoters are liable to a fine not exceeding $300,000.
HERALD STAFF