Capital + Merchant directors face SFO charges

Thursday 9th December 2010 2 Comments

The Serious Fraud Office (SFO) has arrested one current and one former director of Capital + Merchant Finance.

Neal Nicholls and Wayne Douglas face six charges under the Crimes Act involving nearly $14.5 million in loans made between 2002 and 2004 to three companies that converted two Palmerston North high rise office blocks into student accommodation.

When C+MF was placed into receivership in November 2007 the company owed $167.1 million to approximately 7,000 investors.

The SFO alleges that as directors of C+MF Nicholls and Douglas held investors' funds subject to a special relationship with investors, and that they used their position to apply those funds in a manner "inconsistent with that relationship."

SFO chief executive Adam Feeley said the charges relate to one set of transactions and that the SFO "is continuing to investigate a number of other transactions that are of concern to us."

Nicholls and Douglas have been remanded on bail and will next appear on December 16.

The SFO began its investigation in March 2010 after a complaint from C+MF receivers Grant Thornton.

The SFO has now laid serious Crime Act charges against persons involved with a number of finance companies including National Finance, Bridgecorp, Five Star Finance and Capital + Merchant.

"The confidence and financial security of New Zealand investors will not be restored without thorough and timely investigations into all of these companies and, where appropriate, serious criminal charges will need to be laid," Feeley said.

Comments from our readers

On 9 December 2010 at 3:41 pm Rolf Booker said:

It is essential for the Serious Fraud Office to lay charges against those finance company directors that misbehaved in order to to restore some degree of confidence. Unfortunately the horse has bolted. New Zealanders will shy away from finance companies for the next 20 years, just as investors still have not returned to the sharemarket after the excesses of the late 1980s. Where will developers borrow their money now?

On 10 December 2010 at 9:02 am Arty said:

Here is the point, why would you lend a stranger your savings without knowing you can sell an asset worth at least the value of the loan, if they cannot pay? If the security is weak, why lend at all, even if the rate is very high. Banks which appear the safest bet, for example only lend out with rock solid security, but on the other hand money taken from savers is by and large unsecured and at a low low rate. The other issue is people must learn what the jargon means and in what context it is used. A meaningful 3 to 5 page explanatory document setting out the borrowers position would serve better than the small book full of marketing hype interlaced with terms and assumptions that confuse a true position (of the finance co's) The base cause was upward ratcheting property values when incomes are low. Can only mean we borrowed heavily. Helen Clarke proudly said at the last election she won, that NewZealanders were feeling wealthier, due to the increase in values of property, meaning we had not earnt more merely borrowed and spent more than we earned. Was our financial chaos partly Cullen & Clarke management, they cleared out. Trust no bugger, a very wise and wealthy person said to me years ago