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Regulator files criminal charges against director of Capital + Merchant Finance

Friday 19th March 2010

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Directors of failed finance company Capital + Merchant Finance have had criminal charges laid against them by the Securities Commission.

New Zealand’s investments’ regulator has also issued civil proceedings against Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland. Criminal charges only have been laid against Wayne Douglas, who resigned as a director in February 2007.

The proceedings follow extensive commission investigations since the firm went into receivership on November 23, 2007, owing about $167 million to more than 7,000 investors. According to receivers Grant Thornton, who yesterday advised the Commission that there had been transactions that appear to have benefitted “certain related parties”, it is unlikely that any of this money will be recovered.

“The Commission alleges that Capital + Merchant Finance’s offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to related party lending, insurance cover and liquidity,” Commission chairman Jane Diplock said.

C+MF’s registered prospectus and investment statement dated September10, 2007, made untrue statements about liquidity and cashflow, and incorrectly stated that no loans were impaired and that the company’s financial position had not materially and adversely changed since the last balance date, the Commission alleges.

Additionally, five 2007 advertisements made untrue statements about insurance cover for capital secured debenture stock. These claims don’t apply to Douglas, who had resigned his directorship by then.

The Commission further charges that it was knowingly misled by Nicholls and Ryan.

The first court appearances are scheduled for April 8, with criminal charges carrying a maximum penalty of five years imprisonment or fines up to $300,000. The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the current four directors.

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