Bad publicity rains on Diligent's parade

By NZPA

Wednesday 12th December 2007

Diligent Board Member Services founder Brian Henry admitted his failure to be open about his past and that of his convicted fraudster brother, Gerald, "rained on his parade" at the company's public listing today.

Given Diligent's $24 million IPO was several times oversubscribed, the New York-based software firm made a disappointing debut on the NZX today, listing on its issue price of $1 and subsiding to 95 cents.

Following media revelations last week, Diligent had to issue a statement distancing itself from Gerald Henry, saying he had no interest in the company and was not employed by it.

Sources close to promoters, McDouall Stuart, estimated media revelations wiped over $10 million off the company's capitalisation which opened at $140m.

Gerald Henry floated Energycorp in the 1980s and after it crashed spectacularly was bankrupted in 1989 owing $55m. He fled to the United States where he was later jailed for four years in 1996 after he was found guilty of fraud charges totalling $US1.3m ($NZ1.7m).

The Sunday Star-Times revealed Brian Henry was also a director of EnergyCorp, which was notorious for its expensive cars for executives, a corporate jet and subsidiary companies that failed to deliver.

Diligent's promoters and directors, including director Mark Russell of law firm Buddle Findlay, knew of Brian Henry's connection with Energycorp, but decided not to disclose it. Coincidentally, Mr Russell in the 1980s worked for the Bank of New Zealand and helped wind up Energycorp.

Left out of the loop was NZX chief executive Mark Weldon, who invested much time and effort wooing the New York firm to list here.

Henry, who owns 20% of Diligent, said he got "a good telling off" from NZX and Weldon for the non-disclosure.

He told reporters at a function at NZX to mark the listing he had been been in touch with other shareholders "and they agreed this should have come out.

"In hindsight I should have said something about this, I really should have. I didn't think I had to. It was a mistake."

Henry said he made a "myriad of silly assumptions. I thought everybody knew about this and they didn't. It's unfortunate.

He is hoping the story will return to Diligent.

The company was about to release licensing figures showing sales in 2007 have been in line with the prospectus assumptions.

To back their prospectus projections, founding shareholders have agreed to forfeit up to 20% of their shareholding if licence fee projections are not met.

Diligent moved its software division to Christchurch from New York after the September 11, 2001 terrorist attacks.

The company's product is a web-based service which provides board members instant access to board papers via the internet.

Proceeds from the IPO will fund the international expansion of Diligent's sales drive.

Henry said ease of use and extremely strong security were the key selling points of the software.

Diligent is just the fourth IPO listing on NZX this year, excluding mutual funds.

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