SFO closes investigation into Mutual Finance/Viaduct Capital

SFO closes investigation into Mutual Finance & Viaduct Capital

The Serious Fraud Office (SFO) announced today that it has concluded its investigation into Mutual Finance Limited and related company, Viaduct Capital Limited.

The SFO said the initial investigation has found insufficient evidence of fraud to warrant the use of its full investigative powers under Part 2 of the Serious Fraud Office Act.

SFO Chief Executive, Adam Feeley, said “The allegations against Mutual Finance and its associated companies do not currently identify sufficient evidence of fraud. However, some information discovered has raised concerns which we believe are best considered by the Financial Markets Authority (FMA).”

Mr Feeley said that the SFO would consider reopening the investigation if further evidence came to light, and in the meantime it would give the FMA whatever assistance it could.

Mutual Finance provided property finance, business finance and consumer finance to customers, but collapsed in July 2010 owing approximately 450 investors an estimated $17 million. Related property financier, Viaduct Capital, was put into receivership in May 2010 owing 110 depositors $7.8 million.

The SFO commenced its investigation into Mutual Finance in December 2010 following information passed on by the company’s receiver, the Ministry of Economic Development and the Securities Commission (now FMA).

Notes to editors

1. Role of the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO operates three investigative teams:

• Fraud Detection & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.

The SFO operates under two sets of investigative powers.

Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”

Part 2 of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”

The SFO’s Statement of Intent 2011-2014 sets out the SFO’s three year strategic goals and performance standards. It is available online at: www.sfo.govt.nz
2. Background to Investigation
Mutual Finance Limited was incorporated in 1997 It provided financial and lending services for property, business and consumers in the Auckland region. The company also issued debt securities to the public.
In July 2010, Mutual Finance was placed into receivership owing approximately 450 members of the public were around $17 million. Mutual Finance Limited was a participant in the Crown Retail Deposit Guarantee Scheme and $16.6 million of those losses has been paid out under that guarantee.
After considering information obtained by the SFO from the receiver and the National Enforcement Unit of the Ministry of Economic Development, the Director determined that there was reason to suspect that an investigation into the affairs of Mutual Finance Limited and related companies may disclose serious or complex fraud.
An investigation was commenced on 23 December 2010.

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