Lawyer sentenced in South Canterbury case

12 December 2014

Lawyer sentenced in South Canterbury case

Former South Canterbury Finance Limited (South Canterbury) Director and Lawyer Edward Oral Sullivan has been sentenced in the High Court at Timaru today to 12 months’ home detention and 400 hours of community work.

Mr Sullivan’s sentence concludes the Serious Fraud Office (SFO) investigation and prosecution in respect to South Canterbury in which Mr Sullivan was found guilty on four charges of making a false statement by a promoter and one charge of obtaining by deception.

Mr Sullivan was acquitted on four other charges while former South Canterbury Chief Executive Lachie McLeod and former Director Robert Alexander White were acquitted on all charges including those relating to the Crown Retail Deposit Guarantee Scheme.

The majority of the charges related to specific transactions entered into by South Canterbury involving allegedly undisclosed related party lending.

The five month-long High Court trial concluded in Timaru in October following a 14 month-long investigation and the SFO Director, Julie Read, acknowledged today that it was a difficult and complex prosecution.

Ms Read said, “The SFO notes the sentence of 12 months’ home detention and 400 hours of community work imposed upon Mr Sullivan by His Honour Justice Heath today. We are presently considering the sentence and have no further comment at this stage.”

Background to investigation
South Canterbury Finance was New Zealand's largest locally owned finance company.

In 1926, South Canterbury Finance Ltd started business in the South Canterbury town of Timaru. It was then named South Canterbury Loan and Finance and it specialised in small personal loans. Allan Hubbard bought South Canterbury Finance (in the 60s). South Canterbury Finance eventually held a broad investment portfolio including commercial properties across New Zealand and abroad.

In November 2008, South Canterbury Finance was accepted into the New Zealand Deposit Guarantee Scheme.

In August 2009, South Canterbury Finance announced a net loss after tax of NZ$67.8 million for the year ended June 30, 2009 and reported that it had been in breach of lending covenants. It went into receivership in August 2010 and the Government paid $NZ1.6 billion to 35,000 investors under the Retail Deposit Guarantee Scheme.

In June 2010, Allan Hubbard stood down as Chairman of South Canterbury Finance.

The SFO commenced an investigation of South Canterbury Finance on 18 October 2010.

On 7 December 2011, the SFO laid 21 charges against five individuals in respect of South Canterbury Finance. The charges related to a variety of allegedly fraudulent transactions which have a total estimated value of approximately $1.7 billion.

The five accused were originally; former South Canterbury Finance chief executive Lachie McLeod, former South Canterbury Finance directors Edward Oral Sullivan and Robert Alexander White, former chief financial officer of South Canterbury Finance, Graeme Brown, and Timaru chartered accountant Terry Hutton.

Charges against Brown and Hutton were withdrawn in compliance with the Solicitor-General’s guidelines.

Crimes Act Offences

Section 240: Obtaining by deception or causing loss by deception
(1) Every one is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right,—
(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or
(b) in incurring any debt or liability, obtains credit; or
(c) induces or causes any other person to deliver over, execute, make, accept, endorse, destroy, or alter any document or thing capable of being used to derive a pecuniary advantage; or
(d) causes loss to any other person.

(2) In this section, deception means—
(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and—
(i) knows that it is false in a material particular; or
(ii) is reckless as to whether it is false in a material particular; or
(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or
(c) a fraudulent device, trick, or stratagem used with intent to deceive any person.

Section 242 False statement by promoter, etc
(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent—
(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or
(b) to deceive or cause loss to any person, whether ascertained or not; or
(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.

(2) In this section, false statement means any statement in respect of which the person making or publishing the statement—
(a) knows the statement is false in a material particular; or
(b) is reckless as to the whether the statement is false in a material particular.

About 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’s role is the detection, investigation and prosecution of serious or complex financial crime. The SFO’s focus is on investigating and prosecuting criminal cases that will have a real effect on:

• business and investor confidence in our financial markets and economy
• public confidence in our justice system and public service
• New Zealand’s international business reputation.

The SFO operates three operational teams; the Evaluation and Intelligence team along with two investigative teams.

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…”

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:
• the suspected nature and consequences of the fraud and/or;
• the suspected scale of the fraud and/or;
• the legal, factual and evidential complexity of the matter and/or;
• any relevant public interest considerations.

The SFO’s Annual Report 2014 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO’s strategic goals and performance standards. Both are available online at www.sfo.govt.nz

ENDS

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