Report seeks $10m for SCF investors

A $650,000 Queen’s Counsel report has been delivered to Minister of Justice Andrew Little, seeking $10 million in compensation for the 4400 South Canterbury Finance preference shareholders left out of pocket to the tune of $100 million.

The implosion of South Canterbury Finance in September 2010 ultimately cost the Crown almost $1 billion in various payments under its retail deposit guarantee scheme.

Yesterday, a finance sector insider described a newsletter sent to the clients of contro versial stockbroker Chris Lee as ‘‘explosive’’. It outlines accusations in a QC’s report against several parties and the Crown over its handling of the SCF debacle.

The nature of the allegations it contains left recipients unwilling to leak the document.

Mr Lee was contacted and declined to release the QC’s report to the Otago Daily Times, citing legal advice that it had been circulated to a paying clientele, not publicly.

However, Mr Lee confirmed that last month he delivered a QC’s report of about 40 pages — an investigation into the breach of rights of the SCF perpetual preference shareholders — to Mr Little’s office.

Mr Little’s office was contacted yesterday to confirm receipt of the QC’s report, but did not respond.

Mr Lee said the Financial Markets Authority had held on to 35,000 documents for four years, until releasing them to him in May 2015. It then took almost two years for the QC to unravel them.

He believed the Financial Markets Authority did not investigate and ‘‘sat on the information’’ because a Serious Fraud Office investigation was already under way.

Mr Lee said the issue was now ‘‘time barred’’ from reaching any courts.

He admits the allegations levelled at ‘‘several parties and the Crown’’ were ‘‘pretty blunt’’, but also claimed to have ‘‘indisputable information’’ about ‘‘illegal behaviour’’.

Mr Lee claims there were ‘‘13 infringements of the law’’ by ‘‘multiparties and the Crown’’.

Mr Lee said he had taken the QC findings to six ‘‘litigation funders’’, including five Australian firms. However, he said the litigation funders deemed there was ‘‘too much risk’’ that they would not be granted a waiver from the courts to overturn the time bar.

While SCF had paid about $20 million to be included in the Government’s retail deposit guarantee scheme, preference shares were not covered by the scheme as they were considered unsecured.

About $100 million worth of $1 preference shares were issued by SCF in December 2006. They traded at well below $1 for many years and in the last months before SCF collapsed were trading around 9c in the dollar.

Mr Lee said aside from compensation, he hoped the QC’s report would also help establish the facts ‘‘and prove beyond question’’ the allegations he was making.

‘‘The third point is to make sure this never happens again; the illegalities that occurred,’’ Mr Lee said.

He wanted Mr Little to authorise a retired judge or QC to review the issue, and consider compensation.

Of the original 4400 preference shareholders, 1297 had funded the $650,000 required for the QC’s report.

Mr Lee said former prime minister Bill English and former minister of finance Steven Joyce had ‘‘done nothing’’ with the report and it was delivered to Mr Little last month.

Asked what remedy he sought, Mr Lee said the Government should consider $10 million for the preference shareholders.

‘‘It’s small [less than 10c in the dollar] but at least it’s something,’’ he said.

When asked if a disclaimer was required, Mr Lee said before SCF’s collapse he did own 300,000 SCF preference shares.

He had given his clients five days’ notice at the time that he intended selling, advising them to consider selling as well.