$150m loan claim ‘misled investors’

South Canterbury Finance wrongly claimed it had access to $150 million in loans at a time when the finance industry was in crisis, the High Court in Timaru was told yesterday.

Independent expert Grant Graham, of investment firm Korda Mentha, said SCF’s directors misled investors by claiming in a prospectus they had the backing of a major bank when they did not.

He was giving evidence for the Crown against former SCF directors Edward Sullivan and Robert White and former chief executive Lachie McLeod, who are facing a combined 18 fraud charges.

Graham said that in 2008 the company claimed it had a loan facility of $150m from the Bank of New Zealand, which would have reassured investors when other institutions were on the verge of collapsing due to the global financial crisis.

However, $50m of the facility had expired and the remaining $100m was not available to SCF, Graham said.

He said many of the problematic loans were authorised by SCF’s chairman, the late Alan Hubbard, and that there was a lack of realistic strategies and proper records for repaying loans. Yesterday afternoon Graham was crossexamined by Sullivan’s lawyer, Marc Corlett, with many of the questions centred around international accounting standards and statements of standard accounting practice. Graham was also questioned about why he had altered his initial statement regarding relatedparty lending, to later include trustees, regulators, the BNZ and the retail deposit guarantee scheme.

Graham replied: ‘‘I should have written it in my first brief’’.

He will continue to be crossexamined when the trial continues today.