Barcroft loans probed in court

The relationship between failed finance company Bridgecorp and its biggest borrower was the focus of Crown probing yesterday as managing director Rod Petricevic gave evidence for a third day.

Bridgecorp made $76 million of loans to Barcroft. The Crown contends these were related party loans not disclosed properly in the prospectus.

In evidence earlier this month, Barcroft was described as ‘‘nothing more than a conduit’’ through which more loans could be advanced by Bridgecorp.

Barcroft’s ultimate beneficial owners, said the Crown, were former Bridgecorp director Gary Urwin and Bridgecorp Holdings.

Petricevic nevertheless signed off on a prospectus in which Barcroft was described as an unrelated party.

‘ [Urwin] didn’t make decisions, he always excused himself.

Rod Petricevic

Bridgecorp boss

Under intense questioning from Crown lawyer Warren Cathcart, Petricevic yesterday said the prospectus had been through auditors, the company’s trustee and the Companies Office.

He therefore sought no independent legal or accounting advice regarding Barcroft and its description in the prospectus.

Petricevic also said he relied strongly on the fact group chairman Bruce Davidson was a respected commercial lawyer.

Cathcart referred to an executive committee pack from November 17, 2006, in which a credit management note referred to concerns expressed by ratings company PIR during a review.

These concerns, the minute said, pertained to related party lending to Barcroft and that Urwin was chairman of Bridgecorp’s credit committee. PIR was worried about Barcroft’s large exposures and the possible conflict of interest regarding Urwin’s position.

Petricevic said the conflict was managed by Urwin leaving the room during relevant discussions.

‘‘He didn’t make decisions, he always excused himself,’’ he said.

In June 2006 Bridgecorp sold Barcroft a group of seven underperforming loans it had made over hotel developments in New Zealand, Australia, Guam and Fiji. The problem loans were to developer The Urwin Fernandez Group. Urwin had a controlling interest in Urwin Fernan- dez, and Bridgecorp Holdings entered into a joint venture with the group to source and develop hotel projects.

By June 2006 most of the loans had either matured or were about to mature, and Bridgecorp’s directors knew that there were serious deficiencies with them, the Crown said in evidence earlier in the case.

The 2006 prospectus referred to the sale of the Barcroft loans, Cathcart said.

Bridgecorp collapsed in July 2007 owing $490m to 14,500 small investors, who are expected to get back less than 10 cents in the dollar.

Petricevic, Urwin, Davidson and fellow directors Robert Roest, and Peter Steigrad were charged under the Securities Act for allegedly making untrue statements in prospectuses and investment documents. Urwin and Davidson have admitted the charges.