Ex-mayor denies part in fraud

A former mayor disguised connections between Belgrave Finance and its owner, allowing ‘‘enormous’’ relatedparty loans to be hidden, the High Court has heard.

Hugh Hamilton, mayor of Central Hawke’s Bay between 1989 and 1995, yesterday pleaded not guilty to 41 charges in the High Court at Auckland.

The joint prosecution by the Financial Markets Authority and Serious Fraud Office is a rare example of professional advisers being prosecuted for their involvement in failed finance companies.

Nick Williams, acting for the Crown, said Hamilton had worked with businessman Raymond Schofield to allow his client to buy Belgrave for $3.1m in June 2005. But this transaction was structured to hide Schofield’s involvement, Williams said.

‘‘The purpose of hiding his client’s identity and his control of Belgrave was to allow him to borrow from it either deftly or via various borrowing companies that his client also controlled.

‘‘Because of Hamilton’s help, Schofield was able to borrow large amounts of money using public debenture investors’ funds in what were, in truth, forbidden related-party loans,’’ Williams said.

The Crown alleges Hamilton helped Schofield and his entities to get $12.6m in loans from Belgrave.

By March 2008, just before receivers were appointed, 45 per cent of Belgrave’s total assets were Schofield loans.

Williams said Hamilton’s defence would be that he was unaware Schofield was effectively Belgrave’s owner, but this was contradicted in an interview with the SFO in 2012.

Belgrave collapsed in May 2008 owing 1268 investors about $20 million. Receivers have only made $3.5m in realisations with no prospect of further recoveries, the court heard.

The trial, before Justice John Faire alone, is set down for eight weeks with the prosecution expected to call 23 witnesses. Hamilton is one of four people charged in connection to the collapse.