Emails emerge in SCF case as Crown prepares 40 witnesses

The Crown is calling 40 witnesses to give evidence in the South Canterbury Finance fraud trial, which began today at the High Court at Timaru, and among the list is a who’s who of the agribusiness world.

On trial for 15 weeks are former SCF chief executive Lachie McLeod and former board members Edward Sullivan and Robert White, a retired lawyer and retired accountant, respectively. 

Charges against the three include a variety of offences, including theft by a person in a special relationship; obtaining by deception; false statements by the promoter of a company; and false accounting.

Messrs Sullivan, White and McLeod pleaded not guilty to 18 charges. The charges, all under the Crimes Act, carry maximum penalties ranging from seven to 10 years' jail.

SCF, founded by the late Allan Hubbard, was placed into receivership in August 2010, triggering a $1.58 billion payout to investors under the Crown Retail Deposit Guarantee Scheme. The government also lent $175 million to repay secured third party lenders that held prior charges over SCF's assets.

Following receivership the Crown has taken over some of the remaining assets but still faces a shortfall of about $800 million.

Queen’s counsel Colin Carruthers opened his case for the Crown by saying it would be a “document-heavy” proceeding. This is New Zealand’s biggest corporate fraud case.

Mr Carruthers told Justice Paul Heath he would call 40 witnesses, including former Fonterra director Colin Armer. Mr Armer is expected to describe loans made to Dairy Holdings, where he is a director and shareholder. Dairy Holdings chief executive Colin Glass is also on the witness list to give evidence.

Also called to give evidence are Mr Sullivan’s brother-in-law Geoffrey Sullivan and nephew Peter Symes. Mr Symes was made the sole owner of Auckland’s five-star Hyatt Regency hotel between February 2009 to August 2010 despite having no prior experience. The company was formerly owned by SCF.

Mr Carruthers gave examples of evidence introduced during the trial. Among them, an email from Mr McLeod from 2007 while a prospectus was being prepared. In that email he had suggested it would be wise not to say his name in relation to a loan because of “the current environment.”

Forensic accountants from the Serious Fraud Office, (which began investigating SCF in 2010), PwC and KordaMentha are also expected to give evidence.

The trial is set down for 15 weeks.