Jailed Capital + Merchant Finance boss gets more jail

Jailed Capital + Merchant Finance boss Owen Francis Tallentire has been sentenced to serve another year in prison for misleading the finance company's investors in prospectus statements.

Tallentire, 65, is already serving a five-year prison sentence after being found guilty on two fraud charges, brought by the Serious Fraud Office, at Auckland High Court last year.

Today's sentencing at Auckland High Court relates to three separate Securities Act charges bought by the Financial Markets Authority, to which he pleaded guilty last month.

They included two charges of making an untrue statement in a registered prospectus and one of distributing advertisements which included untrue statements between 2006 and 2007.

The misleading statements included information about Capital + Merchant's liquidity and cashflow, management of loans and related-party lending.

Capital + Merchant collapsed in 2007 owing $167 million to about 7500 investors. No money is expected to be recovered.

In sentencing Tallentire this morning, Justice Geoff Venning said that from July 2007 it should have been known the cashflow of the company was unsustainable and the company should not have been taking investor funds at that point. And yet a prospectus was issued.

Australian-based directors also sentenced

Tallentire was sentenced alongside the firm's Australia-based directors Robert Gordon Sutherland and Colin Gregory Ryan, the company chairman, who also pleaded guilty to the three charges last month.

Ryan, 66, was setenced to seven months' home detention to be served at an apartment near the Auckland Viaduct, 300 hours' community work and ordered to make $100,000 reparation. He is allowed to travel to Australia regularly to undergo treatment for a rare medical condition.

Sutherland, 65, was sentenced to six months' home detention to be served in New Zealand, 300 hours' community  work and ordered to make $60,000 in reparation.

The reparation will be paid to the receivers.

Ryan and Sutherland received discounts to their sentences for their early guilty pleas and co-operation with the Financial Markets Authority. Both had offered to be witnesses for the upcoming trial, although that is no longer going ahead because the three other directors, including Tallentire, have now pleaded guilty.

Justice Venning accepted Ryan and Sutherland had an honest belief the statements were true. However, they gave their approval to a number of related party loans and to rolling over a number of dilinquent loans.

"You failed to carry out your obligations as directors," Justice Venning said.

Ryan, a qualified lawyer and accountant, has a rare medical condition, treatment of which was acknowleged in his sentencing.

Justice Venning said Tallentire, who worked in the company, was in a different position to directors Sutherland and Ryan and had a higher level of culpability.

Commenting on the Capital + Merchant Finance case generally, Justice Venning said although its instances of related party lending were fewer than those of Nathans Finance – one of the first finance company director trials before the High Court – they were worse than Nathans's loans, which were not considered to be theft.

What the Crown wanted for sentencing

Crown Prosecutor Nick Davidson, QC, said the appropriate starting point for Tallentire's sentence was a further four year's imprisonment.

Mr Tallentire, involved in the day-to-day running of the financier, had to have known the statements about related party lending were not true, he said.

Tallentire, convicted of fraud last year, had the weight of criminal convictions, relating to last year's SFO fraud trial, behind him for the period immediately before the period these new charges related to.

Justice Venning needed to recognise that criminal offending had been taken into the current conduct to which these new charges relate, Mr Davidson said.

Tallentire's lawyer, Nathan Gedye, said his imprisoned client had no assets or means to generate income and could not offer reparations.

He said Tallentire should be given parity of sentencing with his co-offenders and a sentence of no more than four to six months' imprisonment was appropriate.

Justice Venning said there was a difference between someone who knew the statements were false and those who failed in their duty to monitor them.

What the Crown wanted for Sutherland and Ryan

Mr Davidson acknowleged Sutherland and Ryan were appearing before the court for the first time, but said their conduct was in the highly negligent category.

For Australian-based Sutherland and Ryan, the Crown proposed a starting point of three years imprisonment. However, Mr Williams said a sentence of home detention woudl be accepted.

But their Queen's Counsel David Jones said the pair's early guilty plea had been a catalyst for "the others to capitulate".

He said of the five Capital + Merchant Finance directors who had faced charges, Sutherland and Ryan were the only two to have given full interviews to the FInancial Markets Authority.

"The discount for that should be substantial because they have demonstrated willingness to coooperate and assist."

Nearing the end of the Capital + Merchant Finance stanza

Mr Davidson said today's sentencing was the beginning of the end stanza of the Capital + Merchant Finance prosecutions.

Read more about last year's Capital + Merchant Finance trial here.

Directors Neal Nicholls and Wayne Douglas, serving seven and a half years in jail after being convicted of fraud, are awaiting sentencing on the additional Securities Act charges, to which they pleaded guilty last month.

gbond@nbr.co.nz