Mutual Finance property developer pleads guilty

A property developer associated with failed finance companies Viaduct Capital and Mutual Finance has pleaded guilty as a trial began.

Peter Chevin admitted theft by a person in a special relationship this morning, as the Financial Markets Authority’s trial against the men behind the two finance companies begins in the High Court at Auckland before Justice Mark Woolford.

The FMA has laid various charges over the collapse of Viaduct Capital and Mutual Finance against Paul Bublitz, Bruce McKay and Richard Tim Blackwood – who are linked to both companies – including theft by a person in a special relationship, making false statements in a prospectus and making false statements to a trustee.

Charges against Mr Chevin and Lance Morrison relate to Mutual only, with the latter facing charges of theft by a person in a special relationship and making false statements to a trustee.

Messrs Bublitz, McKay, Blackwood and Morrison have pleaded not guilty to all charges.

Both Viaduct and Mutual held deposits insured by the government’s retail deposit guarantee scheme when they collapsed in the global financial crisis, owing a total of approximately $17 million.

Mr Bublitz’ lawyer, Rachel Reed, said if Mr Chevin was called as a witness by the FMA, there would be a substantial change to the case and it would put her client in a difficult position as well as entitle the defence to see Mr Chevin’s submissions.

Crown lawyer David Johnstone confirmed it would not call Mr Chevin as a witness.

Mr Johnstone said the essence of the case is that Mr Bublitz acquired and used two finance companies to support his various property investments and the other defendants assisted him.

The men deliberately misled investors by failing to disclose related party transactions that benefited them rather than the companies, the lawyer said.

The Crown alleges Bublitz and his co-conspirators then deliberately misled investors and potential investors in Viaduct Capital and Mutual Finance over a series of related party transactions for their direct benefit and to the detriment of the companies.

Bublitz’s Hunter Capital had a portfolio of five property assets nationwide said by the Crown to have been involved in the related party transactions, including a property development in Khandallah in Wellington, Northgate business park in Silverdale, property at Kinloch, a share in assets owned by Dockland Holdings in Auckland, and NKE Trust which had a property development at Helensville.

All of the properties were not generating sufficient income to cover bank loans which Bublitz had provided personal guarantees for.

The Crown alleges the defendants comprised a plan at Blublitz’s holiday home in Pauanui in January 2009 to buy an existing finance company that was covered by the government's retail deposit guarantee scheme. They proposed the finance company would then acquire Hunter Capital’s distressed property assets, but structured in such a way that it wouldn’t alert investors and regulatory authorities to the related party transactions or breach the trust deed.

Priority Capital, later renamed Viaduct Capital, was bought in February 2009 in a complicated transaction that involved Wevers and Bublitz allegedly setting up a shell company, Phoenix Finance, which was lent $2.165 million by Hunter Capital to buy Priority Capital for $2.15 million. Hunter Capital, in turn, sold six loans and its Dockland shareholding to Priority Capital for $2.55 million in cash and $2.35 million in capital notes.

Bublitz was not named as a shareholder or director in the renamed Viaduct but the Crown alleges he effectively controlled it and earned $240,000 a year – the same as chief executive Nick Wevers - as an informal consultant.

“He effectively controlled Viaduct after acquiring it,” Johnstone said, including instructing Wevers on how to run the finance company, setting salaries and the strategic direction.

The company also followed the earlier blueprint laid out to acquire Hunter Capital property assets through a series of transactions that was signed off by the trustee.

The trial is expected to take 12 weeks.

(Additional reporting from BusinessDesk)

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