26 April 2012

Bridgecorp: R. v. Petricevic


Rodney Michael Petricevic has been sentenced to six and half years jail for making false statements to Bridgecorp investors.  The High Court did not accept protestations that he was unaware of severe liquidity problems until just before Bridgecorp went into receivership. 
Bridgecorp used money from public investors to finance property developments.  About 14,500 investors were left out of pocket when in July 2007 Bridgecorp went first into receivership and then quickly into liquidation.  Investors are owed some $459 million.  Those holding secured debentures can expect to recover less than ten cents in the dollar.  Holders of capital notes (about $29 million) or redeemable preference shares ($30 million) will not recover anything.
Some investors lost very heavily.  The court was told one 69 year old retired professional man had placed nearly two million dollars with the finance company.  He has been forced back into working long hours and his wife suffered a nervous breakdown following their loss.  Another investor, a retired couple in their seventies, lost their retirement capital, totalling $250,000.
Central to the prosecution was an allegation of untrue statements in the prospectus that Bridgecorp had never missed any interest payments to investors or returns of principal on maturity.  Statements highlighting excellent liquidity could be expected to give comfort to intending investors in a finance company.
Mr Petricevic told the court he was completely unaware of any late payments until just weeks prior to receivership.  His evidence was not believed.  Witnesses told of Mr Petricevic being present at meetings months before receivership when the problem of missed payments was discussed and another occasion when strategies to hoodwink investors were canvassed, including manufactured excuses about “computer glitches” to justify delays.  By April 2007, Bridgecorp staff were refusing to answer the phones and be party to lies told to investors.
The court was told that Mr Petricevic himself was providing short-term bridging finance to Bridgecorp through April and May 2007 to meet company payments.  Amounts ranging from $500,000 to $100,000 were advanced, being repaid within a few days on each occasion.
In general terms, Bridgecorp directors had failed to properly disclose its deteriorating trading position in offer documents available to the public: impaired loans and non-performing assets had increased; liquidity had worsened since June 2006.  And despite its stated policy, Bridgecorp did not hold a specific reserve in bank deposits to meet investor maturities.
Mr Petricevic was managing director of Bridgecorp and described himself as having thirty years experience in the finance industry.
R. v. Petricevic – High Court (5.04.12 & 26.04.12)
(12.008)