Paul
William Cropp, formerly chief executive officer of the Dominion Finance Group,
has been sentenced to two years seven months imprisonment for failing properly
to handle investors’ money. Loans made
to related parties in breach of company prospectuses resulted in further losses
to investors in Dominion Finance of $700,000 (out of total losses of $233
million) and to investors in North South Finance of $8.4 million (out of total
losses of $46 million).
Convicted of theft by
a person in a special relationship, Mr Cropp was party to desperate attempts by
Dominion Finance executives to fend off a liquidity crisis in March-April 2008.
This involved four separate transactions: restructuring loans to a struggling
Auckland property development and shifting funds from related finance company
North South to an illiquid Dominion Finance.
Each of the four transactions required consent from trustees for
debenture holders; they were otherwise prohibited as transactions between
related parties.
The High Court was
told no prior consents were obtained and in one case Mr Cropp actively tried to
disguise the deal as not being a related party transaction. Justice Lang said failure to get the required
trustee consent breached an important investor safeguard. It did not allow the trustee to exercise any
oversight on investors’ behalf.
Justice Lang ruled
that the starting point for this offence should be three years four months
jail. A nine month reduction was allowed
to reflect evidence of Mr Cropp’s previous good character and expressions of
remorse.
R.
v. Cropp – High Court (23.05.13)
13.026