Stephen
Charles William Smith was sentenced to four years imprisonment after pleading
guilty to charges under the Crimes Act and Securities Act for his actions as
director of failed finance company: Belgrave Finance.
Belgrave went into
receivership in May 2008 with debenture holders likely to lose 90% of their
investment. Mr Smith, formerly a senior
bank manager, was a director of Belgrave for the three years prior to its
collapse.
The court was told Mr
Smith colluded with two others to buy into Belgrave in 2005 and they then
dishonestly misrepresented the company’s proposed lending policies to attract
investment from the public, used the funds procured for a series of related
party dealings in breach of the limits set out its prospectus and then lied to
the trustee for these debenture holders about the level of related party
dealings.
Of the company’s
losses totalling some $18.4 million, $13.2 million arose from dishonest related
party lending.
Justice Toogood said
the pattern of dishonesty was set from Mr Smith’s first introduction to the
company. With two others, Mr Smith was
party to an arrangement which saw $3.175 million borrowed from Australian
finance companies to complete the purchase of Belgrave shares. Belgrave guaranteed repayment of the loan with
directors keeping the fact of the guarantee hidden. This had the economic effect of passing the
risk of the acquisition across to Belgrave’s debenture holders.
In mitigation, Mr
Smith said he poured about $400,000 of his own money into the company over the
six months prior to receivership in an attempt to keep it afloat. Justice Toogood said these steps were hardly
altruistic. They were motivated less by
a concern for debenture holders than a desperate attempt to prevent a financial
collapse which would expose his prior criminal behaviour.
Following an August
2012 guilty plea in a separate prosecution, fellow director Shane Buckley was
sentenced to three years imprisonment.
Justice Toogood said Mr Buckley was entitled to a lesser penalty because
he acknowledged his responsibility when first interviewed by the Serious Fraud
Office and pleaded guilty at the first opportunity.
Also involved in
Belgrave Finance was a Mr Raymond Schofield.
He was described by Justice Toogood as a man with a significant degree
of control over the company’s operations: a shadow director though not actually
appointed as director. A family trust
associated with Mr Schofield has an 80% interest in Belgrave. The court was told criminal proceedings
against Mr Schofield were on hold because of his terminal illness.
R.
v. Smith – High Court (07.06.13)
13.016