Four
Australian directors of finance company MFS Pacific Finance Ltd have been
ordered to pay $A100,000 each and to carry out community work in New Zealand after
pleading guilty to charges of false advertising and issuing a false prospectus.
MFS Pacific operated as the New Zealand
arm of Queensland company MFS Ltd, now delisted and in liquidation. MFS Pacific collapsed owing New Zealand
investors some $325 million. Jason
Robert Duncan Maywald, Mark Lawrence Lacy, Craig White and David Mark Anderson
were directors of MFS Pacific. Company
advertising touted directors’ expertise in commercial property and finance. They were prosecuted for breaches of
securities legislation following the collapse of companies in the MFS
group. Each director pleaded guilty to
making untrue statements in a 2007 prospectus and advertisements aimed at
members of the public asked to invest.
The public image presented was of a
company in good financial health.
Evidence was given of untrue and misleading statements. Reported increases in the company loan
portfolio masked the fact lending had stopped because of poor liquidity; the loan
growth reported resulted from the purchase of poorly performing loans from
other companies in the MFS group. Loans
past due were recorded as repayable in six months. Investor reinvestment rates were falling. As a comfort for investors, the prospectus
gave prominence to the fact MFS Pacific had a put option entitling its
directors to force MFS to take over its loan portfolio. MFS Pacific financial statements for the year
ended March 2007 lists payment of a put option fee of $3.6 million: calculated
at one per cent of MFS Pacific’s assets.
The court was told MFS Pacific directors never did exercise the put
option when the need arose.
Justice Andrews described Maywald and
Lacy as being more than careless. The
2007 prospectus and advertising presented an entirely untrue picture of how MFS
Pacific’s business was operating. She
said if they were New Zealand residents she would have imposed sentences of
home detention and community service, but since home detention is impracticable
lengthy sentences of community work would be imposed. The two directors said they would commute to
New Zealand to undertake community service in blocks of five, eight hour
days. Each was ordered to serve 200
hours of community service, to be completed by mid-2016.
White was considered more culpable,
sentenced to 250 hours community work.
The heaviest sentence was imposed on
Anderson, chief financial officer of the company and also a director: 300 hours
community service.
Each of the four directors was ordered to
pay $A100,000 within a month to the receiver of MFS Pacific Finance (now known
as OPI Pacific Finance Ltd).
R.v
Maywald & Lacy – High Court (18.09.15), R. v. White – High Court (23.09.15)
and R. v. Anderson – High Court (25.09.15)
15.106