Convicted of fraud after milking government guarantees put in place after the 2008 global financial crisis: Paul Bublitz was sentenced to three years two months imprisonment; Bruce McKay twelve months home detention; and Richard Blackwood nine months home detention. Their fraud cost taxpayers $3.38 million.
With investments in his Hunter Capital Group underwater following the global financial crisis, Bublitz looked to shelter his losses. The High Court was told of Viaduct Capital, and later Mutual Finance, being used as vehicles to off-load Hunter Capital assets and to provide loans for further property development. Bublitz held either direct or indirect control over each finance company. Both had the benefit of a short-term government guarantee; part of the political response to feared bank-runs during the world-wide banking crisis by investors taking cash out of the financial system.
Rules governing the government guarantee tightly restricted related-party transactions. The High Court was told of elaborate ruses used by Bublitz to hide his financial interest in Viaduct. Bublitz used a nominee purchaser to gain control of Viaduct, hiding his involvement. Within months of promising Treasury he would not funnel Mutual Finance cash into Viaduct, he did exactly that. Cash was siphoned out quickly over a five month period in 2010. Issuing a misleading prospectus to investors and misleading Treasury amounted to fraud. Prosecutors likened Bublitz’ actions to use of the two finance companies as a private piggy bank.
Government coughed up nine million dollars to compensate Mutual Finance investors. After recoveries, the final cost was $3.38 million.
Justice Toogood described Bublitz as prime mover and instigator of the fraud, with McKay and Blackwood acting under his direction. Sentences were reduced to reflect personal and financial costs incurred by the three having to face a second trial after the first trial was aborted. After sitting for nine months, the trial had to be restarted because of a prosecution failure to disclose relevant documents from the outset.
R. v. Bublitz, McKay, Blackwood – High Court (27.03.19)
19.068
Post judgment note: Blackwood's conviction was overturned by the Court of Appeal in August 2019. There was no evidence Blackwood had seen the government guarantee or knew of its terms.
Post judgment note: Blackwood's conviction was overturned by the Court of Appeal in August 2019. There was no evidence Blackwood had seen the government guarantee or knew of its terms.