Prominent planners start court case

Prominent Auckland financial advisor Roger Moses, on crutches, hobbled out of the courtroom after the first morning of his trial on charges of breaching the Securities Act over contributory mortgage misdemeanours.

It had been a painful experience, listening to prosecutor Brian Dickie and Judge JD Hole work through proposed amendments to the charges which would have extended the mortgage allotment periods covered by the charges.

In the end, the judge refused the amendments, finding the changes would make little difference to the prosecution but could be prejudicial to the defence. If only Mr Moses and fellow Reeves Moses director Gary Stevens had been that particular back in 1999, when the investors' money was lent, and the court case wouldn't have been needed.

Mr Dickie said the two men, as directors of Reeves Moses Hudig Mortgage Brokers Ltd and Reeves Moses Hudig Nominee Co Ltd, were obliged by the Securities Act to know what happened in their companies, and to know when their employees were not acting properly with contributors' funds.

"The regulations do not permit the defendants to absolve themselves of their obligations by delegating responsibilities to employees," Mr Dickie told Judge Hole in opening the Official Assignee's case against the two men.

They face 16 charges of breaching the Securities Act in 1999 in relation to development loans to four projects. Their Auckland District Court trial has been set down for a fortnight, but should be over by early next week.

The trial was supposed to start on Monday, but the judge was called across to handle criminal cases on the North Shore so the start was postponed. Likewise, the separate trial of their mortgage manager, Peter Van Nieuwkoop, on similar charges is delayed without a trial date set because the court didn't appoint a judge.

Reeves Moses Hudig, one of Auckland's busier financial advisory houses, was taken over by Sovereign Assurance, which itself became an ASB Ltd subsidiary. The advisory and mortgage firm was then sold to Harts of Australia.

Irregularities were spotted by new mortgage manager Ken Taylor, who joined the firm in August 1999 and took over after Mr Nieuwkoop's departure in November 1999.

When Mr Taylor had calculations done in early 2000 on the four projects the charges relate to, the total loss or risk potential on them was $3.64 million, or just over $4 million if a loan from one mortgage to another property apparently not secured by any documents was taken into account.

Mr Dickie said in his opening the exemptions to the Securities Act meant mortgage brokers did not have to register a prospectus before allotting a security interest in a contributory mortgage. But he said that under section 58 of the act, they were criminally liable for misstatement in an advertisement or registered prospectus.

On indictment, they would be liable to five years' jail or a $25,000 fine. On summary conviction (their liability on charges that stay within the district court), their liability would be a maximum of three months' jail or a $15,000 fine.

Section 59 imposes criminal liability for offering, distributing or allotting securities in contravention of the act, with the maximum penalty on summary conviction a $15,000 fine.

Mr Dickie said the charges against Messrs Moses and Stevens were based on the "statutory information" documents distributed to investors. He said several breaches of the contributory mortgage regulations could occur in respect of a single mortgage, because every time a contribution was drawn down without the requisite statutory information being given an offence would occur.

Mr Dickie said one of the keys under the regulations was that, at the time of any drawdown, the broker must have sufficient funds in the form of contributions waiting to complete the project.

Moses and Stevens have denied the charges. Moses is represented by Raynor Asher QC and Stevens by Chris Morris. They are expected to open their defence on Thursday or Friday.

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