The charges against: Nathans Finance

Defendants

John Hotchin, Donald Young, Kenneth Moses and Mervyn Doolan

Charges

The Commission alleges that the directors made untrue statements in the registered prospectus and investment statement of Nathans Finance NZ Limited (in receivership) dated 13 December 2006. These statements concern lending to related parties (including Nathans' parent company VTL Group), that Nathans had no bad debts, that it had adequate liquidity, that its lending was diversified, that it made loans and managed them in accordance with robust policies and processes, and that all material matters had been disclosed in the prospectus.

The Commission also alleges that the directors made further untrue statements when they signed a prospectus extension certificate on 30 March 2007.  These stated that the company's financial position had not materially and adversely changed since its last balance date, and that the 13 December 2006 prospectus was not false or misleading.

In addition, the Commission alleges that letters sent to members of the public advertising Nathans Finance debenture stock contained untrue statements about some of the matters referred to above.  These claims do not apply to Mr Hotchin who had resigned his directorship by the time the advertisements were sent out.

The Defendants deny the charges.

Penalties

Criminal charges - These charges are laid indictably under section 58 of the Securities Act and carry a maximum penalty of five years imprisonment or fines of up to $300,000 plus $10,000 for every day the offence is continued.

Civil proceedings - The proceedings are issued under section 55C and related sections of the Securities Act.  The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the five directors. 

Date filed

Criminal charges - filed on 12 December 2008 in the District Court at Auckland.

Civil proceedings - filed on 12 December 2008 in the High Court at Auckland.  

Current status

Criminal charges - High Court trial set down for 15 March 2011 (8 weeks) by Judge alone.  Pre-trial hearing took place on 29 November.

Civil proceedings - stayed pending resolution of the criminal case.