Joint finance company prosecutions promote renewed public confidence and ethical conduct in financial markets

 

Media Release
4 July 2014

Lawyer, Hugh Edward Staples Hamilton (63), who was found guilty of fraud in relation to the collapse of Belgrave Finance Limited (Belgrave), has been sentenced at the Auckland High Court today to four years and nine months’ imprisonment.

Mr Hamilton was found guilty in May of 14 charges brought in a joint prosecution by the Serious Fraud Office (SFO) and the Financial Markets Authority (FMA).

The charges related to loans, with a value of more than $12 million, made by Belgrave to various related entities between June 2005 and March 2008.

Mr Hamilton, a former barrister and solicitor, was a legal adviser to the other people, Mr Schofield, Mr Smith and Mr Buckley, who were charged in relation to the making of substantive fraudulent representations and use of Belgrave investors’ funds.

Mr Hamilton was found guilty as a party to the offending, namely, theft by a person in a special relationship. Mr Hamilton aided Mr Schofield, Mr Smith and Mr Buckley in perpetrating the related party transactions in breach of Belgrave’s Debenture Trust Deed. He also transacted a portion of the loan funds through his firm’s trust account on behalf of Mr Schofield.

SFO Director, Julie Read said, “At the time Belgrave was placed into liquidation, it was the 20th finance company to collapse in two years. The SFO have been acutely aware that the finance company collapses hindered public confidence in the integrity of our financial markets. The sentencing of Mr Hamilton concludes another prosecution and is one step closer to addressing and rebuilding that confidence.”

FMA Director of Enforcement and Investigations, Belinda Moffat, added, “The sentence reflects the seriousness of the offending in the Belgrave case. Professional advisers play a critical role in companies that raise money from the public, and they have a responsibility to ensure they do not enable wrongdoing. We hope this decision and the conclusion of the case will help to promote high standards of conduct in New Zealand’s financial markets.”


ENDS

Andrew Park
09 967 1215
021 220 6770
andrew.park@fma.govt.nz

 

Notes to editors

Background to investigation

Belgrave Finance Limited was incorporated in September 2000.

Belgrave provided financial accommodation and mortgage facilities for commercial and residential property developments. Funds for lending were sourced primarily from the issue of securities to the public in the form of debenture stock and convertible capital notes.

Belgrave was placed into receivership in on 28 May 2008 owing around $22 million to approximately 1,200 investors. The company was placed into liquidation in April 2010.

Following the collapse of Belgrave, the (then) Securities Commission made initial investigations into the company before referring the matter to the SFO in June 2010. The SFO Director determined that an investigation into the affairs of Belgrave may disclose serious or complex fraud, and the SFO commenced an investigation under Part II of the Serious Fraud Office Act in July 2010.

Charges were also laid against former director Shane Joseph Buckley who pleaded guilty and was sentenced to three years’ imprisonment and former director Stephen Charles Smith who pleaded guilty and received four years’ imprisonment. Also charged was the controller of the company Raymond Tasman Schofield who has been granted a stay of prosecution on the grounds of terminal illness, conditional upon review.

SFO charges
Crimes Act offences:

Section 220: Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—

(a) to account to any other person for the property, or for any proceeds arising from the property; or

(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.

(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.

(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.

(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.

Section 223: Punishment of theft
Every one who commits theft is liable as follows:

(a) in the case of any offence against section 220, to imprisonment for a term not exceeding 7 years; or

(b) if the value of the property stolen exceeds $1,000, to imprisonment for a term not exceeding 7 years; or

(c) if the value of the property stolen exceeds $500 but does not exceed $1,000, to imprisonment for a term not exceeding 1 year; or

(d) if the value of the property stolen does not exceed $500, to imprisonment for a term not exceeding 3 months.

Section 242: False statement by promoter, etc
(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent—

(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or

(b) to deceive or cause loss to any person, whether ascertained or not; or

(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.

(2) In this section, false statement means any statement in respect of which the person making or publishing the statement—

(a) knows the statement is false in a material particular; or

(b) is reckless as to the whether the statement is false in a material particular.

FMA charges
Companies Act offences:

Section 377: False statements

(1) Every person who, with respect to a document required by or for the purposes of this Act,—

(a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or

(b) omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or misleading in a material particular—

commits an offence, and is liable on conviction to the penalties set out in section 373(4).

(2) Every director or employee of a company who makes or furnishes, or authorises or permits the making or furnishing of, a statement or report that relates to the affairs of the company and that is false or misleading in a material particular, to—

(a) a director, employee, auditor, shareholder, debenture holder, or trustee for debenture holders of the company; or

(b) a liquidator, liquidation committee, or receiver or manager of property of the company; or

(c) if the company is a subsidiary, a director, employee, or auditor of its holding company; or

(d) a stock exchange or an officer of a stock exchange,—

knowing it to be false or misleading, commits an offence, and is liable on conviction to the penalties set out in section 373(4).

(3) For the purposes of this section, a person who voted in favour of the making of a statement at a meeting is deemed to have authorised the making of the statement.

About the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO’s role is the detection, investigation and prosecution of serious or complex financial crime. The SFO’s focus is on investigating and prosecuting criminal cases that will have a real effect on:

business and investor confidence in our financial markets and economy
public confidence in our justice system and public service
New Zealand’s international business reputation.
The SFO operates three investigative teams:

Evaluation and Intelligence;
Financial Markets and Corporate Fraud; and
Fraud and Corruption.
The SFO operates under two sets of investigative powers.

Part I of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”

Part II of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”

The SFO’s Annual Report 2013 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO’s strategic goals and performance standards. Both are available online at: www.sfo.govt.nz

About the FMA

The FMA was established on 1 May 2011 under the Financial Markets Authority Act 2011, in response to the need to address failures in the financial markets, made evident from the global financial crisis. The Government recognised that New Zealand required a single financial markets conduct regulator to proactively monitor and enforce financial markets legislation.

The FMA is an independent Crown entity and has the following functions:

to monitor compliance with, investigate contraventions of, and enforce securities and investment law, financial reporting law, and companies law, in respect of financial markets participants;
to promote confident and informed participation in the financial markets;
to license and supervise particular financial markets participants, including financial advisers, trustees and statutory supervisors, auditors, and securities markets;
to monitor and conduct inquiries and investigations into financial markets and financial markets participants; and
to keep the law under review.
The FMA is committed to taking appropriate enforcement action against those whose behaviour threatens market integrity and investor confidence in New Zealand.

More information about the FMA can be found at www.fma.govt.nz