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Lack of letters stymies case

Former Reeves Moses directors Roger Moses and Gary Stevens will find out today if they have got off securities law charges.

Thursday, August 30th 2001, 6:49AM

The question of whether contributory mortgage company directors Roger Moses and Gary Stevens committed any securities law breaches was forgotten for a while yesterday.

Instead, it was the office of the official assignee and the Crown Law Office whose performances were under the spotlight.

After starting out last week facing 35 charges each under sections 58 and 59 of the Securities Act and the act's contributory mortgage regulations, the two former owners of Reeves Moses Hudig Mortgage Brokers Ltd were down to four charges each.

Their lawyers, Raynor Asher QC for Moses and Chris Morris for Stevens, succeeded on Monday and Tuesday in seeking a ruling from Judge John Hole that their clients had no case to answer on the section 59 and regulations charges.

Under section 58, they still face one charge each relating to each of four development mortgages in 1999. Knocked back even further, these charges related to statements in introductory letters to mortgage contributors which prosecutor Brian Dickey said they should have known were untrue.

The alleged untruthfulness concerned statements that interest for the investors had been set aside for the full term of the mortgage, and that work would start only after a valuer's completion certificate was completed.

The defence yesterday managed to knock an awful lot of credibility out of the prosecution argument.

Dickey said that under section 58 there was an absolute liability on directors to verify the truth of documents. The only out was an affirmative defence that they believed the documents to be true. "The statement is in the affirmative and places the obligation on the director."

Dickey said the introductory letters for two mortgages, for Pauanui Lake Resort Ltd and 32 St Stephens Avenue Ltd, contained unauthorised alterations.

On the Pauanui letter, Dickey said: "If they had ever seen that letter they would have known it was untrue."

On both of these letters, "if the defendants say they did not see the letter and know its contents, they could not believe it was true. St Stephens and Pauanui [letters] on their face were obviously untrue."

On the notion that a director should believe employees will be honest in their work, Dickey said: "I don't accept that it is sufficient to trust an employee. Checks will never be perfect or foolproof, but some pretty simple checks would have exposed Mr Van Nieuwkoop [Reeves Moses' mortgage manager, Peter Van Nieuwkoop, who will face similar charges in a separate trial]."

And then came the blow from Judge Hole that might knock any credibility out of the Crown case: "What happened to the 'best evidence' rule?" the judge asked Dickey.

The prosecution presented the court with a wad of introductory letters from ICSL, variously described as a subsidiary of Sovereign Assurance (which was Reeves Moses' parent company in 1999), a contributory and trustee of contributories' interests.

Asher had raised doubts over the office master copies of documents during the trial and, at the close, Judge Hole revived the point: "We've got a whole lot of virtual circumstantial evidence in these introductory letters, but wouldn't the best evidence be from at least one contributory to each mortgage saying 'I have a letter, here it is'?"

After Dickey told the judge "I don't accept that is the only way the court can be provided with proof," Judge Hole widened his questioning. "There is no evidence from someone either sending out the letters or receiving them."

Asher, in his response to the prosecution's closing submissions, naturally seized on the judge's opening, pointing to the word "Copy" imprinted in large capital letters on the front of each introductory letter used by the prosecution in evidence.

"These documents all have 'Copy' on them. 'Copy' is not consistent with these being sent to ICSL as a contributory. As a contributory it would be getting originals, which contributories would expect.

"The first of them is computer-generated and reads, 'Dear Salutations…'

"You don't send documents like this to contributories, it's the last thing you'd want to do."

Dickey said there was no evidence the documents got to ICSL any way other than as missives to a contributory but the comparison -- from the sideline, at least -- was clear.

Dickey had accused directors Moses and Stevens of not keeping close enough tabs on the work of their employees, who couldn't be trusted implicitly, and here were Crown Law and the official assignee providing documents which were plainly short of an evidential standard -- what the prosecution had presented couldn't be trusted.

On directors' liability, Asher said the Crown's interpretation "would be tantamount to saying every director in a nominee company would have to read every letter that goes out to contributories, and to satisfy the Crown's test it seems likely they would also have to be involved in the sending of them to make sure there was no change."

Instead, Asher said, "the real untruth is that Mr Van Nieuwkoop did not intend to do that which the introductory letters said would be done. This is the fundamental misconception behind the [Dickey] submission."

Judge Hole adjourned the trial until 2.15pm Thursday for "at least a bald answer" on the charges. "I won't necessarily have reasons at that point, in fact I doubt it."

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