FMA drops case against Bridgecorp

Wednesday, March 12th 2014, 11:06AM

The Financial Markets Authority (FMA) has consented to an $18.9 million settlement between the receiver of Bridgecorp, the Bridgecorp directors, and their liability insurers. FMA has agreed to end its own civil proceedings against the Bridgecorp directors once the settlement sum has been paid.

FMA says the settlement represents the best outcome for Bridgecorp investors in the circumstances, and will ensure that investors receive the funds in a timely way.

Bridgecorp Ltd and Bridgecorp Investments Ltd were placed in receivership in July 2007 with approximately $459 million owing to 14,500 investors. Two of its former directors, Rodney Petricevic and Robert Roest, are each serving over six years imprisonment following successful prosecutions taken by FMA.

FMA Head of Enforcement, Belinda Moffat, said the decision to discontinue its civil proceedings against the Bridgecorp directors was not taken lightly.

“We assessed the public interest in continuing with the claim, and after considering the personal financial position of the directors and the settlement sum achieved by the receivers, and the fact that FMA would not be able to achieve a greater recovery, it was clear that it would not have been an appropriate use of taxpayers’ money to proceed,” Moffat said.

“Our claim would have gone after the same pool of funds that the receiver has reached a settlement on, so there was little, if any, money left to pursue.

“It was also our view that the custodial sentences handed down in the criminal trial had sent a very strong deterrence message to the market which continues to be felt today,” Moffat said.

FMA has a number of ongoing civil proceedings against finance company directors which it is currently assessing. Announcements on these will be made in the near future.

PwC Partner, and one of Bridgecorp's receivers, Colin Mr McCloy says, “The settlement is a very good result. The contributions from Bridgecorp’s insurers and the individual directors were negotiated on the basis of available assets, and taking into consideration the delays and cost of taking the matter to Court. This was the key factor in reaching a decision, along with balancing the time, costs and risks associated with ongoing litigation when compared to the certain outcome today.

“The settlement will enable us to pay an interim distribution to secured investors of 4 cents in the dollar ($18m). The interim distribution is expected to be paid in April. Combined with the 8 cents ($37m) already paid to date, overall recoveries for secured debenture investors following the interim distribution will be 12 cents in the dollar ($55m).

“It is pleasing to be in a position to make a distribution considerably sooner than would have otherwise been the case,” McCloy said.

The receiver will continue to work to resolve the remaining issues and conclude the receivership process at which stage a final but modest distribution will be paid.

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