In 2009, the Securities Commission laid criminal charges against five directors: Neal Nicholls, Owen Tallentire, Colin Ryan, Wayne Douglas and Robert Sutherland, under the Securities Act.
These charges related to untrue statements in offer documents distributed in 2006.
At the same time, civil proceedings were filed against four of the directors - Nicholls, Tallentire, Ryan, and Sutherland - seeking declarations of civil liability and civil pecuniary penalties. The civil proceedings were stayed pending the outcome of the criminal proceedings.
The FMA assumed responsibility for the criminal proceedings alongside the Crown Solicitor in 2011. In 2013, the five directors pleaded guilty to the criminal charges and received varying sentences of imprisonment, home detention, community work and some directors made reparation payments of between $60,000 and $100,000.
Earlier this year, Capital + Merchant’s liquidators settled their claim against the company’s former auditors for $18.5 million. This sum is subject to claims from a number of other parties and the balance will be available for distribution to investors. The receivers’ claim against CMF’s former trustee and former solicitor is currently before the courts. The receivers hope to write to investors within the next two months to start the distribution process.
The FMA has determined that in light of the outcome of the criminal proceedings, the actions taken by the receivers and liquidators, and the limited personal assets of the directors, there would be little prospect of any recovery for investors if it were to pursue its civil claim.
The FMA considers that the misconduct that was the subject of the civil proceedings has been adequately addressed through the criminal process and the further time and cost of pursing the civil proceeding would not be justified or in the public interest.
Capital + Merchant Finance owed $167 million to approximately 7500 investors when it was placed in receivership in November 2007.
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