Prosecution of company directors in breach of s. 261 of Companies Act 193

Under s. 261 of the Companies Act 1993 a liquidator of a company has powers to obtain documents and information from a former director of the failed company. Failure to provide that information to the liquidator can result in the director being prosecuted and if convicted of an offence under s. 261, he or she “liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 2 years”.

If the company director has been adjudicated as a bankrupt at the time of sentencing a judge would be compelled to impose a prison sentence rather than impose a fine. If the offending involved long-term and systematic refusal to supply documents to a number of liquidators involving multiple companies of which he/she had been a director, and the non-compliance showed a pattern of flagrant disregard for the law, a judge would no doubt be compelled to impose a maximum sentence. For to do so would be in the public interest because the law has a pedagogical role in addition to a punitive element designed to bring offenders to their senses regarding the rule of law as it prescribes and defines criminal behaviour.

Section 261 of the Companies Act entitled “Power to obtain documents and information” includes: [Read more...]

David Ian Henderson: Bankrupt Christchurch property developer v. the Insolvency and Trustee Services

Introduction

Liquidation is a process where the assets of a company that cannot pay its debts, are distributed by a liquidator or by a Crown authority called the Official Assignee (AO). The AO only deals with liquidations where it has been appointed liquidator by the court or, in certain circumstances, by itself. A company is placed into liquidation when it is unable to pay its debts. This is done voluntarily or by a court order. A liquidator is appointed to investigate the company’s financial affairs, establish the reason why the company failed, investigate possible offences, and identify and sell any assets to help repay creditors. Officers of the company must assist the liquidator by providing information and answering questions. 

Failure to assist the Official Assignee is a serious offence and may lead to prosecution. It is an offence for a director to conceal or remove property with the intention of preventing or delaying the Official Assignee from taking custody of it, or to destroy, conceal or remove records or other documents. Penalties can include fines and imprisonment.

Bankruptcies are managed by the AO and normally last for three years. Bankrupts are unable to direct a company and are not allowed to manage a business without the OA’s consent. [Source: http://www.insolvency.govt.nz/]

The Society for Promotion of Community Standards Inc. is concerned that the ability of liquidators serious about fulfilling their statutory duties to investigate and report possible offences by company officials against the Companies Act 1993, the Financial Reporting Act, the Securities Act and the Insolvency Act 2006; are being undermined and thwarted by a number factors including: [Read more...]

David Ian Henderson – a two-time bankrupt accuses Liquidator of conduct breaches

David (Dave) Ian Henderson, twice-bankrupt high-profile Christchurch property developer, and his business associate Ian Bruce Hyndman, appear to have been behind a Notice in the National Business Review (NBR) and one in the NZ Herald (22/05/13) that ran last year, apparently seeking “information” on chartered accountant Robert Bruce Walker, liquidator of Property Ventures Ltd (in receivership and liquidation), the parent company of interconnected companies owned or controlled by Henderson. Henderson was behind the failed $2 billion Five Mile town development at State Highway 6, Queenstown, near the Queenstown Events Centre, colloquially known as “Hendo’s Hole.

As sailors know, it is important at sea to avoid peeing to windward. The blow back can be very unpleasant. So can the result of trying to gather ‘dirt’ and throw it at a person and make it stick, when a very strong gale is opposing the thrower.

Dave Henderson who was bankrupted in 1996 and discharged in 1999, was then bankrupted again on November 29, 2010, the latter one of the largest bankruptcies in New Zealand’s history. By his own account he had gross personal debts of about $165m and $86m after the sale of secured assets. The debts come mainly from personal guarantees he had given on loans to his companies.

Bankruptcies are managed by a Crown authority called the Official Assignee (OA) and normally last for three years. Henderson remains an undischarged bankrupt because the OA filed a notice of objection to Mr Henderson’s discharge, pursuant to s 292 of the Insolvency Act 2006, on 28 November 2013. The OA “strongly suspects that Mr Henderson had entered into, carried on, or taken part in the management or control of businesses during his bankruptcy, contrary to s 149 of the Act. Mr Henderson strongly refutes the Assignee’s suspicions…” (quoted from High Court judgment dated 18 March 2014 – CIV-2010-409-000559 [2014] NZHC 499). [Read more...]

Fraud charges follow liquidation of company

A Company director has been arrested at his home and bailed to appear in Court on Tuesday facing four charges of causing loss by deception (fraud), following the liquidation of his company which has debts of more than $2 million.

The Dominion Post (Friday, June 22, p. A5) has named the man the company in its report:

See: http://www.stuff.co.nz/business/7149604/Piano-shop-director-to-face-fraud-charges

A PLIMMERTON piano salesman, Cameron Crawford, is facing fraud charges after claims millions owed to those who sold instruments through his company are gone.

Cameron Crawford, director of Pianoshop Ltd for more than a decade, was arrested at his home in Raumati South yesterday and bailed to appear in Porirua District Court on Tuesday.

He will face four charges of causing loss by deception. However it was likely that more charges would be laid as other victims came forward to police, Detective Jocelyn Bell said.

Police will request a lengthy remand period, in order to give time to gather statements from victims, in particular those who had bought or sold pianos through Crawford, Ms Bell said.

Pianoshop, in Plimmerton, was placed in liquidation on May 21, with debts of more than $2 million

A list of creditors included more than 200 customers who bought or sold pianos through the store, but had not received the money they were owed or the instrument they purchased.

Two creditors have told The Dominion Post they have already begun legal action to try to collect debts they claimed were more than a year old.

Contacted at his home earlier this week about allegations of fraud, Crawford refused to make any comment.

Shortly after the company was placed into liquidation, Crawford said he was “gutted” the company had been liquidated.

Ms Bell said police had received complaints from several creditors who had given Crawford pianos to sell, but had never received their money. Some were told up until February that their instruments were unsold, but were then contacted as creditors in March by a company trying to strike a deal to receive Pianoshop’s debt.

“From there they’ve been able to uncover the fact that the piano has been sold a year earlier.”

Ms Bell understood that another complaint had been made in Rotorua in relation to the case, and that police had received a file from liquidator Murray Allott which also alleged fraud.

The first liquidator’s report on Pianoshop showed it had run up debts of almost $2.4 million, however selling its assets was likely to raise less than $100,000.

Secured creditor Lock Finance is owed more than $340,000, while employees and the Inland Revenue are owed another $236,000, making it unlikely unsecured creditors will receive any payment from the liquidation.

Eden Digital Ltd – update on liquidation and Erotica Lifestyles Expo licence transfer

Update on Inquiry into Funding of NZ Porn Industry: On 13th June 2012 the second Liquidator’s Report on Eden Digital Limited (In Liq) was issued (It was put into liquidation on 22/11/11 and was directed by American businessman John M Carr CPA from 23/04/08 to 13/09/11). [ Photo of John M Carr http://www.carr.co.nz/images/jmc.jpg ]

The Report revealed that one preferential creditor – (the IRD) has filed a claim in liquidation for $171,792 [for unpaid GST & PAYE].  Based on the first (earlier) Liquidation Report, the company’s employees, who constitute another class of preferential creditors, are owed $20,000 in wages. The latest report shows that seven non-preferential (unsecured) creditors, have filed claims in liquidation for $183,901. This brings the total owed by Eden Digital Ltd to these creditors, to $355,693. An additional several thousands of dollars will probably be claimed by Grant Bruce Reynolds, the Liquidator, of Reynolds & Associates Ltd, (Insolvency Practitioners), for his fees and expenses, and these costs must be paid in advance of all other payments to preferential creditors.

It is unlikely that any of the unsecured creditors will receive anything after all the secured creditors are finally paid out. The latter include the shareholder CVC Group Ltd, directed by John M Carr CPA and holder of all 150,000 company shares in Eden Digital Ltd; Vision Rentals Ltd, Solutions Group Receivables, Konica Minolta Business Solutions and Harper Collins Publishers.

Eden Digital Ltd, which was incorporated on 23rd April 2008, held the licence for Erotica Lifestyles Expo until 16 September 2011 (as reported in the Waikato Times) – the day John M Carr CPA resigned as director of Eden Digital Ltd and appointed Raymond Sydney Corben Simpson of Mt Eden, Auckland, as its sole director. On that same day the Expo licence owner, CVC Group Ltd, directed by John M Carr, withdrew the licence from the licencee Eden Digital Ltd, also directed by John M Carr. (CVC Group Ltd owns Eden Digital Ltd and both have John M Carr as sole director).

Although Eden Digital Ltd was technically put into liquidation on “by special resolution of the shareholders”, under ‘the watch’ of Mr Raymond Simpson on 22nd November 2011; this action was necessitated as a result of a financial collapse that occurred under the sole ‘watch’/directorship of John M Carr.

It would appear that Eden Digital Ltd must have been trading whilst insolvent and had not been paying tax for many months – prior to Mr Simpson being appointed as director – a state of affairs that occurred under the directorship of John M Carr – [ Note again!: he was director from 23 April 2008  to 16 September 2011. More importantly he was sole director from 15 May 2010 to 13 September 2010].

Having abandoned the directorship of Eden Digital Ltd on 16 September 2011, Mr John M Carr’s next move was to incorporate the company Esprit Events Ltd, of which he is sole director, a company also owned by CVC Group Ltd. Esprit Events Ltd purchased the Erotica Lifestyles Expo licence from CVC Group Ltd, a company of which he (Carr) is also sole director. CVC Group Ltd wholly owns both Eden Digital Ltd and Esprit Events Ltd.

Eden Digital Ltd was the licensee of Erotica Expo Expo and the transfer of the licence to a related party, Esprit Events Ltd, could hardly be seen as a significant or complex financial transaction. Director John M Carr merely obtained the licence from himself and then gave it to back himself, then returned it to himself, to put it crudely. Such a ‘transaction’ did not require a large contingent of lawyers from Checketts McKay Law firm in Cromwell or a consignment of Adult Services handmaidens to effect the ‘complex’ financial ownership transmutation. It was not exactly the ‘sale of the century’.

Having now obtained the financial records of Eden Digital Ltd, Grant Bruce Reynolds, the Liquidator, has indicated that he will be focusing his investigation into Mr John M Carr’s activities as director: specifically on “any potential breaches under the Companies Act,” and on any possible voidable preferences”. He will also be “Reviewing the sale of the business [Erotica Lifestyles Expo/Eden Digital Ltd] to a related party [Esprit Events Ltd] pre liquidation including obtaining advice on the validity of the sale and whether or not adequate consideration was given by the Purchaser for the business.”

Among the 22 unsecured creditors of Eden Digital Ltd listed in the First Liquidation Report filed on 23 November 2011, are PJ Digital Ltd and the US-registered corporation Better Business Services, Inc.  [see note below] both owned and directed by John M Carr; NZX Media Ltd and Ezisoft Computer Systems Ltd, both directed by David Bruce Crow; ASB Showgrounds which has provided the venue for a number of successive Erotica Lifestyle Expos; IRD (penalties and interest for unpaid tax), and ACC (unpaid ACC levies).

Note: Better Business Services, Inc., also referred to as BBS Inc, was incorporated in San Antonio, Texas, on November 11th, 1983, and was authorised under Texas Charter number 67876000 to carry out defined business activities in Texas, including those carried out in a certified public accountancy practice (tax returns, bookkeeping, payroll etc). John M Carr CPA is director, president and registered agent of Better Business Services, Inc. an unsecured creditor of the NZ-registered company Eden Digital Ltd (In Liq). On 6th September 1984 under charter number P03291 BBS, Inc. was authorised to do similar business in Florida.

References:

Expo claim ‘bollocks’  By Daniel Adams. 29 November 2011

http://www.stuff.co.nz/waikato-times/news/6053216/Expo-claim-bollocks

Companies Office website: www.companies.govt.nz

Porn Kingdom asset sale to be questioned. National Business Review. 8 July 2009. By Lucy Craymer.

http://www.nbr.co.nz/article/porn-kingdom-asset-sale-be-questioned-105061