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Case no encouragement to potential directors -- Thomas

Fuseworks Media
Fuseworks Media

By Alastair Bull of NZPA

Auckland, Aug 3 NZPA - One of the Feltex directors yesterday cleared of criminal charges of misreporting says the case would not have encouraged anyone wishing to become a company director.

Five directors of Feltex -- Peter Hunter, Peter Thomas, Michael Feeney, John Hagen and Tim Saunders -- were found not guilty of charges brought by the Ministry of Economic Development of failing to publish a breach of Feltex's banking covenants and not properly classifying its $A119.5 million ($NZ157 million) ANZ Bank debt facility.

Judge Jan Doogue in Auckland District Court said there was overwhelming evidence they were honest men of unimpeachable integrity and there was no evidence that they misled market shareholders or investors.

The Feltex directors argued in court that they had done everything that reasonable and conscientious directors could have possibly been expected to do in compiling their accounts, most notably employing accounting firm Ernst & Young to review the company's report.

Judge Doogue said the directors were entitled to seek and rely upon specialist advice.

"Ironically, it seems clear that the company's specialist advisers were judging the financial statement by reference to the requirements of the previous standards rather than those of the new standards," she said.

The prosecution had argued the directors should have done more to ensure the statements were compliant and they should have read the standards themselves.

Mr Hagen and Mr Thomas said the charges should never have been brought, and they would take the matter up with the Registrar of Companies, Neville Harris.

Mr Thomas said cases such as this would discourage people from becoming company directors.

"If you're someone sitting out there contemplating whether you want to go into public directorship life and you've seen the way this case has been conducted, would you take these risks?

"At a time when New Zealand needs good directors, is this the sort of thing we want? Absolutely not."

Mr Thomas said the judge had rejected each of the requirements the prosecution said the directors should have taken.

"You must ask the question: given she's rejected the basis on which the prosecution said this case should be brought, did the prosecution understand the law? Did they understand director's duties? Why was the case ever brought if every skerrick of evidence that they presented to her, she rejected."

Mr Thomas said costs reimbursement would be sought. He would not say how much that was.

David Cooper, one of the lawyers for Mr Saunders, Mr Hunter and Mr Hagen, said the directors would read the judgment carefully before considering whether any action would be taken against Ernst and Young.

The Companies Office said neither Mr Harris nor the Companies Office would be making any comment.

Mr Saunders, the company's former chairman, said it was questionable whether directors should be subject to criminal charges for misreporting where there was no fraud or deliberate misleading.

"In my view criminality was not an issue from the start, and yet we and a number of other directors out there are facing criminal charges in similar vein when there is absolutely no suggestion that they acted in a criminal way."

Feltex was floated on the New Zealand stock exchange in May 2004 and raised $254m. The company collapsed two years later.

The ANZ, which was owed $135m, placed Feltex into receivership, and days later its assets were sold to rival firm Godfrey Hirst.

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