Three former directors of Nathans Finance have been found guilty of misleading investors.
Nathans Finance went into receivership in August 2007, owing $174 million to about 7000 investors.
In a reserved decision issued in the High Court in Auckland on Friday, Donald Young, Kenneth Moses and Mervyn Doolan were each convicted of five breaches of the Securities Act.
The judge found that untrue statements were made in a series of company statements and letters in 2006 and 2007.
Young, Moses and Doolan were each acquitted on one charge of breaching the Securities Act.
They were released on bail and will be sentenced on 2 September following a six-week trial. The charges carry a maximum penalty of five years' jail or fines of up to $300,000.
The Crown argued Nathans portrayed itself as a prudent lender when it had lent dangerously large amounts to its parent company VTL.
The men said they made the best decisions they could at the time in what was a competitive environment.
Another former director, John Hotchin, pleaded guilty for misleading investors earlier this year. He was sentenced to home detention, fined $200,000 and ordered to do community service.
FMA prosecution
The Financial Markets Authority welcomed Friday's convictions, saying it sends a clear message to the industry about its responsibilities.
The authority, which regulates financial markets, says the judgement shows that directors must ensure their investment documentation is not misleading and that they cannot delegate that duty to employees or advisers.
FMA chief executive Sean Hughes says it will resume civil proceedings against the Young, Moses and Doolan and is seeking penalties of up to $500,000 against each man.
Shareholders' Association chairman John Hawkins says it is a landmark judgement and the verdict makes plain that directors are responsible for making sure their investment documents are not misleading.
