A South Canterbury Finance executive with 29 years' service resigned because of the risky lending he felt the business was involved in, a court has been told.
Former chief executive Lachie McLeod and former directors Edward Sullivan and Robert White are defending 18 fraud charges at the High Court in Timaru relating to the $1.7 billion collapse of the company in 2010.
From left: Edward Sullivan, Robert White and Lachie McLeod. Photo: Mytchall Bransgrove
While cross-examining a defence witness about the significance of risky lending that the company was involved in, Crown lawyer Colin Carruthers, QC, said the resignation of general manager of funding Kevin Gloag was driven by a letter from a nervous investor.
Elizabeth Barr had written to Mr Gloag expressing her horror at reading in the newspaper that South Canterbury Finance had been 'indulging in related party lending' and asking for an assurance that her investment was safe.
Mr Carruthers read part of Mr Gloag's resignation letter to the board where he asked, "Can I honestly tell her we have the business practices in place to protect her money going forward, given our current state of health?"
Mr Carruthers said the related party lending the company was involved in was of major concern to investors.
Testy exchanges
There were testy exchanges between the judge and the defence on Monday.
The Crown cross-examined South Canterbury Finance's former chief financial officer Graeme Brown, who has been appearing as a defence witness.
Defence lawyer Mark Corlett twice objected to the line of questioning. But Justice Paul Heath told Mr Corlett to sit down and wait to see where it was going, saying the purpose of cross-examination was to test the evidence from a witness.
Earlier, Mr Brown appeared to lose his patience with the questions and accused Colin Carruthers of subjecting him to a memory test.
Statements questioned
Mr Brown was questioned over evidence he had given relating to an earlier charge.
He was originally charged along with the three defendants and faced one charge of false accounting, which was later withdrawn.
The charge related to a 2009 transaction described by another witness as an accounting fiction.
Mr Brown has given evidence for the defence that the idea was his brainchild. Crown lawyer Colin Carruthers said this was at odds with his original statement to the Serious Fraud Office, in which he said the idea actually came from one of the accused, Lachie McLeod.
