AUSTRALIA: ASIC and DPP secure convictions in long running fraud trial

On 18th December, Mr David Knott, Chairman of the Australian Securities and Investments Commission (ASIC) released details of the successful prosecution of two men connected to the Nambucca Group of companies.

The prosecutions, together with other proceedings, have spanned a period of more than 18 months, but for legal reasons it has not been possible for ASIC to publicly announce the results before today.

The two men, Mr James Gordon Kearns and Mr Damien Parkes, were both former officers of the Nambucca Group, which was principally engaged in land development projects in the mid-north coast region of New South Wales. In the proceedings concluded on 18th December in the District Court of NSW, Kearns, a solicitor and former company officer, was sentenced to six years' jail, with a non-parole period of four and a half years, on nine counts of fraud arising from his involvement with the Nambucca Group.

Earlier proceedings brought by ASIC againstParkes resulted in:

A five-year jail term with a non-parole period of three years, on seven fraud charges relating to the Nambucca Group, handed down in the NSW District Court on 25 May 2001;
A 25-year ban from being involved in the management of corporations, arising out of Parkes' conduct in relation to the Nambucca Group, Schoeller Australia Ltd, and a number of other companies, handed down by Mr Justice Austin of the NSW Supreme Court on 10 May 2001; and
An additional 12-month jail term for misusing funds from the merchant bank Schoeller, handed down on 16 October 2002.
Parkes has appealed his conviction and sentence in relation to the Nambucca Group offences. The appeal was heard on Friday 6 December 2002 and a decision is pending.

'Today's sentence is the final stage in a series of actions taken by ASIC against the two men. Kearns and Parkes engaged in deliberate and calculated fraud against companies and investors. They were the perpetrators of serious deceit which warranted equally serious responses', Mr Knott said.

On 16 October 2002 Parkes appeared in the Sydney District Court for sentencing after pleading guilty to two ASIC charges relating to his conduct as Chairman of the failed merchant bank Schoeller Australia Limited. During 1996 Schoeller promoted itself as a merchant bank and offered high rates of return on short-term deposits. Approximately AUSD2.35 million was owed to investors when Schoeller was placed into liquidation in August 1997. The two charges involved Parkes' misuse of approximately AUSD160,000 of money invested in Schoeller, in 1996, which went towards acquiring a house in Vaucluse for his wife and children. Parkes was sentenced to twelve months jail on one charge and six months on another charge. These two terms are to be served concurrently over 12 months beginning on 24 May 2004 and expiring on 23 May 2005.

On 10 May 2001 Mr Justice Austin of the Supreme Court of NSW banned Parkes from managing a corporation for 25 years following an application by ASIC.

Mr Justice Austin found that Mr Parkes had repeatedly contravened the law by taking part in the management of Credit Alliance Pty Ltd, W G Herle Pty Ltd and Barrack Mortgage Managers Pty Ltd while he was an undischarged bankrupt. Mr Justice Austin also found that while Parkes was an officer of Nambucca Investments Pty Ltd, Lawnkin Pty Ltd and Schoeller Australia Limited, he had repeatedly failed to perform his duties as an officer honestly, fairly and efficiently, and that he had dishonestly transferred company property for his own benefit.

On 25 May 2001 Parkes was sentenced in the NSW District Court to five years imprisonment with a non-parole period of three years, on seven fraud charges brought by ASIC.

Parkes fraudulently transferred funds totalling AUSD162,500 while an officer of Nambucca Investments Pty Limited and Lawnkin Pty Limited. Parkes did not use the AUSD162,500 for purposes related to the business of Nambucca Investments or Lawnkin. Instead, he used some of the funds to pay off a debt for crew and management services provided in relation to the yacht 'Freight Train', which was previously owned by Mr Parkes and a regular competitor in the Sydney-to-Hobart race.

The Nambucca Group carried on business in the mid-north coast region of New South Wales as a finance company, until it was placed into liquidation in December 1995. Lawnkin Pty Limited (Lawnkin) was a wholly owned subsidiary of Nambucca Investments Pty Ltd (Nambucca) and was principally involved in land development projects. Nambucca raised funds totalling approximately $8.6 million by issuing debentures. The 134 debenture holders at the collapse of Nambucca were local retirees, pensioners and small superannuation funds.

On 2 December 2002, Mr Kearns was found guilty of:

dishonestly obtaining $300,000 from Lawnkin by falsely representing that the Equitable Group of companies, a New Zealand based insurance group, had agreed to take over Nambucca and its subsidiaries;
dishonestly and improperly using his position as an officer of Nambucca and certain subsidiary companies, by causing the payment of $164,920 to his family company Snoco Limited;
dishonestly obtaining a total of $50,000 from two investors, by falsely representing to them that their money would be invested in certain Equitable Group investment products; and
obtaining approximately $220,000 from an investor for Nambucca, by making false or misleading statements.