Six-year jail term for LWR collapse losses

November 25, 2013 | By More

Court House-07LWR owner Kenneth James Anderson’s frauds leading up to the company’s $100 million collapse have left him shamed, devastated, bankrupt, without assets at the age of 66 – and now jailed for  six years.

The judge said he had lost everything, and was now “a broken man”.

Anderson’s dealings with Westpac bank involved loans totalling $100 million and left the bank with losses totalling $70 million when the company failed.

The bank had relied on the purported honesty and integrity claimed by Anderson, said Crown prosecutor Brent Stanaway.

Anderson reported incorrectly, in 36 financial statements from 2006 to 2009, on the health of LWR and Westpac had relied on that material. Mr Stanaway described the reports as “largely fictitious documents, with careful thought given to presenting a picture of solvency and profitability”.

He said Westpac should not been seen as “a faceless, corporate victim”. The money involved came from advances made up from many individual and corporate investors.

Judge Jane Farish said Anderson had provided the bank with “massaged accounts” which did not reflect the internal management accounts provided by his own accountants.

Anderson pleaded guilty to four representative charges of using a document with intent to defraud, before his Christchurch District Court trial was due to start on October 14.

Defence counsel Kirsten Gray said the Crown’s starting point of up to 14 years was too high for a prison term. The defence argued for a starting point of between seven and nine years to reflect his culpability.

She said it was not a case where Anderson had set out to steal the money from Westpac. He had incorrectly reported on the state of LWR because of the difficult period the company was in, a situation that developed from the devastating effects of Chinese imports and the high value of the New Zealand dollar.

Judge Farish agreed. She said the amount of the loss – about $70 million – did not reflect his level of culpability. The figure included $37.8 million from the actual loss, and another $31 million from the cost of the company’s receivership.

Miss Gray said the figure took into account the proceeds from the sale of the company’s assets, including its properties, and the sale of Anderson’s own assets because he was the guarantor for the loans.

She said he was ashamed and devastated, and had been left bankrupt and without assets at the age of 66. There was genuine remorse. “He has been essentially devastated by his own actions,” she said.

Mr Stanaway said Anderson’s methods had been aimed at keeping the true picture from Westpac. “It must have been obvious from an early stage that he wasn’t going to be able to trade his way out of this.”

The offending arose from his desire to maintain personal standing in the business community, as well as the prestige and status of LWR when it was “objectively an insolvent and unprofitable business”.

Judge Farish said the New Zealand apparel company was a long-standing Canterbury entity. Anderson bought it in 2001, and was responsible for the “massaged” accounts submitted to Westpac, which was the only victim in the offending.

The high New Zealand dollar made it increasingly difficult to trade, and the company was hit by the loss of one of its largest customers which switched to a Chinese provider for its products.

When the company was placed in receivership in 2009, the total credit facility provided to the LWR group amounted to $100 million.

She said the references she had received spoke highly of him. “You have had, until recently, a sterling career.”

She told him: “One of the things that sets you apart in this series of frauds is that you risked everything. You have not hidden any of the assets you acquired in the course of your career. Everything was subject to a personal guarantee.

“You have lost everything. You are now reliant on superannuation. You now don’t have a home. You have no other assets. You are very much a broken man.”

She referred to a description of Anderson as having an “autocratic” management style, which may have been because he wanted to keep other people at a distance.

She noted Anderson had written to the bank to express his shame and regret for the way he had treated those at the bank who had relied on his integrity.

There was no indication he was motivated by greed, but was trying to keep a business afloat, she said.

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