Inquiry into N.Z.F.P. share deals

Press, 27 January 1988, Page 1

Inquiry into N.Z.F.P. share deals

By

ADRIAN BROKKING,

finance editor, and PA

The Registrar of Companies has begun an investigation into the share dealings between N.Z. Forest Products, Ltd, Rada Corp., Ltd, and Prorada, Ltd.

N.Z.F.P. is New Zealand’s third-largest publicly-listed company. Rada and Prorada are its off-shoots. The probe was confirmed yesterday by the Minister of Justice, Mr Palmer, who said that “the series of events surrounding these companies, as portrayed by the media, has given rise to the interest of the Registrar. He now wishes to determine the factual situation before considering any further action.” "The integrity of the sharemarket as a method of financing the productive activities of the corporate sector is being questioned. These doubts need eradicating to instil future confidence in that mechanism.”

The investigation now under way was being done under the jurisdiction of section 9A of the Companies Act, 1955. That section empowers the Registrar to inspect company dealings. Mr Palmer’s statement was made after reports from Auckland that the head of the Justice Department’s corporate fraud unit, Mr lan Ramsay, was at Rada’s Auckland office yesterday. Last week a disgruntled N.Z.F.P. shareholder, Mr Max Gunn, appealed to Mr Palmer requesting an investigation of Rada because of its $5OO million loss in the sharemarket crash. Rada’s biggest investment is a 44

per cent shareholding in N.Z.FJ 5 . Mr Gunn, an Auckland accountant, was among the many shareholders who criticised the N.Z.F.P. directors at a special shareholders’ meeting last Tuesday. Also that day Mr Ramsay said that the fraud unit would launch investigations into some of New Zealand’s most powerful public companies if it had the resources. He named one large company, but on legal advice the name was not published at the time. Yesterday Mr Palmer said: “Events involving publiclylisted companies in recent weeks are causing concern' both here and overseas.”

N.Z. Forest Products issued a statement pledging the company’s support for the investigation. N.Z.F.P.’s corporate affairs general manager, Ms Rosanne Meo, said the company hoped the investigation would clear up “the confusing and unwarranted speculation that has been surrounding the company in recent weeks.” “It has obviously been very difficult for the company to respond to rumours and unsupported accusations given the normal legal and commercial restraints of the marketplace,” said Ms Meo. It was vital both N.Z.F.P.

shareholders and New Zealanders in general retained their confidence in the integrity of the sharemarket, particularly after the October crash, she said. N.Z.F.P. was involved in a programme to rebuild the confidence of its

The Opposition spokesman on justice, Mr Paul East, said Mr Palmer was shutting the stable door after the horse had bolted.

“For the last two years the Opposition has been calling for stricter rules to govern share trading activities — but the Government, in its scramble to deregulate financial markets, has failed to put in place proper and adequate rules to control dealing in shares.

“After three years of frantic activity on the sharemarket it is getting a little late in the day for the Minister of Justice to finally take an interest in this matter,” Mr East said.

Rada was floated in January, 1986, to the shareholders of N.Z.F.P. as an investment subsidiary. The same year it bought a 24.9 per cent stake in N.Z.F.P., which virtually protected the forestry giant from a hostile takeover. Also that year Prorada Properties, Ltd, was floated to Rada shareholders as Rada’s property investment arm. All three companies have the same chairman, Mr Bob Gunn.