Eaton calls for law change

Press, 1 March 1989, Page 8

Eaton calls for law change

PA Auckland Creditors appeared bemused when Michael Eaton, a former director of Kinetic Investments, called for more laws to control futures traders.

At the winding up of his company, he said several people must prompt the Government to pass laws. “Could it have been avoided?” he asked.

“Compulsory audits would have saved millions of dollars.”

Eaton, aged 30, told the meeting of about 200 creditors that he wished to express regret and sympathy to all those who lost money in Kinetic.

It was revealed by the provisional liquidators, John Waller and Paul Preston of Price Waterhouse, that there was a net estimated shortfall of more than $9.7 million in Kinetic, taking into account reported futures profits.

Without these the figure was $7.22 million. Price Waterhouse was appointed liquidator at the meeting which revealed little to creditors about the whereabouts of the missing money.

Pressed for answers, Eaton on several occasions said the matter was sub judice. He faces seven charges of theft by fraudulent conversion involving more than $1 million. The depositions hearing is set for June 19. The other director of Kinetic, John Peach, told creditors he had trusted Michael Eaton completely and relied on his reports of financial affairs.

He said there was a possibility he could become bankrupt over the company collapse. Mr Peach and his wife, Sylvia, had shares in the company. So did Eaton and Rochelle Hook, who later became Eaton’s wife. The four had between them 20,000 shares at $1 each when the company was incorporated on June 22, 1984. Mrs Eaton resigned from the company on August 10. The most pressing question from creditors was what money was in a trust fund.

If a trust is upheld by the Court then there will be no funds for many of the investors, particularly those who traded futures

The futures trading contributed to a shortfall of $4.3 million in funds.

There appeared to be confusion over whether it included money traded on the futures markets as well as that for investments.

The matter will be addressed soon by the High Court. The Official Assignee, Mr On Hing, said there were moves in Melbourne to secure property seized by police when Eaton was arrested there.

Eaton and his secretary, Christine Frampton, disappeared from New Zealand on Labour Day week-end, a week before the company collapse. Eaton was extradited from Australia late last month after he was caught speeding in Victoria. Mr Preston, of Price Waterhouse, said the winding up of Kinetic involved a number of complex legal issues. The job would cost between $llO and $l2O an hour. The cost of the liquidation was raised when Mr On Hing said he had cause lately to question the levies imposed by some receivers.

“There have been cases when a firm has acted for one party or debenture holder and it Is my view that charges have been grossly excessive,” he said. Mr On Hing yesterday also questioned Jeremy Putley, from the Development Finance Corporation. Mr Putley, who put his name forward to be on' a committee of inspection for Kinetic, said his company was owed $250,000 by Kinetic which it had “inadvertently paid.” Mr On Hing was critical of the fact that the money had gone straight into Kinetic’s bank account without any security. “I thought D.F.C. had an impeccable record,” he said. When Eaton was questioned about the statement of financial affairs he showed to Mr Peach, he said: “I virtually never saw the bank statements. They always went to the accountant and his assistant who loaded them into the computer.”

Mr Peach said he looked after individual accounts, while Michael Eaton handled pooled accounts for futures trading.