Businessman Paul Bublitz to go to jail for crimes during global financial crisis

Wednesday, 27 March 2019

Paul Bublitz, pictured here in 1999, was sentenced in the High Court in Auckland on Wednesday.

A finance company director has been sentenced to three years and two months in prison after being found guilty of crimes committed during the global financial crisis.

In February Paul Neville Bublitz, Bruce Alexander McKay and Richard Timothy Blackwood were accused of deliberately misleading investors to try to save failing investments.

At the High Court in Auckland on Wednesday Justice Kit Toogood sentenced Bublitz to three years and two months in prison. Mckay and Blackwood were sentenced to home detention.

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Bublitz was found guilty of four charges of theft by a person in a special relationship and two charges of false statement by a promoter.

McKay was found guilty of three charges of theft by a person in a special relationship.

Blackwood was found guilty of four charges of theft by a person in a special relationship.

McKay and Blackwood were directors of Viaduct Capital and Bublitz was on the board of Mutual Finance when the firms went into receivership in 2010, owing 110 investors $17 million and sparking investigations by Treasury, the Serious Fraud Office and the Financial Markets Authority.

In a judge-alone retrial in 2018 the men faced six charges of making a false statement, seven charges of false statement by a promoter and 17 charges of theft by a person with a special relationship.

The businessmen were first charged in 2014 for crimes committed during the global financial crisis.

Bublitz was found guilty of six charges, Blackwood four and McKay three.

Bublitz and his co-defendants were first charged in March 2014, but the trial, which began in August 2016, was aborted after it emerged the Crown, and the FMA as prosecuting authority, failed to disclose 14,619 documents.

The men were awarded $115,000 in damages at the time, including $40,000 from the FMA. The FMA was also ordered to pay $10,000 to the Ministry of Justice.

In 2017 Crown prosecutor David Johnstone said the essence of the Crown case was that Bublitz acquired and used the two finance companies to support his various property investments, and was assisted by his co-accused.

In sentencing Judge Toogood said Bublitz was 'the prime mover and instigator' of a plan to use the finance companies to undertake unlawful transactions.

Bublitz was set to benefit the most from a plan which 'involved the exploitation of investors' to defraud a Crown guarantee scheme designed to rebuild public confidence in the financial markets in the wake of the global financial crisis, Judge Toogood said.

The scheme, set up in 2008, guaranteed that the Government would repay those who lost money in failed financial institutions. In 2010 taxpayers bailed out Mutual Finance to the tune of $9.2m and Viaduct Capital $7.6m.

The offending was calculated and involved related party transactions that were 'sailing so close to the wind it was inevitable that they would cross the line into criminality', Judge Toogood said.

'The scale of offending was significant,' Judge Toogood said.

Bublitz's lawyer Simon Lance said his client deserved a reduced sentence due to rehabilitation, remorse, good character and 'extensive delays' in legal proceedings.

Because Bublitz had been deemed at low risk of reoffending there was no basis for a sentence that would deter his client from further offending, he said.

However, Judge Toogood said offending of this kind warranted a sentence that would deter others from committing similar crimes in future.

Lance said the offending happened at a time when even the most experienced directors were making bad decisions.

'This was an offending during a unique time - the GFC,' Lance said.

'They were faced with a situation they hadn't come across before.'

Judge Toogood said that was 'even more reason to behave appropriately'.

Judge Toogood laughed when Lance said there were no victim impact statements from investors to present in his submissions to the court.

'That's because the taxpayer stepped in and took the hit,' Judge Toogood said.

Lance said Bublitz started working in the business when he was 18 years old. At the time of offending, which occurred over three or four months, he was 40 years old.

Bublitz was genuinely remorseful for people that had been affected by the collapse of Mutual Finance, he said.

'He accepts that he got it wrong back then.'

Bublitz had been drained of his personal finances and suffered reputational damage, he said.

Judge Toogood accepted the fact that four years to get to charging the defendants and six years to go to trial, followed by a nine month aborted trial, had taken a toll on the defendants.

'It's a highly unusual if not unique factor which has undoubtedly had a punitive effect on the defendants.'

McKay's lawyer Greg Bradford said most mornings for the past five years the first thing his client would think about when he woke in the morning was whether he would be going to jail or not.

'It's 1825 days that Mr McKay has woken up and wondered what's going to become of him on 27 March, 2019,' Bradford said.

'That's the human side of it and that reflects the difficult task your honour has today.'

Judge Toogood acknowledged that would be 'a constant and draining burden'.

A fourth associated businessman, Peter Chevin, who pleaded guilty to charges, was sentenced to 9 months home detention in March 2017.

FMA general counsel Nick Kynoch said the case involved theft and deliberate misconduct in dealing with funds invested by the public.

It also involved abuse of the Crown Retail Deposit Guarantee Scheme, which resulted in the taxpayer meeting substantial costs and losses.

'This was a difficult and complex case, which took considerable time and resource to investigate and prosecute,' Kynoch said.

'However, such was the cynical and egregious nature of the misconduct, the defendants had to be held to account for their actions.

'It involved misleading investors, with false statements in the prospectus, as part of a deliberate plan designed to funnel investors funds, and ultimately tax payer funds, to support Mr Bublitz's failing commercial enterprises.'

*An earlier version of this article incorrectly stated that Paul Bublitz, Richard Blackwood and Bruce McKay and were all convicted of misleading investors.