The founder of property finance company Fincorp, which collapsed early in 2007 with debts of $200 million, is facing jail after being found guilty of making a series of payments to himself a year after setting up the company.
Fincorp founder Eric Krecichwost was found guilty yesterday in the NSW District Court of dishonestly using his position as a director to pay himself and family members more than $3 million in fees to which he had no claim.
The jury heard that in 2003 Krecichwost orchestrated the payment of three cheques to himself and members of his family for “spotter’s fees” for setting up property transactions.
The three transactions – for $1.98 million, $900,000 and $825,000 – were unlawful because none of the property developments made a profit.
The jury found Krecichwost guilty on all three charges. Each offence carries a maximum jail sentence of five years and a fine up to $220,000.
Krecichwost has been bailed and will be sentenced on March 25.
The Australian Securities and Investment Commission had fought a running battle with Fincorp since 2004, when it began investigating claims that the company has misled investors in a $75 million equity raising the previous year.
When Fincorp collapsed under $200 million of debt in 2007, ASIC launched fresh investigations which led to criminal charges against Krecichwost and other directors.
Fincorp was an early casualty of the global financial crisis, taking down more than 8000 investors when it went into administration in March 2007.
Fincorp’s 10 property projects – six in Queensland and four in Victoria – were sold by insolvency firm Korda Mentha but unsecured note holders received nothing from the sales.
Former Fincorp investors have launched a class action against the trustee of the failed company, Sandhurst Trustees. The action, which is being run by law firm Slater & Gordon, is seeking to recover as much as $100 million.
