The founder and sole director of the Forestlands group of companies, Rowan Kearns was sentenced to four months’ community detention and 100 hours’ community work with a 9pm – 7am curfew last month.
This follows a prosecution brought by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – filed in the Nelson District Court in September 2020.
In February 2023, Mr Kearns pleaded guilty to:
– one representative charge of making a false statement under the Financial Reporting Act 1993, section 41 (false statement charge);
– two representative charges of failing to deliver financial statements under the Financial Reporting Act 1993, sections 18 and 38(b); and
– one representative charge of failing to lodge financial statements under the Financial Markets Conduct Act 2013, section 461H.
The false statement charge relates to Mr Kearns’ failure to ensure that the financial statements of three Forestlands companies recorded a $1 million loan to the Nelson Building Society.
As the sole director, Mr Kearns was responsible for facilitating and overseeing the process of filing financial statements. The financial statement charges relate to Mr Kearns’ failure to ensure financial statements for the year ended 31 March 2015, March 2016 and March 2017 were filed by the Forestlands Companies. Mr Kearns was convicted and discharged on the financial statement charges.
The judge declined Mr Kearns’ application for a discharge without conviction.
FMA Head of Enforcement, Margot Gatland, says: “Financial reporting is critical for investor confidence in the markets, and the FMA has used its powers in this criminal case to hold Mr Kearns to account for his offences and multiple breaches of the financial reporting legislation. We understand this has been a long and difficult case for the shareholders in the Forestlands companies. The court has agreed financial reporting must be accurate so investors can make informed decisions and give them a sense of protection when investing.”
Background
From 1998, Mr Kearns founded Forestlands New Zealand Limited and its 18 related companies. Forestlands companies collectively owned 1,934 hectares of forest land on the east coast of the North Island and in the south-west of the South Island.
The Forestlands companies provided vehicles for investment in forestry. The investment opportunity was advertised as an opportunity for “every New Zealander” to “participate in an affordable forestry and property investment programme.” Each Forestland company raised up to $2.75 million.
In mid-2015, Mr Kearns signed a conditional sale and purchase agreement for all forestry assets held by the Forestlands companies, but did not advise investors of the possibility of the sale before it was finalised. The sale was completed in October 2016 and totalled $23.5 million.
Following complaints received by investors, the FMA contacted Mr Kearns in regard to the need for him to file financial statements and discussed the appropriate means of distributing the proceeds of the sale to the shareholders. In early 2017, at the direction of the FMA, $18 million was placed in trust to secure the interests of investors.
In 2017 some of these matters were referred to the Serious Fraud Office.
In September 2018, the FMA successfully applied for the 18 Forestlands companies (which raised money from the public) to be placed into liquidation after determining that insufficient progress had been made towards completing the shareholder distribution process.
