The Serious Fraud Office has been called in by New Zealand's education ministry to investigate the theft of up to NZ$750,000 (Pounds 306,000) in student loans.

The referral came after preliminary investigations by the ministry into a small number of loans administered by Student Loans Management Limited, which was contracted to the ministry between 1992 and 1994 to manage the operation of all student loans.

The ministry said the irregularities mostly related to several "purported" students on one distance-education course, the legal executive programme, at the Open Polytechnic of New Zealand in Wellington. It said the irregularities appeared to involve 80 people.

Student loans and allowances manager Tim Day said the irregularities came to the notice of the ministry's quality control unit in January with assistance from the polytechnic and the new loan accounts manager, GCS Limited, which took over the contract in September 1994, a changeover the ministry said was co-incidental.

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Steps had been taken to prevent similar irregularities occurring in the processes operated by GCS.

SFO director Charles Sturt said a great deal of investigative work had to be done before any decision was made on criminal prosecutions. However, several search warrants have been executed in Wellington since the case was referred to the office.

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Student Loans Management is a subsidiary of BNZ Finance, which issued a statement to the stock exchange saying the issues under investigation did not extend beyond the subsidiary. The company's share price dropped three cents following the announcement.

The contract with Student Loans Management provides that the company will be liable for monies misappropriated or stolen by its employees. BNZ Finance said it had not been determined whether any liability existed under the SLM contract and if so, the extent of any liability. If liability existed, BNZ Finance would meet it.