SC FINANCE PLAYING OUT LIKE A SHAKEPEARIAN TRAGEDY
Imagine going from the richest South Island bloke to sitting at home with bank accounts frozen because (allegedly) someone who hasn’t lost any money has grizzled to the Companies Office about the lack of a prospectus? This would be comic stuff if it were not for the awful financial fall out that will result as a consequence.
The end of June signaled the end of the financial year for SC Finance. Investors in that company have voted with their feet sending the company’s listed Preference Shares to the basement (10 cents in the dollar). Where the ownership of this company goes now is going to be dreadfully important to all investors in this company. For example if it is taken over by somebody who destroys continuity of ownership, tax credits would be written off and ordinary and preference shares would be substantially affected.
The recent steps taken by the authorities which have placed Mr & Mrs Hubbard and their associated Aorangi Securities and charitable trusts under statutory management will have a profound affect on all business touched by Allan Hubbard. The relationship between all of the companies, Aorangi Securities, the charitable trusts and SC Finance still revolve a great deal around Allan Hubbard and his personal exposure to any calls that are made on him.
I don’t believe there will be a financial story that won’t be followed more closely in New Zealand for the next few weeks. There are reported to be 40,000 people involved in SC Finance thus the actions of the authorities in respect of how they deal with this closely associated business will come under the spotlight.
For the Companies Office to have kicked off the initial investigation into this alleged complaint by one person is extraordinary when looking back at their record over the last ten years. From 2000 through to 2005 this writer pleaded with the Companies Office to take action against a number of now notorious individuals who escaped prosecution by that office for many years despite the most overt fraudulent activities you could describe. Even the Serious Fraud Office was reluctant to get involved in the “Operation Allsorts” fraud exposure in Cambridge, despite this turning out to be a huge and profitable catch of shonky solicitors, accountants, mortgage brokers and other business people. In that instance the Serious Fraud Office only picked out two individuals to prosecute and then carried out their operation in a way which was completely unhelpful to the civil process of recovery (the rest were left to the New Zealand Police). In the South Canterbury debacle so many people have been part of the decision making process. They include the Minister of Commerce, Simon Power, the Cabinet, the Securities Commission and the Serious Fraud Office. The exact reason for the statutory management was given by the Securities Commission who said “that they were taking action pursuant to Section 38 of the Corporations Investigation and Management Act 1989 …. and that Mr & Mrs Hubbard are involved in the affairs of the entities as depositors, managers and borrowers, and that loans to related parties have not been properly secured and documented, it was felt statutory management was the only option”.
The big difference between this management and all those that have gone before will be that (1) there is no apparent loss occurred and (2) it has arisen out of an “alleged” innocent failure of documentation which might impact on the investors, whereas all the earlier incidents of intervention have arisen out of reckless and wanton mistakes of managers which have resulted in loss.
It really will be a tragedy if the statutory intervention infects the outcome of South Canterbury Finance and all other related parties at this most delicate of time in the financial recovery calendar.
David A Wood Llb; Affiliate of the Australian Securities Institute
