Tuesday, June 21, 2011

Allan Hubbard Saga: Fraud Charges - The Detail

In the light of yesterday's charging of alleged fraudster Allan Hubbard with 50 plus counts of fraud and deception including; Theft by person in a special relationship, false statement by a promoter and false accounting, it is worth looking at what these charges mean in terms of their detail and evidence needed to charge and what possible judicial remedies are available to the Serious Fraud Office should Allan Hubbard face the courts in Timaru and be found guilty of fraud and deception of investors who lost 10s of millions in Hubbard Management Funds and Aorangi Securities.

Hubbard has strenuously denied any guilt at all and he has indicated he will fight the charges.

Charges were laid against Mr Hubbard because the evidence against him was overwhelming and it was in the public interest to charge him even though there could be questions - and an out argued by his lawyers, at the expense of investors - over his ability to stand trial on the basis of his health and age. This was considered the smaller of the reasons why Hubbard shouldn't be charged and the issue of public interest to get at the truth trumped the senility and bad health defence and therefore charges were laid.

From a statement from the SFO yesterday indicating some legal detail surrounding the charges from the Crimes Act 1961:

"Crimes Act 1961

Section 220 - Theft by person in special relationship

(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—
(a) to account to any other person for the property, or for any proceeds arising from the property; or

(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.

(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.

(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.

(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.


Section 242 - False statement by promoter, etc

(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent—

(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978 ; or

(b) to deceive or cause loss to any person, whether ascertained or not; or

(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.

(2) In this section, false statement means any statement in respect of which the person making or publishing the statement—

(a) knows the statement is false in a material particular; or

(b) is reckless as to the whether the statement is false in a material particular.


Section 260 – False accounting

Every one is liable to imprisonment for a term not exceeding 10 years who, with intent to obtain by deception any property, privilege, service, pecuniary advantage, benefit, or valuable consideration, or to deceive or cause loss to any other person,—

(a) makes or causes to be made, or concurs in the making of, any false entry in any book or account or other document required or used for accounting purposes; or
(b) omits or causes to be omitted, or concurs in the omission of, any material particular from any such book or account or other document; or
(c) makes any transfer of any interest in a stock, debenture, or debt in the name of any person other than the owner of that interest.

4. Solicitor-General Prosecution Guidelines

The purpose of the Guidelines is “to ensure that the principles and practices as to prosecutions in New Zealand are underpinned by unified values. These values aim to achieve consistency in key decisions and trial practices. If these values are adhered to, New Zealand will continue to have prosecution processes that are open, fair to the defendant, witnesses and the victims of crime, and reflect the proper interests of society.” SFO Statement, 20 June 2011

Take a look at the full statement made yesterday by the SFO and pay particular attention to "the test for prosecution" which is in brief here:

"The Test for Prosecution is met if:

(i) The evidence which can be adduced in Court is sufficient to provide a reasonable prospect of conviction – the Evidential Test; and

(ii) Prosecution is required in the public interest – the Public Interest Test".

The test, if it reaches court, will be above all the preponderance of evidence against Hubbard and the prosecution arguing these charges in a manner that shows clear guilt. The outcome, even if Hubbard is found guilty, may be disappointing to people like me and to investors who have lost money because of Hubbard's business 'inconsistencies" because the defence may be argue diminished resposibility for a number of legal and "moral" reasons.

Stay tuned.


Allan Hubbard Saga

Full SFO Statement on SCF Fraud Investigation

Hubbard Letter to Simon Power

Download Grant Thornton Report 1
Download Grant Thornton Report 2
Download Grant Thornton Report 3
Download Grant Thornton Report 4
Download Grant Thornton Report 5
Download Grant Thornton Report 6

Join the Put Allan Hubbard Away Facebook Group

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c Share Investor 2011