We have looked at a probable defence for alleged fraudster Allan Hubbard so now we must look at the case for the prosecution; what the details surrounding the case are and what he could be convicted of if found guilty.
In the Sixth Grant Thornton Report (A 7th is due at the end of June) it outlines the detail of the SFO case thus far and is a good starting point for prosecution purposes:
On Aorangi Securities Ltd: “The amount due to investors is $96 million. The preliminary estimate of the realisable value of the portfolio is in the range of approximately $87 million to $97 million.
Based on these estimates, investors could suffer a loss and Mr Hubbard would receive no money from Aorangi. No interest would be paid with realisations at this level.”
On Hubbard Management Funds: “The report states that some shares recorded as belonging to HMF are subject to possible claims from others. They say shares have been pledged as security to financiers for borrowings made by Mr Hubbard or parties related to him.
As previously stated, statutory managers’ reconciliation as at 31 March 2010 indicates that there were insufficient assets to provide investors the investments noted on their statements. There were also investments that were not allocated to investors and some valuations that, in the statutory managers’ opinion, were incorrect.
Once all adjustments and corrections were processed, the shortfall of assets compared with the investor statements is estimated at about $31 million.” Sixth Grant Thornton Report
So here we have a "shortfall" of $31 million for HMF and a reasonable chance of recovery with Aorangi. In relation to the facts as stated above we now come to how and why some of the above occurred.
Under the Crimes Act 1961 Mr Hubbard has been charged with more than 50 counts of fraud and the SFO have outlined why they are charging and what for:
"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". Crimes Act 1961
So Mr Hubbard has been charged with false accounting, false statements and Theft by a person in a special relationship. These relate to instances of forged signatures, failure to do adequate paperwork, omissions in paperwork, failure to disclose business relationships in relation to insider lending, failure to provide adequate information on which investors can make clear decisions on investing with Hubbard etc.
The evidence for prosecution is very clear, it just has to be proven in court, if it gets that far.
I am picking the SFO will pursue the false accounting, false statements made as a promoter and the theft charges as they appear to be the most serious charges laid.
These are very serious charges and any one count alone if found guilty would be enough for a suitably serious sentence.
Allan Hubbard Saga
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