Share Investor: Eric Watson

Showing posts with label Eric Watson. Show all posts

Thursday, December 9, 2010

Serious Fraud Office set to Make "Ponzi" Arrests

There is going to be an arrest today based on evidence obtained by The Serious Fraud Office (SFO) of an individual involved in a "ponzi" type money go round scheme where 10s of millions of dollars have gone south.

There is conjecture though as to who the individual might be. There are a number of SFO investigations currently active as listed on their website. Those involved with investor money, and with more than $20m of losses are as follows:

Aorangi Securities
B'On Financial Services
Bridgecorp
Capital+Merchant Finance
Dominion Finance
Five Star
Hanover Finance
Kiwi Finance
Nathan Finance
National Finance
South Canterbury Finance
WSD Global Markets

All the above have been involved in dodgy shell games with other peoples money so it is anyone's guess just who it might be.

In my opinion the most likely contenders are Hanover Finance, Aorangi Securities and South Canterbury Finance.

The last two entities are just two of Allan Hubbard's failed financial vehicles and have been under investigation for a number of months by the SFO and other financial oversight bodies but the investigation is unlikely to be finished yet due to the complications surrounding bookkeeping issues, the sum of money involved and the complex interrelation of insider companies lending money to each other.

There has been some indication though from evidence thus far disclosed that there has been some sort of "ponzi" like money go round, with fake investments, forged documents and lack of full disclosure or any disclosure at all with the bulk of investments made during the last two years or so.

To me though the most likely contender for manacles today will be either Mark Hotchin or Eric Watson from the failed Hanover Finance group.

In the dying days of Hanover many millions were transferred from the company to the personal accounts of the aforementioned and for many more years before that the company operated on a knife edge cashflow wise as dividends were stripped and short term money was invested in long term assets - as most finance companies did.

Hanover has been under the shadow of the SFO for most of 2010 and only a few weeks ago pressure was put on directors as they faced some "serious questions" from an SFO ready to finally grab one of the more high profile individuals from New Zealand finance company failures over the three or four years.

From the list of Finance companies above there are already a number of individuals as directors facing court time in 2011 and some have already been charged with other financial misdemeanors and worse and have either walked or faced a slap on the hand with the proverbial bus ticket.

Hanover is the most high profile finance company failure bar the Allan Hubbard Saga and Hotchin and Watson certainly do not have the support that Hubbard has had and would be a feather in the SFO cap as they seemed to have reached a frenzy of activity over the latter part of 2010 after being relatively quiet over the last 4 years on finance company failures.

The scalp of either Watson of Hotchin would be a major public relations coup for them and for that reason, along with their clear hide and seek nature with investors funds of their former business, I will take a punt and pick them for court time in 2011.

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Hanover Saga

Hanover, Allied Farmers deal more of the same
Hanover's "White Knights" are really daylight robbers
Hanover collapse: It was just a matter of time

Allied Farmers Saga

Allied Farmers: Rights Issue Decision
Allied Farmers: Prosecutions should be on the cards
Allied Farmers Fraud passes with little fanfare
Allied Farmers: What's it Worth?
Hanover, Allied Farmers deal more of the same

Allan Hubbard Saga

Full SFO Statement on SCF Fraud Investigation

c Share Investor 2010

Friday, December 4, 2009

Hanover, Allied Farmers deal more of the same

So the Hanover Finance "rescue" package proposed by Allied Farmers has been given the big tick in an "independent report" by Grant Samuels . Well GS does reports on a number of companies and favour in its reports usually falls on the side of the party paying the cheque, so we can largely discount the GS report.

This is what it basically said though:

The Allied Farmers proposal is superior to the status quo and a high risk of receivership for Hanover Finance investors, according to Grant Samuel. NZ Herald

I happen to have an alternative view.

As I said back in November 2009 when Hanover proposed their moratorium, the best thing to do would have been to vote to wind the company up and get what you could get.

Hanover investors instead voted to give Eric Watson and his fellow fraudsters another chance and of course we now know that has blown up in investors faces just one year latter.

Investors in Hanover and United Finance, who Allied are also interested in buying, have the choice again to this time give directors at Allied a chance to get some money back on assets that are not likely to improve in value any time soon, in a property market that is uncertain at best or to simply bury their pride and vote to wind up the companies and get the best they can get at today's market rate.

I bet you Mark Hotchin's $35 million house in Paratei Drive that taking the money now rather than crossing your fingers for a recovery under future management will be the best bet.

Related Share Investor reading

Hanover's "White Knights" are really daylight robbers
Hanover collapse: It was just a matter of time
Money Managers Saga: 3 Story wrap
Money Managers gives First Step investors the middle finger
Greed is bad: Geneva Finance Folds
Financial 101: Learn before you leap
Kevin's Blog

Related Amazon Reading

Resisting Corporate Corruption: Lessons in Practical Ethics from the Enron Wreckage (Conflicts and Trends in Business Ethics) by Stephen V. Arbogast
Buy new: $64.00 / Used from: $21.50
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c Share Investor 2009

Sunday, November 23, 2008

Hanover's "White Knights" are really daylight robbers

Some of the tripe written recently about how positive the "rescue package" that owners of Hanover Finance have put forward this week has me concerned because it presents a false picture of what is going on at Hanover now, and what has happened with the company in the past.

This from Phillip Macalister of Good Returns, a company that used to advertise on its websites and magazines for Hanover:

"It has been pretty open about its situation and its plans. That is a major plus." Phil's Blog, Nov 2008

When asked if he thought that the deal would silence all the critics he said: “I don’t think there’s any solution which would deliver that.”

The package being put forward though is designed to show that the “shareholders are standing up and supporting the business in its time of need.”

Also it makes sure that there is a future for the business. Good Returns, News Centre Sept 2008

Macalister contends that Hanover and its two top monkeys, Eric Watson and Mark Hotchin have been "pretty open" about the situation of the company but nothing could be further from the truth.

If one did just a little googling one could find a plethora of writing from credible investigative journos that would give lie to Phil's assertions. Unfortunately many of the 16000 investors in Hanover are of an age that they think googling might be related to self abuse rather than information that they would find illuminating about Hanover.

As far back as 2004, Deborah Hill Cone-ironically writing in a piece originally written for the National Business Review but reprinted in one of Macalister's websites-discovered there was trouble brewing for Hanover and its 16000 investors:

But if you want to write anything about Hanover Group itself why it has more than $100 million tied up in related party loans, say, or why it lent money to the sad sacks signing up for conman Henry Kaye's seminars or even the seemingly simple question of why it doesn't file consolidated accounts that's not considered quite so charming. Deborah Hill Cone, The Secretive Rise of the House of Hanover, Sharechat, March 2004

Just in the last two years alone the NZ Herald reports that $NZ86.5 million in dividends were creamed from Hanover and went to Watson and Hotchin:

Hanover Finance yesterday told the Herald that of $86.5 million in dividends it had paid out to Mr Watson and Mr Hotchin over the last two years, just over $70 million had been used by them or their companies to repay "related party" loans. Investigators swoop on Hanover, NZ Herald, July 2008.

But as Deborah wrote back in 2004, financial figures supplied by Watson and Hotchin for Hanover don't show the full picture because of the vast amount of inter-party lending and the complex nature in the way Hanover and its dozens of interrelated companies are structured is able to disguise inter-party lending so that Eric and Mark could even buy a super yacht with depositors money.

Why aren't accounts filed for Hanover that would show the consolidated picture for the whole group?

Karen Toner, one of the authors of KPMG's Financial Institution survey laughs when I say I'd like to see the consolidated figures for Hanover Group.

"Wouldn't we all? I think everyone in the industry would like to know that."

The group has a complex structure, with Hanover Group Holdings as the overall holding company and Elders Finance and Nationwide Finance subsidiaries of Hanover Financial Services. Elders is the parent company of subsidiaries United Finance, Leasing Solutions and FAI Finance.

Another finance company, Onesource Finance, is owned by Hanover Group, a separate subsidiary of Hanover Group Holdings. Deborah Hill Cone, The Secretive Rise of the House of Hanover, Sharechat, March 2004

Now the way Hanover was structured and its vast amount of inter party lending-that is lending that personally lined the pockets of Eric Watson and Mark Hotchin-may not be different from the 2 dozen or so finance companies that have done investors dough over the last two years but for Greg Muir, the outgoing chairman of Hanover, to come out today on behalf of the dastardly duo to make them look like white knights coming to the rescue of investors and they should all be grateful and in awe of their generosity has got to be the joke of the year:

"I can't talk about their personal motivations, I don't know what they are...all I can say is I think the shareholders have dug into their pockets as deeply as they feel they possibly can and this is the best result they can deliver." Hotchin told the Star-Times that shareholders had no obligation to put in more money but had done so because they wanted the company to keep going and repay investors. "I personally don't owe that money [to investors], neither does Eric, the company does, but we're pledging fresh money to help ensure they get back their principal. Hanover Duo Dig Deep, Sunday Star Times, Nov 2008

Morally, the principal duo do owe investors in Hanover because they extracted at least NZ$300 million from the company since 2001 and possibly as much as half a billion, which puts this weeks offer of $56 million of cash and dubiuos "assets" in some context.

The most recent publicly available Elders accounts, for the year to June 2003, show related party transactions of $93.5 million, up from $83.6 million in 2002, and $67.7 million in 2001. ShareChat, March 2004

Hanover Finance yesterday told the Herald that of $86.5 million in dividends it had paid out to Mr Watson and Mr Hotchin over the last two years. NZ Herald, July 2008

This easy money went to themselves and other "related parties" but hey according to Hotchin there is nothing personal about it, it is the Hanover business that owes 16000 investors more than half a billion bucks.

If you expect the same people to look after you in a restructure of the company, through their moratorium, that ran it into the ground in the first place then you need to take a good hard look at yourself.

Related Share Investor reading

Hanover collapse: It was just a matter of time
Money Managers Saga: 3 Story wrap
Money Managers gives First Step investors the middle finger
Greed is bad: Geneva Finance Folds
Financial 101: Learn before you leap
Kevin's Blog

Share Investor

Thursday, December 9, 2010

Serious Fraud Office set to Make "Ponzi" Arrests

Friday, December 4, 2009

Hanover, Allied Farmers deal more of the same

Sunday, November 23, 2008

Hanover's "White Knights" are really daylight robbers

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