Share Investor: Serious Fraud Office

Showing posts with label Serious Fraud Office. Show all posts

Monday, June 27, 2011

Allan Hubbard Saga: The Prosecution

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

Full SFO Statement on SCF Fraud Investigation

Hubbard Letter to Simon Power

Monday, June 20, 2011

Allan Hubbard Saga: Hubbard to Face Fraud Charges

Well, I was skeptical that Allan Hubbard would be charged with fraud over dodgy goings on at Aorangi Securities and Hubbard Management Funds but just a few hours ago fifty charges under sections 220, 242 and 260 of the Crimes Act have been laid today in the District Court in Timaru by Adam Feely of the Serious Fraud Office.

The charges relate to theft by a person in a special relationship, false statements by a promoter and false accounting and they carry a maximum prison term of 10 years.

I was of the view only a few months ago that Hubbard would cop a plea and plead guilty to minor charges after his lawyers had stalled for time over the last year at times citing the need to get extra paperwork and his own counsel even questioning his mental capability to stand trial.

I have always been of the view that Mr Hubbard has been guilty of some very serious charges in relation to the aforementioned business and associated companies like South Canterbury Finance and there was enough evidence to support that view and I feel more than slightly vindicated to have had that view and still stick by it even after pressure from self-appointed and self-interested feral Hubbard supporters like Paul Carruthers , whose defense while being interviewed on radio live this afternoon was to attack the interviewer because he really had little substantive of factual to say.

In a SFO statement on the fraud charges it is clear why they were made and the deliberations Feely and his people had made before laying charges:

“Whatever the public may think, in considering whether serious fraud has been committed, the motives or lifestyle of an alleged offender are ultimately irrelevant. We have to consider matters such as whether deceit has occurred; the losses caused by that that deceit; and whether the facts meet the prescribed elements of one or more criminal offences.”

Mr Feeley said that prior to making a decision to lay charges the SFO gave very careful consideration to the Solicitor General’s Prosecution Guidelines, including the issue of whether a prosecution was in the public interest.

“The decision to charge has been reached only after extensive analysis of the evidence, as well as discussions with senior prosecution counsel, including the Crown Solicitors and the SFO Panel Counsel,” he said.

“Throughout the investigation we have been aware of the level of public interest in, and support for, Mr Hubbard, and the issues of Mr Hubbard’s age and health which have been raised by his lawyers.”

“However, we also have to consider the interests of justice and the interests of the investors relative to the evidence we have obtained during our inquiries.”

“We are satisfied that, on balance, there is strong public interest in having this matter put before the Court, and any issues regarding fitness to stand trial will be matters for the Court to adjudicate on.” SFO Statement 20 June 2011

So the pros and cons have been weighed and on balance we are going to see a trial and I would concur fully with the decision to do so.

As I wrote months ago if there was no trial and a consensus come to on minor changes nobody from either side would have been happy. This way the public can rightly assess the guilt or otherwise of Hubbard based on the facts put before a count.

As has been the case through this saga and the dodgy goings on over the collapses of South Canterbury Finance I expect Mr Hubbard to come out at some stage and strenuously deny the charges and evidence of fraud and claimed he is innocent .

I will be glued to the Timaru courts to see what happens next as my readers will likely be and we will see how Mr Hubbard's defence goes.

A guilty plea that would save taxpayers further expense would be the best way to go.

Allan Hubbard Saga

Full SFO Statement on SCF Fraud Investigation

Hubbard Letter to Simon Power

Thursday, April 14, 2011

Hanover Finance: Hotchin Ponzi Scheme Suppression; Investors failed by SFO & SEC

The lifting of name suppression yesterday for Mark Hotchin and Kerry Finnigan, a former director and chief executive of the Hanover Group on a case involving their "investment " of personal money in a ponzi scheme, opens up a number of questions for investors in the failed Hanover Finance that went bust in 2008, taking with it over half a billion of investors money.

Hotchin's lawyer, on Hotchin's instruction, at the time argued that disclosure of his name would inflict the following on Hotchin:

* "There would be concern over the investment strategies adopted within the Hanover organisation because of the loss of credibility and damage to my reputation."

* "Investors and third parties with whom Hanover and its entities deal could well come to the conclusion that if one of the directors of Hanover was making inappropriate investment decisions personally then he could well be doing the same for the group. This in turn could cause a lack of investor confidence and support potential for a run on funds, the possible collapse or restructure of the group with obvious impact on its 600 employees."

* "The commercial relationship Hanover has with commercial partners would also be placed under stress. In those circumstances I anticipate that my fellow shareholder [London-based Eric Watson] and director could well request my resignation as a director."

Of course the claim that name disclosure for Hotchin would seriously affect the Hanover Group, in terms of lost investor confidence, may well have an element of truth to it but the main reason for the, until now, permanent name suppression, was self preservation on Hotchin's part, as the lifting of the suppression orders would have put a dent in his own ponzi scheme happening at Hanover Finance. NZ Herald, April 13 2011

The ponzi scheme that Hotchin lost money in promised 160% returns over 2 months, yes, you read that right a 960% annual return! The deals lacked paperwork and clear investment details and the recipients of the funds spent the money on personal items, like real estate, jewelry and extensive luxury travel - much like Hotchin and Eric Watson were doing with Hanover investors moola in fact.

The fact that Hotchin and Finnigan put their own money into this obvious ponzi scheme points at the risks they were taking with others money within the walls of Hanover's head office in Auckland. Clearly if investors knew about Hotchin's involvement in a get rich quick scheme they probably would not have piled more of their money into Hanover.

Disclosure of Hotchin and Finnegan's involvement in such a scam was clearly in the public interest then but the courts decided, wrongly in my opinion and probably in the opinion of most of us, to keep name suppression a permanent thing.

Judge Weir at the time stated:

"there is a failure also to identify any person or past person who would specifically benefit by publication of the details of the case".

It can be argued of course, as I have above, that those that would have benefited from lifting name suppression would have been prospective investors in Hanover.

Putting aside that poor judgement The Serious Fraud Office (SFO), that was directly involved in the case, and other legistlative arms of the State such as the Securities Commission (SEC) who are tasked with protecting investors from financially reckless individuals such as Hotchin and Finnigan, were happy to keep this kind of disclosure, that is normal in business, secret from investors.

The court judgement lay unchallenged by either the SEC or the SFO and therefore they failed in their duty to make investors aware of the poor judgement and financial ability and therefore the inability of Hotchin and Finnigan to be competent managers of other peoples money.

The New Zealand Herald should be congratulated for overturning what the SFO and SEC had no interest in.

Related Share Investor Reading

Mark Hotchin Comes Out Swinging
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

Recommended Fishpond Reading

Buy The Intelligent Investor & more @ Fishpond.co.nz

c Share Investor 2011

Tuesday, February 15, 2011

Allan Hubbard Saga: Hubbard looks set to cop a plea

The NBR has reported this morning that there is yet another delay in the Serious Fraud Office case against Allan Hubbard and his failed business empire.

There have been serious charges investigated and evidence of fraud, forgery and bogus investments but Allan Hubbard's legal team have been delaying the final charges being brought via the SFO by last year requesting further time to gather evidence and last month submitting an MRI brain scan of Mr Hubbard.

Classic delaying tactics for an accused as old as Mr Hubbard all pointing to his legal team trying to prove that Mr Hubbard is not fit to stand trial and maybe instead willing to plea bargain their way out of the more serious charges and admitting to some of the lesser charges brought and thereby saving face on both sides.

A decision by the SFO is "weeks away" according to SFO head Adam Feely and in that time parties to the case look likely to hammer out the terms of a plea bargain to make everyone look good.

After the SFO has spent so much time and money on the case they are unlikely to want to let the accused walk away scott free, there is after all clear evidence of serious charges, so allowing Hubbard to cop a plea, would, in the SFO's eyes, make their pursuit of him seem justified to the public.

Age or sickness should not of course be a factor in serious charges of this nature being brought against the accused but all indications are leading to a cop out and get out of jail free card for the hubbardmeister.

Allan Hubbard Saga

Full SFO Statement on SCF Fraud Investigation

Hubbard Letter to Simon Power

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.

Related Share Investor Reading

Finance Company & Related

Picking up Mercury with Chopsticks
Securities Commission needs a clean out
New Zealand Financial Oversight bodies fail Blue Chip Investors
Mark Bryer's at the top of a very shaky pyramid
Whatever happened to? Muriel Dunn
Financial Adviser Alert: Murray Weatherstone
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
Scam Watch: Optionetics
Peter Marshall deserves longer sentence

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

Wednesday, October 20, 2010

Allan Hubbard Saga: NBR VS the SFO

Good lord !

It just keeps getting worse for Allan Hubbard and his collapsed empire and the NBR is now being forced by the Serious Fraud Office to disclose documents and evidence over an investigation by one of their journos into the Hyatt Regency and Hubbards part in it. The NBR have until 9.00am this morning to disclose or the editor could face a $15,000 fine and the publisher a $40,000 slap or up to 12 months in the pokie.

If you were not aware of the shenanigans over the development of the Hyatt Regency and South Canterbury Finance part in it you might want to read the Matt Nippert NBR investigation into it published a few weeks back. Here is an excerpt just to put you in the picture:

"A South Canterbury Finance director muddied related-party links to the company’s single biggest debtor by making his freezing worker brother-in-law the sole owner of Auckland’s five star Hyatt Regency hotel.

South Canterbury loans to redevelop the hotel ballooned to $42.3m and government receivers are likely to book multi-million dollar losses when they finally sell it.

According to documents filed with the Companies Office 66-year-old retired Christchurch meatworker Peter Symes was a director and the 100% owner of the company controlling the Hyatt between February 2009 and August 2010.

The company had formerly been owned by South Canterbury or its parent company Southbury Group.

Mr Symes – who suffers bowel and lung cancer – told NBR he is the brother-in-law of former South Canterbury director Edward Sullivan.

He confirmed Mr Sullivan approached him to become a director and shareholder in numerous Hyatt-related companies in December 2008.

“My understanding is I was brought in because there were too many people from one company [South Canterbury] involved,” Mr Symes said.

Mr Symes said he acted on Mr Sullivan’s instructions."

Dodgy as a whole shop full of 2 bob watches huh?

The SFO clearly must have any incriminating evidence that the NBR has but any sources must be protected by anonymity if this was the rationale for them giving evidence to the NBR from the get go.

Without that anonymity we don't get people willing to dob in the criminals and yobs that try and rip us good folk off.

Tuesday, October 19, 2010

Allan Hubbard Saga: South Canterbury Finance to be investigated for Fraud

Well, finally the inevitable has come to pass. Allan Hubbard and his collapsed South Canterbury Finance company are to be investigated over possible fraud related to dubious inter related party lending and false statements made on financial documents.

"The Serious Fraud Office has launched an investigation into South Canterbury Finance. (see full SFO statement)

Chief Executive Adam Feeley said after inquiries by the SFO's new fraud detection unit, the SFO had grounds to suspect that a number of related party transactions involving SCF may have involved false statements or other fraudulent conduct." Stuff.co.nz

Those of you who read this blog will know that this has been coming for months but supporters still see that Hubbard has done nothing wrong.

Three Grant Thornton Reports 1 2 3 on related collapsed businesses and documents released last week have revealed so much inter-party stuff it makes Mr Hubbards empire look like a rather large Utah based extended family, with all the back biting, chest rubbing and back slapping that goes along with such a closed group.

We will see a closer investigation, more evidence and hopefully a jail conviction for Hubbard and his fellow travellers.

It has so far cost the New Zealand taxpayer the thick end of 2 billion (if you include interest, administration and lost opportunity cost) and will cost more as the Serious Fraud Office begins their investigation.

We ca only hope that this time the SFO has got their Is dotted and their ts crossed because this big smelly fish cannot be let go like all the other toe rags have.

See more @ NZ Herald

Monday, June 21, 2010

Allan Hubbard's Statement on SFO probe into Aoarangi Securities

Allan Hubbard, the South Island's richest man, has the Serious Fraud office after him over his Aorangi Securities mortgage company and seven charitable trusts . Mr and Mrs Hubbard's personal assets and bank accounts – have also been placed into statutory management.

While I have no idea of the reasons for the SFO taking this action, they claim it relates to issues over inter-party lending and insufficient documentation.

Here is the statement issued in rebuttal by Mr Hubbard yesterday to his clients:

"I am writing to you following recent action by a Government department.

"I have operated Aorangi Security as a mortgage company for over 30 years and during that entire period interest has been paid quarterly and the clients have suffered no loss of capital and have a prompt return of capital.

"The current position of Aoarangi is approximately as follows:

"Mortgage and loans owing to Aoarangi: $126 million

"Cash at bank: $2 million.

"This adds to $128 million.

"Client desposits $88 million which means a surplus of $40 million.

"The $40 million surplus belongs to myself and family and all our equity has been subordinated to client interest, ie, the Hubbard family stands any loss before clients do.

"The Crown seems to believe that your capital is at risk under my management and have appointed a statutory manager whose job is to realise all the loans and repay you your capital. This will take time as it is not possible for borrowers to repay loans at short notice.

"There are sufficent funds on hand to pay interest due at June 30.

"If for any reason you do not receive your capital back in full and provided it is within my resources I will meet any shortfall.

"I extend my personal apology for what has happened.

"I am sorry that this action was taken by a government offical with little consultation with myself and can only conclude that the government official has been misguided in his action.

"In the past month I have been working on finding a solution to South Canterbury Finance affairs and hope to arrange an agreement with an overseas company, subject to confirmation by June 30 to inject a large amount of capital which would place South Canterbury Finance in a secure position for the future.

"As you will have read in the media in February last I introduced $150 million of assets into South Canterbury Finance to ensure that there was an equity for preference shareholders and that they suffered no loss.

"I don't believe in the history of New Zealand that any person has acted more honourably than myself." Allan Hubbard, June 2010.

On the surface it looks like Mr Hubbard has the figures on his side and that the SFO looks to have moved too early.

Hubbard's South Canterbury Finance has had poor fortune over the last year or so but Hubbard has introduced his own personal money into the company to cover any losses his clients may have incurred had he not.

I am not saying there is no fire where there is smoke but I am at a loss over this scenario when dozens of other finance companies that collapsed over the last 3 years haven't had the same sort of scrutiny.

This move by the SFO is going to have an impact on South Canterbury and there is likely to be a run on funds there as a result.

Simon Botherway, a director from the Securities Commission, has also been embroiled in controversy over a serious conflict of interest with him helping in making the decision to put Mr Hubbard into statutory management and having a brother, Jonathan Botherway, whose company was put into receivership last year by Hubbard's company Canterbury Finance.

Share Investor

Monday, June 27, 2011

Allan Hubbard Saga: The Prosecution

Monday, June 20, 2011

Allan Hubbard Saga: Hubbard to Face Fraud Charges

Thursday, April 14, 2011

Hanover Finance: Hotchin Ponzi Scheme Suppression; Investors failed by SFO & SEC

Tuesday, February 15, 2011

Allan Hubbard Saga: Hubbard looks set to cop a plea

Thursday, December 9, 2010

Serious Fraud Office set to Make "Ponzi" Arrests

Wednesday, October 20, 2010

Allan Hubbard Saga: NBR VS the SFO

Tuesday, October 19, 2010

Allan Hubbard Saga: South Canterbury Finance to be investigated for Fraud

Monday, June 21, 2010

Allan Hubbard's Statement on SFO probe into Aoarangi Securities

Total Pageviews

Translate

Search Share Investor

Share Investor Blog Archive

Share Investor

Share Investor Portfolio Individual Shareholder Websites

Market/Financial News

Stockmarket/Business Blogs/Share Forums

My Favourite Reading