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.
Related Share Investor Reading
Bothered by Simon BotherwayAllied 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
Jane Diplock Q & A Interview
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
Discuss this topic @ Share Investor Forum - Register free
From Fishpond.co.nz
Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz
c Share Investor 2010
