Tuesday, June 1, 2010

Allied Farmers: Prosecutions should be on the cards

I do not understand why the Securities Commission is not pursuing directors of Allied Farmers Ltd [ALF.NZ] for fraudulent behavior over failure to disclose the true value of assets bought off Hanover Finance in its prospectus issued in November 2009 before the restructuring of Allied and the assuming of new shareholders owned money by Hanover into the Allied group.

Assets assumed by Allied from Hanover are now worth 30% of what they were valued at in the November 2009 prospectus and ALF shares are trading below 6c.

Rob Alloway from Allied is now assessing assets on its books acquired from Hanover:

Yesterday Allied Farmers managing director Rob Alloway said it had completed assessment on a further $69.1 million of loans or around 65 per cent of the loans book acquired from Hanover and would be writing them down by $33.6 million. A further $37.5 million in loans had yet to be assessed.

Excuse me for my ignorance but didn't he and his mates do due diligence on Hanover assets before issuing their prospectus or did Rob merely take Mark Hotchin and Eric Watson's word that there was close to half a billion of assets to be realized for new investors in Allied Finance and existing Allied shareholders.

Of course given the smoke and mirrors nature of Hanover's business their loan book was likely to be one filled with inconsistencies, overvaluations, inter-party loans and poor record keeping but it was up to Rob and Allied and their mates to do sufficient homework so as to give Hanover investors an accurate picture of what they could get out of a sale of Hanover assets to Allied and therefore give them a real choice as to whether they should have agreed to the deal or vote to wind up Hanover.

Grant Samuels wrote an "independent" report into the deal late last year and said:

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

Rubbing salt into the wound the Samuel's report indicates:

Samuel said an alternative cash offer for Hanover was a remote possibility, and if it were to eventuate from another party it would be at a substantial discount to the current book value.
NZ Herald

Samuel's report then was clearly wrong on all counts and the money paid to them for the report came from Allied Farmers pockets.

I criticized their report last year but there seems to be few in the mainstream business media willing to lam-bast these bastards - the big boys protecting themselves again?

I would be loathed to say that the Allied deal done last year was a purposeful conspiracy to get Watson and Hotchin off the hook, but it has (so far?), and those involved in helping; Allied, Samuels, Hanover investors and Allied Farmers shareholders, et al should all feel some shame.

Where the hell are the real independent appraisers willing to call a spade a spade instead of fraudulent reports agreeing with the participants in the deal. Who the hell is protecting the investor, besides their own savvy and financial education?

I just wonder where The Securities Commission and the NZX are on the blatant failure to disclose the true value of Hanover assets in the November 2009 prospectus.

It is their duty to at least make a public statement but what SEC really need to do is break down the door of the Allied Farmers head office, grab the books and do a forensic accounting analysis on the Hanover/Allied deal.

Perhaps then we will find out where the bodies lie.

Allied @ Share Investor

Allied Farmers Fraud passes with little fanfare
Allied Farmers: What's it Worth?
Hanover, Allied Farmers deal more of the same

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Resisting Corporate Corruption: Lessons in Practical Ethics from  the Enron Wreckage (Conflicts and Trends in Business Ethics)
Resisting Corporate Corruption: Lessons in Practical Ethics from the Enron Wreckage (Conflicts and Trends in Business Ethics) by Stephen V. Arbogast
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