South Canterbury Finance Limited

[Beagle]

I see that Hubbard invested in Lord of the Rings and was done by The Hollywood shell.

http://www.nzherald.co.nz/business/n...ectid=10693123

Thanks Peat, a lengthy but interesting article.

[Enumerate]

... yet you have no interest in Aorangi Securities or in Mr Hubbards so called funds management business, should that read his related party lending business ?

I would have thought his reputation is inextricably linked to the above entities and SCF ...

First of all, related party lending is not illegal. Aorangi and HMF were set up to be explicitly related party. I doubt either entity would have got very far if it was announced that Mr Hubbard had no interest in any of investments.

I have never seen a proper balance sheet or cashflow analysis for either entity. The Statutory Manager (or defacto Liquidator) reports do not seem to present a comprehensive view of either entity. Maybe, by now, there is some complete disclosure - but I haven't kept up. With the multiple millions of dollars of fees paid in Statutory Management; the amount of time spent; the probable fact that there was an existing auditor ... how difficult would it be to present a comprehensive view.

Capitalising interest on an investment is not illegal. It is common practice in property development - why not farm development? If a wealthy benefactor wants to make the interest payments - this is also not illegal. Macquarie even turned it into a "model" - perhaps here we have the "Hubbard model" for development of farm capacity - there are alot of people prepared to attest to the fact that it seemed to work.

Clearly a robust level of disclosure should be enforced ... perhaps the Gen-Y accountants working for the Statutory Manager can't make their way around a manual set of journals? Who knows ... there seems to be a vast amount spent in search of the answer to all of this.

Given the power the state has applied to annex control of Aorangi and HMF given that one investor wanted a prospectus ... I would say the results do date have been very poor. Perhaps the power has gone to Adam Feeley's head - he now owns Allan Hubbard's life and doesn't see any need to disrupt this cozy situation by giving the public a coherent justification of why the powers of Statutory Management were invoked.

Perhaps that Jane Diplock finds this a useful distraction as to the question that why, on her watch, $8.5billion evaporated without any apparent action taken to even question events as they were unfolding.

Maybe this is all about the MED showing that they can act where Commerce dithers. That the MED aligned SFO has publicly visible teeth; whereas the Commerce aligned SFO was ineffective (in public relations, if not prosecution).

Maybe this is all about the politics of the new Financial Markets Authority and the need for the "new order" to exploit a crisis to concentrate and centralise broader powers of regulation and investigation.

[minimoke]

I have never seen a proper balance sheet or cashflow analysis for either entity.

It sounds like AH hasn't seen one either - consequently there is little chance the investors saw one either. I'd say they rank above you in seeking a copy - but I wouldn't mind a glance wither.

[Beagle]

[

QUOTE=Enumerate;329723]First of all, related party lending is not illegal. Aorangi and HMF were set up to be explicitly related party. I doubt either entity would have got very far if it was announced that Mr Hubbard had no interest in any of investments.

Under the Companies Act directors have a duty to act independently and in the best interests of the company for whom they are a director. The exponential increase in related party lending in SCF over recent years showed scant regard for this legal requirement. But one example, how was it in the best interests of SCF to advance funds to Lachie McLeod in a non recourse loan to buy shares in Southbury, a high risk $21 million dollar loan purely for the benifet of Alan Hubbard and direct contravention of the legal requirements of the Companies Act. It will be interesting to see how AH and his fellow directors who were asleep at the wheel ? justify this in due course.

I have never seen a proper balance sheet or cashflow analysis for either entity. The Statutory Manager (or defacto Liquidator) reports do not seem to present a comprehensive view of either entity. Maybe, by now, there is some complete disclosure - but I haven't kept up. With the multiple millions of dollars of fees paid in Statutory Management; the amount of time spent; the probable fact that there was an existing auditor ... how difficult would it be to present a comprehensive view.

If good financial records were there it wouldn't be, they arn't plain and simple.

Capitalising interest on an investment is not illegal. It is common practice in property development - why not farm development? If a wealthy benefactor wants to make the interest payments - this is also not illegal. Macquarie even turned it into a "model" - perhaps here we have the "Hubbard model" for development of farm capacity - there are alot of people prepared to attest to the fact that it seemed to work

.

It works in good times with rising property prices. Its clear AH had no idea how to cope with a GFC.

Clearly a robust level of disclosure should be enforced ... perhaps the Gen-Y accountants working for the Statutory Manager can't make their way around a manual set of journals? Who knows ... there seems to be a vast amount spent in search of the answer to all of this

.

Every accountant worth his salt understands journal entries, unless of course you come from the Alan Hubbard school of accounting practices.

Given the power the state has applied to annex control of Aorangi and HMF given that one investor wanted a prospectus ... I would say the results do date have been very poor. Perhaps the power has gone to Adam Feeley's head - he now owns Allan Hubbard's life and doesn't see any need to disrupt this cozy situation by giving the public a coherent justification of why the powers of Statutory Management were invoked.

The crown were into a process of mitigating their losses, remember they wern't the ones responsible for the NBDT crown guarantee scheme.

Perhaps that Jane Diplock finds this a useful distraction as to the question that why, on her watch, $8.5billion evaporated without any apparent action taken to even question events as they were unfolding.

She needs all the distractions she can get so she can sleep at night, I agree her performance has been woefully inadequate.

QUOTE]Maybe this is all about the MED showing that they can act where Commerce dithers. That the MED aligned SFO has publicly visible teeth; whereas the Commerce aligned SFO was ineffective (in public relations, if not prosecution).[/QUOTE]Maybe this is all about the politics of the new Financial Markets Authority and the need for the "new order" to exploit a crisis to concentrate and centralise broader powers of regulation and investigation.[/QUOTE
Who knows you could be right.

[Enumerate]

Under the Companies Act directors have a duty to act independently and in the best interests of the company for whom they are a director.

To whom do they owe this duty ... the shareholders.

The exponential increase in related party lending in SCF over recent years showed scant regard for this legal requirement. But one example, how was it in the best interests of SCF to advance funds to Lachie McLeod in a non recourse loan to buy shares in Southbury, a high risk $21 million dollar loan purely for the benifet of Alan Hubbard and direct contravention of the legal requirements of the Companies Act. It will be interesting to see how AH and his fellow directors who were asleep at the wheel ? justify this in due course.

The duty is to the shareholders ... if this is disclosed and they are happy with the situation it is difficult to see a contravention of the Companies Act.

If good financial records were there it wouldn't be, they arn't plain and simple.

Maybe they should ask AH for a walk through ... this simple solution seems beyond the wit of the Statutory Manager.

It works in good times with rising property prices. Its clear AH had no idea how to cope with a GFC.

And it also works in times of rising Fonterra payouts ...

Every accountant worth his salt understands journal entries, unless of course you come from the Alan Hubbard school of accounting practices.

Ok we fallback to the position that the Statutory Manager staff are witless.

The crown were into a process of mitigating their losses, remember they wern't the ones responsible for the NBDT crown guarantee scheme.

The statement does not make sense ... of course the crown were responsible for the Retail Deposit guarantee. Not withstanding this, anticipated losses under the scheme cannot possibly be used to justify Statutory Management of Mr Hubbard because Aorangi and HCF were not part of the scheme - SCF was part of it but was not put into Statutory Management.

[minimoke]

A bit off topic Enumerate, but interested in your views citizenship / natural justice etc views on whats just happened to Mark Hotchin. He's had his assets frozen by SecComm without the benefit of a Statutory Management or recievership as protection against any so far um lodged civil claims. It was a closed court hearing today and Hotchin had no advance warning of the application.

I'll have to look into this in more detail but I would have thought it would have been up to individual litigants to secure the security - not some govt agency. And how can a govt agency secure assets when there is no accusation of any wrong doing. As far as I can tell Hotchins actions were subject to rigorousness due diligence by the financial experts in Allied Farmers and Hanover / ALF investors had loads of professional independent advice from external financial investment experts.

It strikes me that as a NZ citizen we have much more to fear from todays actions than AH's Stat Man. This is brand new territory for the Govt - its something that has never been done before - yet Stat Man is a relatively well trodden road.

[Alan3285]

I'd be interested in Enumerate's views too - more educated on these matters than most.

With respect to Mark Hotchin though, my own view is that the process applied to him is far preferable when compared to what they did to Allan Hubbard.

At least Hotchin has had the protection of the court. The executive, represented in this case by the ComCom, had to make its case to the court and, in this case, the court agreed. Hotchin could and can challenge that decision in court.

Allan Hubbard was summarily deprived of his assets by the executive without any recourse to an independent judiciary. Those rights were hard-won in England almost a thousand years ago, and should not be lightly dismissed in a fit of schadenfreude irrespective of the final outcome.

Alan.

[Enumerate]

There was a proposal to give the new FMA the ability to act on behalf of creditors and secured depositors. At first glance it does "smell" like the application of this new power. However, there would need to be new legislation to achieve this end - it would not simply be a regulatory matter; I am not aware whether this has happened.

There is an ongoing investigation and there is the possibility that some kind of charges will be laid. The only comfort to be had in the situation is that it is before the courts; not a secret process within the executive.

Statutory Management of an individual is not a well trodden road.

[minimoke]

Statutory Management of an individual is not a well trodden road.

Donald Rea, Lisa Talbot and Catherine Trezone are three individuals to name a few who have been placed in Stat Man.

Donald placed investors money in "private" placements. (like first ranked secured mortgages?)

He was known for his humanitarian work and was known to be honest and caring (as AH is known for his good deeds)

He used word of mouth as his marketing tool - even using referrals from his tax consulting business (like a Timaru accounting firm?)

Rea plead his innocence till the end and some investors still continued to have faith in him.(As does AH and his supporters). He even held public meetings declaring it was all a government conspiracy.

Old investors were paid with the money of new investors (And AHs old clients were paid with new money he put in)

He lured people mainly from the Bay of Plenty into his scheme (AH seems to have firm support from the folks in Timaru) including farmers

He placed the money in areas his investors thought worthy. (like fledgling south canterbury businesses?)

Rea was involved in supporting charitable trusts (how many did AH have?)

Accounting paper work wasn't really his thing (have we heard that somewhere before?)

His wife Catherine helped out. (And who was AH's book keeper?)

Rea maintained a line that he was being persecuted by IRD and the SFO.

At his trial there were a few legal issues - he maintained he followed the law of the gods (see a religious connection here?)

Investor money went into some dodgy investments like a Nigerian money washing schemes (not laundering - bank notes actually got cleaned!) and railway bonds. A pile of money went into trusts linked to Rea (we are getting an idea of the high risk places AH put his "sophisticated " investors money now).

Apparently investors were still being paid out - right up till the time the SFO stepped in

Donald Rea was by all accounts not a well man - he died part way through his trial.

Beginning to see the similarities? - this path has already been well worn. On another thread I was asked (tongue in cheek) if I was building a time machine. I don't need to because history repeats - if you wait long enough the past simply comes along again.

[Enumerate]

Mini, yours is an argument by induction ... it is not a proof of guilt.

Until there is proof of guilt - the state has no business denying a citizen his rights. Nor is it proper for the state to deny a citizen his rights to embark on fishing expeditions in search of proof of guilt. Nor is it proper to fit Statutory Management on a party who is in the process of complying with a request to produce a prospectus (let the punishment fit the crime).

Policemen are always prone to believing an inductive argument. However, if you have ever done any deep investigation outside of human psychology - you realise just how dangerous belief in an inductive argument can be. This is why our justice system is based on deeper principles of rights and equity.