By Bernard Hickey
South Canterbury Finance's driving force and the man behind Aorangi Securities and Hubbard Management Funds, Allan Hubbard, has denied fraud, senility and stupidity in a television interview, but he acknowledged others may have taken advantage of his naievety and that he made mistakes, as humans do.
Hubbard also said his fellow directors on the board of South Canterbury Finance rejected his advice to invest government guaranteed deposits into the stock market, instead choosing to put it into property.
Hubbard said in this 60 minutes interview on TV3 that he did not believe the conspiracy theories circulating about who was behind the government's decision to put Aorangi and HFM into statutory management and why it was done, but said some elements may be true.
The 60 minutes interview started with a tour of Allan and Jean Hubbard's house in Timaru and started with a discussion about Hubbard's frugal lifestyle.
"I'm basically a fairly insignificant person living in Timaru. I haven't chosen to have a high profile or live a glamorous life. I just don't think I'm anybody really," Hubbard said.
"Our personal philosophy is that the money is not ours. If we received it, it was to help other people," he said.
Asked if there was any need for Aorangi to fail, he said: "Abosolutely none whatsover. The company was solvent and we were about to issue a prospectus and I had in the previous year had introduced NZ$40 million of my own assets to ensure it was always sound."
Hubbard was asked about the anonymous letter of complaint that apparently triggered the statutory management.
"It was alleged that they'd asked for an investment statement and hadn't got one. I was unaware of that because I mainly dealt with Aorangi, and if a person had asked me for it I would have been aware of it and would have explained that we don't have an investment statement because we don't accept deposits from the public," he said.
"I don't mind if they attack me, but my wife is not intimately involved with it. She's only a director because you need to have two directors."
Hubbard was then asked flatly at 5 minutes 10 seconds in the video if he had committed any fraud. He replied: "Never. My conscience is very clear. If I have wronged anybody, I would certainly apologise and if it required monetary compensation I would do it to the best of my ability." It is worth physically watching the video at this point in the interview.
'Afraid of putting on the heater'
60 minutes reporter Rod Vaughan then spoke to a couple who had retired from a farm to a lifestyle block and had put their entire savings into Aorangi.
They spoke of wanting to die and being in tears during the winter because they were afraid to put on the heater in order to save money.
Hubbard supporter Paul Carruthers then spoke about the actions of the government.
"Why didn't they just put a bullet in his head? It would have been more humane," he said.
"There's been a concerted effort to push Allan out of the business and into retirement. My personal view is that statutory management being imposed onto Aorangi and HMF and Allan's other entities was actually a smokescreen. The real goal was South Canterbury Finance. The day after they put him into statutory management the deposits in South Canterbury Finance plummeted from NZ$2 million a day to NZ$200,000 a day. That's a 90% drop," he said.
Hubbard himself said he was not convinced anything untoward had been done by the authorites.
"Some people say it's all part of a plot to gain control of South Canterbury Finance. I don't personally believe that. There may be when you hear of some of the players involved. Maybe it was and I'm just a naive old person that's too honest and believes and accepts people at their word," he said.
Not senile or stupid
"I certainly object to being described as senile and stupid. But South Canterbury Finance was not run by me," he said.
"I was just one of four other directors and we had an extensive management system of chief executives and financial officers and accountants. The downfall of the company was the economic downturn when business conditions tightened up and a lot of businesses failed. I think you could attribute a lot of it to the government guarantee. That more or less gave the cue to finance companies that it was as good as government stock."
Hubbard denied investing too much in property before the arrival of the government guarantee.
"We'd been in the property business before that. We never spent up large on property. At the peak we were at 25%. That was governed by the board. They set the parameters. It was never set by the chief executives," he said.
Hubbard was then asked at around 11 minutes 20 seconds in the video if he had made loans that bent the rules.
"I had a charitable trust that I lent money people interest free. That had nothing to do with South Canterbury Finance. I mainly helped people to get on their feet or young fellas starting farming," he said.
"With hindsight looking back with South Canterbury Finance we could have been more prudent in other areas," he said.
'We're all human'
"When we got a lot of the money I wanted to invest in the share market, but my directors didn't agree with me. If they had done that, we would have been lauded as the most enterprising and thoughtful finance company in New Zealand because the share market went that way (up) and the property market went that way (down).
"But we all make mistakes because we're human aren't we?"
Hubbard said he still aimed to regain control of his assets and help investors get their money back.
"My aim is to get out of this statutory management business and to redeem my reputation and to assist everybody to get back to where they were and to suffer no loss."
17 Comments
Hmmm, when asked whether he'd committed fraud his hand went up to partially obscure his face - the only time in the interview he made that gesture. I'm not going to pretend I'm that chap off "Lie to Me", but that's a classic sign of lying.
He came off well in the interview, but it was a very sympathetic interviewer. Where were the hard facts and questions?
I'm not saying that he should be bullied, but surely 60 Minutes should have pushed him harder than that?
Some " guests " only agree to be interviewed if they have seen the questions first . A sharp shooter ( such as Kim Hill of RadioNZ , or Sean Plunkett ) would've got to the heart of the issue , no holds barred . Don't expect that from TVNZ or TV3 . See the BBC HardTalk interviews for professionalism in the art of extracting information and making a guest squirm .
I understand thru commentary in the Herald etc that Hubbard has always been quite reclusive, reluctant to give interviews or face exposure. This was taken as a possible warning sign of Ponzi schemes etc - lack of transparency - which fits with his other behaviours (related party transactions, lack of outside scrutiny etc). So the interview may fit that pattern - carefully choreographed to be sympathetic & avoid the hard questions.
Cheers
If a proportion of his deposits were in fact his own loans being returned to him, and he is not aware of this, then it's possible that he can believe that there is no fraud. He's not required to take this effect into account and in fact is probably unable to. But it seems likely that this has happened. An interest free loan to the guy starting up allows him to buy the farm from the couple retiring into town who deposit the proceeds with one of Hubbards entities.
Hubbard is entitled to believe that the deposit is someone else's money but in fact it could be money backed by the very loan he made the previous year. Being "inside" the business he can't see this happening he only sees a more deposits coming from "somewhere else".
So, as long as he can grow all will be well and if he had been allowed to carry on he may have been able to do so for a few more years. But, at any point in time, because of this effect, if you tried to unwind the empire the value of the assets backing the loans are less than the deposits. Isn't this true for any bank.
http://www.youtube.com/watch?v=uzef43gdupk&feature=player_embedded
Excuse me for not knowing much, but is it the done thing to put your funds in the sharemarket if you are Finance company... with a prospectus that says you finance people into stuff...so his board wouldnt let him do it, and lost the money anyway, and yes he could have made a packet if he had, but should he have suggested it in the first place??? Answers anyone?
If he's talking about Aorangi, then it's a private company with private objectives and it can put its money where it wants to. The directors are ultimately responsible for the decisions made. Also there was no public prospectus for Aorangi, because it allegedly didn't seek money from the public, but only from "habitual investors" - which is of course obviously bullshit.
Yeah, but I can't believe that the guy is just incompetent. He's been very succesful for many decades - if he was incompetent he would have gone under years ago, surely?
There must be more to it than that - there's an amazing story behind this and I don't believe that anybody has uncovered it yet.
Get to it Bernard!
Regardless of Hubbard's poor judgement and timing on a number of fronts that led to his "perhaps" untimely demise......it is clear there is a new story emerging worthy of note.
Botherway's involvement in recommending statutory management was clearly in my opinion a conflict of interest scenario.
I should like to have a chat with his (Botherway's) brother to see how he felt about having been wound up by Hubbard and Co for the paltry sum of 7.8 mill......and then onto George Kerr's connections to Botherway although a matter of record ...you can bet he had a major role in looking after Kerr's interests.
Not hard to see where this is going ....Govt...will go into lock-down stating you've had your lamb and now you wanna see if the Butcher's clean..............witch-hunts off go back to your life nothing to see here............regards...bla bla..bla... the Fat Man.
Once again everything will be technically legally correct and yet stinking to high heaven......have ya had enough yet punk...or do ya want some more...?...well do ya punk...?
Interesting to hear the old boy say " If I could have just issued another prospectus " ..
Classic Ponzi .. Borrow money at 8% - lend a huge chunk of it at zero and get the next bunch of suckers to fund the last lot's interest.
This was always going to end in sadness - Just a timing issue !
I think we have to go beyond the arguments that are being repeatedly circulated on the internet.
Jonathan Botherway is one of the bad debtors who in John Key's words brought down SCF.
Hubbard reminded us that he was just one of several directors. So why the witch hunt after Allan Hubbard.
It would be interesting to know who signed off the loan of more than $7.5 Million to J Botherway who obviously borrowed more than he could cope with and must have had a bad business plan. NZ is a small country so when all these people are borrowing millions to make their dreams come true where are the customers coming from to earn them the millions they need to pay all that money back? Or did he just believe that Allan Hubbard just gave money away?
The Gould couple put their life savings into Hubbard and now they have no safety net. But why was that? That was because Allan Hubbard was the richest man in the South Island and he got that way after 60 years of hard work. He didn't become the richest man in the South Island overnight so most people see him as being the most secure investment tool in the country.
When I watched 60 minutes I saw some strange things.
1. I saw an elderly retired gentleman commenting the way he would have run a business if he was still actively involved and saddened by the way a younger group of people had destroyed the company he spent his life creating i.e. he would have chosen shares rather than property. As a wise old 82 year old, hIs advice should have been worth a fortune.
The strange part is that while Mr Hubbard has the lifestyle and appearance of an elderly retired gentleman, he isn't. The missing link needs to explain why in 2010 he is at the centre of NZ's most scandalous financial disaster yet. When the last 2 Hubbard entities went into statutory management, I think the government finally worked out how to use the law. For the former Hubbard and Churcher business, it is business as usual which is part of the law. Aorangi and HMF missed out on that paragraph. Why was that?
2. Then I saw the church congregation meeting in the Westend Hall in Timaru instead of in the church. All those good honest people who are wondering why the government has taken their life savings away from them. Sad as it may be to say financial investment isn't something you do in church.
3. Finally the Facebook group who were running the meeting seem to care about the elderly but don't always get their facts right.
The facebook group has obtained a copy of the complaint that set the ball rolling but unfortunately if you look on the Securities Commission Website, anonymous complaints are permissible.
There she blows. The great white whale, the Securities Commission legally permits anonymous complaints. So a fake complaint written by someone who isn't even an Aorangi investment (as Mr Hubbard told us in 60 minutes he didn't know about the questions asked in the complaint because the person who complained had never contacted him) fits into the criteria legally acceptable to the Securities Commission.
The statutory management law legally permits the overthrow of a financial empire without a defence. The are no clauses in the law that provide for cross-expertise on the same data given to the statutory managers by a defending statutory manager.
Finally we have the flimsy 18 page report that has been published publicly. So the Statutory managers can say Mr Hubbard overstated by 25% but there is no supporting evidence to corroborate that affimration.
Being in the public interest still doesn't mean being published prior to final conclusions.
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