By Gareth Vaughan
The Securities Commission could reveal whether it will lay criminal charges against directors of failed property development financing group Hanover as soon as this month.
In a highly unusual move, the regulator announced last November that it had nearly completed an investigation into the Hanover group and might lay criminal charges against directors in the New Year. Then in December the Securities Commission successfully obtained approval from the High Court to freeze Hanover co-founder Mark Hotchin's New Zealand assets.
Asked when the Securities Commission might reveal whether it is laying charges or not, Commission spokesman Roger Marwick told interest.co.nz further news was likely this month.
"We expect to be able to update you on further progress around the middle or towards the end of this month," Marwick said.
A court hearing is scheduled for Monday and Tuesday February 14 and 15 as Hotchin looks to overturn or alter the court orders covering the freezing of assets and living expenses Hotchin's allowed. See Justice Helen Winkelmann's December judgment here.
Hanover's other co-owner, Eric Watson, was never a director of Hanover Finance, Hanover Capital or United Finance according to Companies Office records. However, he did sign Hanover prospectuses. Aside from Hotchin, other former directors include Greg Muir, who was forced to relinquish the chairmanship of sharemarket listed children's clothing retailer Pumpkin Patch late last year shortly after the Securities Commission revealed the possibility of criminal charges against Hanover directors.
Hanover froze NZ$554 million owed to 16,500 investors in July 2008. Investors' subsequently approved a moratorium proposal in December 2008 that pledged to pay them back over five years. Then a year later after getting back just 6 cents in the dollar, Hanover investors agreed to swap their Hanover debentures for shares in Allied Farmers valued at 20.7c each which are now worth less than 2c each.
Valued at NZ$396.2 million in last December 's deal, Allied Farmers had slashed the carrying value of the Hanover assets it acquired by more than NZ$300 million by June 30 to just NZ$94.3 million.
Hanover paid dividends to its shareholders of NZ$86.5 million in the two years ended June 2008.
The SFO revealed last November that, after a three month investigation, it had decided to investigate at least four or five Hanover Finance transactions with a particular focus on dividends Hotchin and Watson paid themselves prior to the company freezing investors’ money in July 2008, and debt restructuring before Hanover's finance book was sold to Allied Farmers in late 2009.
SFO chief executive Adam Feeley told interest.co.nz last week that the SFO's investigation into Hanover could take six months.
"We've got an entire room full of boxes, not to mention the (computer) hard drives we have," said Feeley. "It's a beast of a case in terms of size."
7 Comments
Gareth - the answer(s) to your question are :
It would seem you need to join the dots a little bit better.
(a) Several months ago there was a damming press release (in NBR or NZHerald?) from Alan Bollard and Treasury, slamming the Trustee's failures, and discussing the inter-relationships between the Finance Co's and the Trustees and the Auditors where the Trustees were pointing the finger at the Auditors. The report discussed the failure of the Trustees, which immediately drew a blame-shifting response from the Trustees representative lobby-group. And there the matter lay. It disappeared of the radar. Why didnt you question it.
(b) Trustees are responsible to the Bond-holders. Auditors are responsible to the shareholders. Different masters. Go back and have a look at Bollards article and then look at the Trustees nonsensical response which incidentally the media failed to pick up on. They are too busy behind their keyboards to investigate or even say whooooaaaa this isnt right.
(c) By comparison, in AU there were few if none finance company failures. However there were a number of spectacular property development failures with identical finance models to the NZ finance companies. The first and most notable was Westpoint. This has finally come to a conclusion with ASIC suing the Auditors who have quietly done a deal to hush it down .. see http://www.smh.com.au/business/compensation-at-last-for-westpoint-investors-20110201-1ace0.html
(d) SecCom and SFO have at their disposal Criminal and Civil remedies
(e) Have a closer look at the ASIC case of using persuasion and the threat of action.
(f) and that bring us back to the Auditors and the Trustees
Your comments please
Iconoclast, after reading your comments I thought you must have missed this story but then I saw you had posted a comment on it - http://www.interest.co.nz/news/trustees-safe-guarded-finance-companies-…
In answer to my question to UrbanFarmer, are you suggesting the SecCom and SFO should be suing trustees and/or auditors rather than finance company investors? Perhaps on behalf of the investors?
Absolutely
There are two dimensions to the question .. The criminal and the recovery. While Mandrake waves his sleight-of-hand right hand at Hanover and Hotchin everyones attention is on the criminal, overlooking what isnt being done simultaneously about the Trustees and Auditors and the Financial Advisors?
It invariably boils down to who has the deepest pockets. SFO and SecCom seem to be focusing on the "lowest hanging fruit" and targeting the criminal weapons in their arsenal at the perpetrators and everyone is overlooking the recovery aspects. Have a close read of the ASIC v Westpoint case. ASIC even got some reparation out of the (deep pocketed + fidelity insurance) Financial Advisors who had blindly funneled clients funds into this scheme. Sound familiar?
FYI an update on this. The Securities Commission says it has now interviewed Hanover senior managers and directors and received and reviewed a lot of information, including some from the SFO. It says there'll be another "progress update" on its Hanover investigation in mid-late March.
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