Auditor-General Lyn Provost and Prime Minister John Key may find themselves at loggerheads over just who is really to blame for the $1.78 billion the taxpayer stumped up to bail out depositors in the failed South Canterbury Finance.
It's too early to judge Provost's mettle.
Investigating whether Sammy and Pansy Wong pilfered the parliamentary travel budget for the wrong purposes (which was one of the latest reports to be pumped out of the Auditor-General's office) hardly requires balls of steel.
Pansy and Sammy had already scampered from the parliamentary precincts. They are the kind of small fry who tend to get flicked overboard to save political embarrassment.
But Provost's decision to investigate just how the Treasury administered the Crown guarantee that was extended to depositors in approved financial institutions in the wake of the global financial crisis puts her in the shark tank with some very big political players.
Make no mistake about this one.
Since Timaru financier Allan Hubbard's death, Key has repeatedly said he stood by the actions his Government took to put Allan and Jean Hubbard into statutory management along with Aorangi Securities and some other entities.
"The Government has to protect the rights of taxpayers in New Zealand and, in the end, the record will show hundreds of millions of dollars have been lost as a result of the collapse of South Canterbury Finance."
He also said the Government asked for and received advice about whether South Canterbury Finance and the Hubbards in particular should be put into statutory management. "We acted on that advice and we believe we did the right thing."
But Key puts a convenient cart before this dead horse.
Only a few tens of millions of so-called taxpayer "assets" are at stake in the Hubbard-related statutory management, a bunch of assets that were indirectly transferred to South Canterbury Finance when Hubbard was persuaded to "strengthen" that company's balance sheet.
The statutory manager believes those assets could still be owned by the Hubbards and thus be available to prop up Aorangi Securities in line with Allan Hubbard's wishes.
Probably a few other instances of this are the subject of legal argy-bargy between South Canterbury's receivers and the Hubbards' statutory managers. And these issues will be taken into account when the Government decides whether Jean Hubbard should come out of statutory management.
This sort of untidiness should also come under Provost's scrutiny as South Canterbury still had its Crown guarantee. But Treasury had its eyes wide shut.
Judging by the realisations that have been made so far by South Canterbury's receivers, the net cost to the taxpayer from the "bailout" is likely to be well over $1 billion - far more than the $700 million top figure that the politicians talked about last year.
What Provost - and she is undoubtedly a highly intelligent woman - should be questioning is why the Treasury didn't pull the pin on the finance company in January 2009 when (just two months after it signed the deposit guarantee scheme contract) it transferred $89.6 million of loans to parent company Southbury without seeking Crown consent nor even an expert view as to whether it was an arm's length transaction.
The Reserve Bank clearly had plenty of concerns. But the Treasury's warnings - such as they were - were toothless.
If the Government had slapped South Canterbury into statutory management once it became clear it was serial offending against the terms of the guarantee, it would have frozen all the finance company's assets and liabilities and bought time for a restructure.
Instead, South Canterbury's boy wonder CEO went on a spending spree, financing second- and third-string assets as fast as Auckland's wide boys could flick them on.
The depositors climbed on board for a Government-guaranteed ride.
And the ultimate funding gap got bigger.
If statutory management for South Canterbury had been imposed (as suggested several times), the Crown could have negotiated a deal with the depositors to preserve the face value of their investments but sharply reduce the interest income.
All that and more was obvious from a painstaking reading of the massive amount of documents and emails that were finally released by the Treasury and Reserve Bank well after South Canterbury was slapped into receivership. We should expect Provost to produce a robust report.
Her predecessor, Kevin Brady, certainly had the cojones to take on Governments. Brady crossed swords with Helen Clark when he effectively ruled Labour had unlawfully plundered some $800,000 from the taxpayers' coffers to fund its 2005 election campaign.
But in the wake of the financier's death, some tough calls have to be made.
One of the major issues is what happens now to Allan Hubbard's promise to make good Aorangi investor losses. In negotiations with Grant Thornton a process was under way.
The process was to result in a "global pledge" by the Hubbards to confirm and formalise the promises he had made to stand by the Aorangi investors. It would also result in the annulment of the transfers of shares to charitable trusts in conjunction with other farming shareholders and the transfer of the Hubbards' interests in various assets for the benefit of receivers.
Thornton notes those assets have a recorded value of $50 million to $60 million and are already included in the Aorangi portfolio.
Yesterday the Hubbard family welcomed the Prime Minister's indication of a process to consider Jean Hubbard coming out of statutory management next week.
A formal statement said Jean Hubbard and her family had instructed their representatives to take up the Registrar of Companies' offer to meet to progress matters, as a matter of urgency.
In the interim, the judicial review case - challenging the decision to place the Hubbards personally into statutory management, which was to begin in Timaru today - has been adjourned. The Serious Fraud Office has confirmed it was lifting the fraud charges against the deceased financier.
As for Provost, her team's report will be awaited with much interest.By Fran O'Sullivan Email Fran