Fran O'Sullivan on business

Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: What odds for a fair trial for Hubbard?

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Photo / Dean Purcell
Photo / Dean Purcell

Such state force is seldom seen in New Zealand's commercial history, writes Fran O'Sullivan.

How can Allan Hubbard fight 50 fraud charges when the state controls his personal funds, refuses to fully pay his lawyers, controls documents he needs for his defence and still won't reveal who laid the complaint that ultimately led to him being slapped into a fiscal straitjacket?

Toss in the fact that he is 83 years old, on regular kidney dialysis and unlikely to face a trial for many months if not at least another year.

Then question if these circumstances persist for much longer whether a fair trial will even be possible.

One word describes Hubbard's situation - Kafkaesque.

Once lauded as the "South Island's richest man", Hubbard has been for many years a law unto himself. Plenty of people hold him to blame for the $1.75 billion cheque that taxpayers underwrote to pay Government-guaranteed depositors in his former flagship, South Canterbury Finance.

Others take a more kindly view.

But Hubbard now faces the full weight of "the state" in a fashion that has seldom been seen before in New Zealand's commercial history.

Think about it.

On Monday the Serious Fraud Office laid 50 criminal fraud charges against the financier in the Timaru District Court over his stewardship of Aorangi Securities and Hubbard Funds Management - two personally managed companies which were slapped into statutory management along with Hubbard and his wife Jean on June 20 last year.

The charges are very serious.

SFO chief executive Adam Feeley underlined this when he said the decision to issue charges had been reached only after extensive analysis of the evidence, as well as discussions with senior prosecution counsel, including the Crown Solicitors and SFO Panel counsel (one of whom ironically happens to be Hubbard's own lawyer, although for obvious reasons he does not sit on this particular panel).

Feeley's comments were designed to deflect criticism from Hubbard's loyal band of supporters. Many of these South Island-based folk previously had been given a financial leg-up by him to set-up businesses or farms.

Others are simply loyal investors who trusted their investments to him.

Irrespective of Hubbard's wayward business practices, they believe he has not deliberately set out to defraud them.

Either a district court judge - or a jury - will ultimately determine whether Hubbard is guilty as charged. That is, unless Hubbard's lawyers succeed in a "stay of prosecution" - an avenue they have already flagged.

But the state has to make quite sure its own actions are not oppressive.

On Monday, Feeley's office resorted to a "Hollywood" - a slogan dreamed up by a former SFO director to cover his office's practice of issuing a "whisper" so reporters were prepared for an announcement.

It is unlikely that Hubbard would have sought name suppression - although that might have given him and his wife time to prepare for the media onslaught.

But the SFO did not inform Hubbard's lawyer before filing the court "informations" so the option to seek an interim suppression order was denied him.

What is even more concerning is that Hubbard's lawyer, Mike Heron, wasn't given a list of the 50 charges until Monday afternoon - just the SFO's spin-laden press release.

The first opportunity Hubbard's legal team will have to properly confront the SFO charges will be at a July 4 callover.

Meantime Hubbard and his wife stay in statutory management. Their affairs continue to be managed by Grant Thornton.

Hubbard's lawyers, Russell McVeagh, have issued legal action to try and get the Hubbards out from under Grant Thornton's control. But the hearing date for the judicial review has yet to be set.

It is likely to be heard by a High Court judge in either September or October.

Russell McVeagh has so far received a partial payment of $1 million out of the total $2.5 million it has invoiced Grant Thornton for advising Hubbard. But unless the law firm gets a surety that sufficient funds will be made available, the extent of defence capability available to the financier to fight the fraud charges remains in limbo.

This is clearly a matter of some urgency.

Commerce Minister Simon Power has commissioned Sir John Anderson and Rod Pardington to review the decision to put the Hubbards into statutory management. That report is due at the end of this month.

There is no surety that the duo will recommend releasing the Hubbards from their current bonds.

But that step would seem reasonable given the fact that Hubbard and his lawyers contend he will then be able to access sufficient of his remaining personal wealth to underwrite the court actions.

The financier also wants to put more of those assets behind Aorangi Securities to shore it up - but cannot do so until he is released.

The Hubbards are not the only ones seeking release from their state bonds.

A group of investors in Aorangi Securities also plans to meet in Timaru tomorrow to develop a commercial strategy to get that company out of statutory management. Both they and Hubbard contend that the statutory management process is undermining the value of the company.

Long-time finance guru Tur Borren is involved.

With the whole apparatus of the state bearing down on the Hubbards, it's time for some careful considerations all round.


Note: The comments feature for this article has been removed due to the high number of postings that were unpublishable due to legal reasons. All of the charges facing Allan Hubbard are currently before the NZ courts. Below is a selection of comments that have been published.

- NZ Herald

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