SFO to investigate Hubbards

In a rare move, Allan Hubbard has been placed into statutory management along with several entities he runs.
In a rare move, Allan Hubbard has been placed into statutory management along with several entities he runs.

Eight separate entities run by Canterbury millionaire Allan Hubbard have been placed in statutory management over irregularities involving investments worth $134 million.

The SFO will investigate Allan Hubbard and his wife Margaret, Aorangi Securities and seven charitable trusts for possible breaches of the Crimes Act.

South Canterbury Finance, with which the elderly Mr Hubbard was closely associated, was not part of the statutory management order, Mr Power said.

The Treasury confirmed "all eligible SCF depositors remain covered by the Crown's retail deposit guarantee scheme".

More than 400 Canterbury and Otago investors are affected by the lending, which a Companies Office investigation found was "inadequately documented," appeared to be unsecured, and was apparently made "contrary to the instructions given by investors that their deposits be lent under security of a first mortgage".

The Serious Fraud Office is now investigating.

Covered by the statutory management order are Hubbard and his wife, who face an investigation into unsecured lending made to them personally, and eight entities: Aorangi Securities Ltd, and the Te Tua, Otipua, Oxford, Regent, Morgan, Benmore and Wai-iti charitable trusts.

"Given the circumstances that Mr and Mrs Hubbard are involved as depositors, managers and borrowers, and that related party loans have not been properly secured and documented, it was felt statutory management was the only adequate option," Mr Power said.

He said the Securities Commission recommendation came after "careful consideration" and followed weeks of consultations between the Companies Office and Mr Hubbard.

Mr Hubbard stepped down from the board of the finance company last month after 30 years at the helm, taking on the title President for Life and saying his first priority was to find a new equity partner for the business.

Trevor Thornton and Richard Simpson of Grant Thornton were appointed as statutory managers, and were expected to be in touch with investors soon.

Companies are put into statutory management to prevent fraud and reckless company management and to protect investors.

Mr Power said the Securities Commission received a complaint from an Aorangi investor in February, who was shown neither an investment statement nor prospectus before making a deposit.

Aorangi was incorporated in 1974 and is solely controlled by the Hubbards, who are both directors.

It had begun life as a nominee or contributory mortgage company, "but seems to have since transformed into a finance company, raising runds from investors and on-lending those funds," the investigation found.

A diagram shows investors lending $98 million to Aorangi, which made an undisclosed total of unsecured loans to the Hubbards, who invested the funds in their own right or through related entities, including trusts.

Loans to other commercial interests were "secured by mortgage in some cases," the investigation concluded.

The decision to proceed to statutory management under the Corporations (Investigation and Management) Act 1989, first used to deal with the Chase Corp. collapse of that year, followed a Securities Commission recommendation made on Saturday.

- additional reporting NZPA

FULL PRESS STATEMENT

The Government has today placed Aorangi Securities, seven charitable trusts, and Mr Allan Hubbard and Mrs Margaret Hubbard into statutory management, Commerce Minister Simon Power announced.

South Canterbury Finance, with which Mr Hubbard is closely associated, is not part of the statutory management order.

The charitable trusts are: Te Tua Charitable Trust, Otipua Charitable Trust, Oxford Charitable Trust, Regent Charitable Trust, Morgan Charitable Trust, Benmore Charitable Trust, Wai-iti Charitable Trust.

"My action follows a recommendation from the Securities Commission, and I advised a meeting of the Acting Prime Minister and senior Cabinet Ministers of my decision at 2pm today," Mr Power said.

"The Registrar of Companies has referred a number of matters relating to Aorangi Securities Ltd to the Serious Fraud Office to investigate potential breaches of the Crimes Act.

"The recommendation of statutory management was the result of careful consideration by the Securities Commission.

"The decision to place these entities under statutory management is being taken pursuant to section 38 of the Corporations (Investigation and Management) Act 1989, and is effective from 3.30pm today.

"It follows a process that took a number of weeks and involved the Companies Office and Mr Hubbard.

"The main objectives are to prevent fraud and reckless company management, to protect investors and to enable the orderly administration of a company's affairs.

"The Commission considered other remedies.

"But given the circumstances of this case, that Mr and Mrs Hubbard are involved in the affairs of the entities as depositors, managers, and borrowers, and that loans to related parties have not been properly secured and documented, it was felt statutory management was the only option.

"The Commission was satisfied on reasonable grounds that Mr and Mrs Hubbard are so closely connected with the business and affairs of the entities that the statutory managers would be unable to effectively exercise the powers conferred by the Corporations (Investigation and Management) Act 1989 unless they are also declared subject to statutory management."

The Government has appointed Trevor Thornton and Richard Simpson of Grant Thornton as statutory managers.

"These decisions have been taken to protect investors, and the matters are now in the hands of the statutory managers and the Serious Fraud Office.

"I am advised that the statutory manager will be in touch with investors shortly."

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