Govt seizes control of Hubbard affairs

Allan Hubbard. Photo / Supplied

The Government yesterday moved swiftly to seize control of millionaire South Island financier Allan Hubbard's affairs.

And it confirmed the Serious Fraud Office is investigating possible breaches of the Crimes Act.

However Hubbard's troubled South Canterbury Finance remains under the control of its board and management, and its 30,000 investors - owed about $1.3 billion - remain protected by the Crown Retail Deposit Guarantee.

Commerce Minister Simon Power said yesterday that Mr Hubbard - reportedly the South Island's richest man - his wife Margaret, their company Aorangi Securities, and seven associated charitable trusts had been placed under statutory management.

Power said he took the action after receiving a recommendation from the Securities Commission 24 hours earlier.

It is the first time statutory management has been used in seven years.

Information supplied by Power's office said Aorangi Securities had been under investigation by the Securities Commission and then the Registrar of Companies after a complaint was received this year from an investor who said they had not received an investment statement or prospectus before depositing money with the company.

The commission believed that the Hubbard's Aorangi Securities Ltd, which was originally a contributory mortgage company, had been operating as a finance company.

Aorangi Securities had deposits of at least $98 million from 407 Otago and Canterbury investors, but many of its loans - worth $134 million in total - were inadequately documented or even unsecured.

Some appeared to have been made contrary to instructions from investors that their money be loaned only on first mortgages.

Power said the Registrar of Companies had referred matters relating to Aorangi Securities to the Serious Fraud Office for investigation of "potential breaches of the Crimes Act".

The main reasons for applying statutory management were "to prevent fraud and reckless company management, to protect investors and to enable the orderly administration of a company's affairs", he said.

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

The Treasury yesterday said the statutory management did not apply to South Canterbury Finance, and its investors were protected by the Crown Retail Deposit Guarantee scheme.

South Canterbury has been battling to overcome big losses incurred on property lending during recent years and as recently as last week was conducting roadshows as its sought to raise $1.25 billion from retail investors.

Its chief executive, Sandy Maier - who was statutory manager for the failed state owned Development Finance Corporation in 1990 - said yesterday said Hubbard had left the board "some weeks ago".

"We've been very careful to provide succession and ring fencing from Allan's affairs," Mr Maier said.

Mr Hubbard, 82, reportedly had a fortune of about $650 million before South Canterbury ran into difficulties.

How it works:

Rarely used, statutory management exists alongside more traditional methods of dealing with at-risk companies, such as receivership and liquidation. It applies:

* If a corporation may be operating fraudulently or recklessly

* When it is desirable to preserve the interests of the corporation's shareholders, creditors, beneficiaries, or the public, and

* If there is no other lawful way to adequately protect those interests

A statutory manager has wide powers, including paying creditors, carrying on business, suspending debt payments, and selling any part of the business.