Hanover directors face SFO probe

Mark Hotchin. Photo / Richard Robinson

The directors of failed company Hanover Finance are to face questions as part of a Serious Fraud Office probe, the office confirmed yesterday.

SFO chief executive Adam Feeley said his organisation had been conducting an investigation into Hanover which had reached a point where reasonable grounds existed to believe that fraud may have been committed.

"Given the intense public interest and media speculation, it has not been appropriate to make any public comment on this matter until we had a detailed understanding of the issues involved, and the entities and individuals behind the Hanover operation.

"We have undertaken extensive preparatory work and are now in a position to move into a more active phase of the investigation."

Burnt investors who lost much of their retirement savings welcomed the confirmation that a Serious Fraud Office probe was under way.

The scale of the collapse was such that it was not feasible for the office to investigate all aspects of its failure, Mr Feeley said, so the probe was focusing on some very particular transactions and specific individuals within Hanover management and board.

Having considered the Securities Commission report and the complaints of a number of parties, including from Allied Farmers, the efforts of the investigation were best focused on key areas relating to the payment of dividends and other transactions occurring immediately prior to announcement of the moratorium proposal, and debt restructuring involving the transfer of assets to Allied Farmers.

"We will be interviewing a small group of key Hanover staff and professional advisers to seek explanations of these transactions," he said.

"The interest in Hanover is such that it is in the interests of all parties to ensure it is carried out with the utmost professionalism and urgency. In addition to a large internal team, and collaboration with the Securities Commission and Registrar of Companies, we have engaged a number of New Zealand's senior legal counsel and leading forensic accountants to assist us."

Hanover issued a statement on Friday indicating it was co-operating with regulatory authorities.

The Securities Commission has also said it is considering whether to lay criminal charges against Hanover directors and expects to make a decision by Christmas.

The SFO investigation was backed by Shareholders Association chairman John Hawkins.

"The association welcomes the SFO has chosen to get involved as well as the Securities Commission because the SFO has very significant powers of discovery, more so than most groups," Hawkins said.

Rowland and Marvyn Crone, Paraparaumu retirees who had about $50,000 in Hanover and United, were pleased to hear of an SFO probe.

Rowland Crone was relieved to have escaped with any money at all. He reckoned on a wide-scale bailout by other shareholders which had prompted him to quit Allied shares before the price plummeted.

Facing questions

* The SFO says more than 30 former staff, advisers and directors of Hanover will be questioned.

* Former Hanover directors and executives include: Mark Hotchin, Greg Muir, David Henry, Sir Tipene O'Regan, Bruce Gordon and Sam Stubbs.

* The SFO will look closely at transactions made before the moratorium, including dividend payments to shareholders Eric Watson and Mark Hotchin.