Eric Watson joins watchdog list

Eric Watson. Photo / Kenny Rodger.

Jetsetting businessman Eric Watson, the co-founder of failed Hanover Finance and United Finance, is in the sights of the Securities Commission and a lawyer representing desperate investors.

The commission and Tim Rainey, a lawyer for Hanover investors, were both looking at Mr Watson after the regulatory authority this week froze the New Zealand assets of fellow co-founder Mark Hotchin.

"Eric Watson is a promoter of some of the securities issued by Hanover Group, and he would be one of the people liable if the offer documents contained untrue statements," a Securities Commission spokeswoman said.

Mr Watson, a $250 million Richlister, is not a Hanover Finance director. Only David Brian Henry and Mark Stephen Hotchin are listed as directors by the Companies Office.

Mr Watson is the high-profile financier who calls London home but holidays in St Tropez, controls international lingerie brand Bendon and is selling his five-bedroom lifestyle compound, Westbury Estate, at Karaka in south Auckland.

A share of the Warriors league team and a stake in the Viaduct Harbour restaurant Soul are part of the empire of the businessman once married to Nicky Watson.

In its move against Mr Hotchin, the Securities Commission said it wanted to ensure compensation was available to meet any civil claims that might be brought by investors.

Mr Rainey, lawyer for the Hanover Action Group, said Mr Hotchin had been subjected to most of the fury from investors and the public, leaving Mr Watson out of the picture.

Mr Hotchin's $30 million Paritai Drive house had been a particular focus for anger.

"Mark Hotchin has been the one with his head above the parapet and very public ... and everyone has been after him for a long time. I'm not suggesting I have any sympathy for him but there's a fairness thing here," Mr Rainey said.

He said he was interested in why the commission froze Mr Hotchin's assets and did not move against others.

He was keen to see the High Court decision this week after the commission won its case, giving it the power to freeze Mr Hotchin's New Zealand assets including his bank accounts.

Through trusts Mr Hotchin holds a multi-million dollar Boatshed Bay farm on Waiheke Island and the almost-finished house in Paritai Drive, one of Auckland's most expensive streets.

Mr Hotchin plans to appeal against the commission's freezing orders and the matter could be in court by February.

Mr Rainey said about six parties would be named in legal proceedings to be filed within weeks.

"We have not made a final decision on that yet, but there are about half a dozen, yes," he said, referring specifically to action over one document, an explanatory memorandum and meeting notice for an investor meeting in December last year at which Hanover and United investors agreed to swamp their securities for Allied Farmers' shares.

"In the New Year, we'll hopefully be in a position to commence proceedings, and whether it will be one action or several is yet to be determined," Mr Rainey said.

The civil litigation would focus on allegations of negligence, breaches of security regulations over documents issued and then relied on by investors in making decisions, claims of deceptive conduct and issues relating to trustees and their fiduciary duties to the investors, Mr Rainey said.

Thousands of people lost about $500 million in Hanover and United.

Four classes of investors - secured depositors, secured stockholders, subordinated noteholders and capital bondholders - agreed to the Allied deal.

The Serious Fraud Office has been investigating the affairs of Hanover Finance for three months and said a fortnight ago that reasonable grounds existed to believe fraud may have been committed.

Hanover and United froze $554 million of investors' funds in 2008.

Investors agreed to a moratorium proposal but were later asked to swap four classes of securities for Allied shares - the price which has since plummeted.

The Securities Commission spokeswoman said the body was close to completing its investigation into Hanover.

"It is likely any criminal charges would be laid and civil prosecutions be commenced in the New Year."