Fran O'Sullivan: Watchdog tails Prince of Parasite Drive

Hanover Finance co-owner Mark Hotchin has angered investors with his unlimited spending. Photo / Richard Robinson

The return of the Mark Hotchin - dubbed the Prince of Auckland's "Parasite Drive" - has finally prodded one of our watchdogs into saying they will make a decision before Christmas whether to lay criminal charges against directors of the Hanover Finance companies.

It goes without saying that investors - who were angered by the "partying up large" style of the fabulously thick-skinned Hotchin and playboy Eric Watson - won't be satisfied unless Jane Diplock's Securities Commission throws the book against the two Hanover shareholders.

Who can blame them for getting pissed off at their dwindling financial nests while newspaper headlines blared Hotchin's $30 million house in Paritai Drive and Watson's posh parties with the Eurotrash?

Typically, Hotchin was on top of his game when an ill-prepared TV3 reporter tackled him at Auckland airport this week, batting away questions with characteristic sang froid.

No new information, bud. Just here to get the pile sold. "Why do I keep talking to you?"

But the commission's statement left it tantalisingly open as to whether other former Hanover directors such as Pumpkin Patch's Greg Muir and establishment favourite Sir Tipene O'Regan might also be in the frame alongside the more flamboyant shareholders.

Yesterday the commission said it had nearly completed its investigation into the Hanover Finance, United Finance and Hanover Capital companies.

But the Serious Fraud Office has yet to indicate where it sits.

If you believe the spin coming out of the SFO you would assume that newbie boss Adam Feeley would also have put some experienced investigators on the job when the commission flicked its interim Hanover report its way.

But Feeley has publicly denied to journalists that the SFO is "investigating" the Hanover deals.

There is an element of semantics at play.

It may be that this hired gun, who promises to blaze a trail by investigating big players, not merely pissant small fry, doesn't want to frighten the horses by publicly confirming that the SFO is also making its own investigations.

It may also be that Feeley is worried that Hotchin and Watson might suffer reputational damage if he does publicly confirm the investigations and finds no evidence of fraud. Or, it may be the file is in the too hard basket.

But investor confidence would be better served if the public was assured that Feeley's crew were also doing their job and that ultimately their results would be put in the public eye.

What is worrying is the discrepancies that have emerged over how the SFO - and for that matter also the commission - treat individual investigations.

Timaru businessman Allan Hubbard has faced the full blaze of publicity.

Yet when it came to the multimillion-dollar dividends that Hotchin and Watson took out of their cash-strapped group, the authorities slapped confidentiality orders over their investigations.

The Hanover directors already have the finest silks the company can afford. But 82 year-old Hubbard has to get a Government-appointed official's permission to access his own cash to fund his legal team.

All through this sorry year the authorities have publicly pussy-footed around the Hanover directors.

But in Hubbard's case it has been open slather - a bit like observing 21st century version of Kafka's The Trial except with a subject convicted in the court of public opinion by a Government that stumped up $1.8 billion to bailout former depositors in the failed South Canterbury Finance in which Hubbard was a prime shareholder.

Then there is the question of balance.

This week Diplock's commission threw the book at Huljich Funds former managing director Peter Huljich for pumping up KiwiSaver returns with a bit of his own money.

The charges - which are laid against both Huljich Wealth Management and Huljich - allege the firm and its former manager criminally misled prospective investors by misrepresenting the investment performance of the scheme's funds in offer documents.

What is notable is that it has taken nine months for the commission to get around to laying these relatively straight-forward charges.

It may be that the Diplock's team simply had too much on its plate to deal with what is a second order issue.

But it is dead certain that the commission's tardiness has worked to the benefit of the two prominent directors of the wealth fund, former National MPs John Banks and Don Brash. Banks did not have to face delicate questions during the Auckland Mayoralty race.

And Brash managed to resign altogether and put his shares on the block before the proverbial hit the fan. This might look like good time management.

If so, it is a pity it didn't apply for South Canterbury. The decision to personally force Hubbard into statutory management scuttled any chance of a recapitalisation and probably made the $1.8 billion tax-payer funded payout inevitable.

There's some hard lessons to be learned here.