Another Hubbard firm frozen

Allan Hubbard's business interests are in the hands of statutory managers. Photo / Supplied

A ninth company associated with South Island businessman Allan Hubbard has been added to those under statutory management, the first report out by Grant Thornton has shown, amid a review of what they have called an "intricate" and "complex" set of affairs.

In a rare move, the Government last month appointed statutory managers to Aorangi Securities, seven charitable trusts and the business interests of Allan and Jean Hubbard.

Yesterday statutory managers Richard Simpson and Trevor Thornton said after three weeks of investigation they had found "clear evidence that there is an intricate and complex relationship between the affairs of Aorangi, Te Tua Trust and the affairs of Mr and Mrs Hubbard and other associated entities".

The pair said a lack of paperwork had impeded their progress and the standard of paperwork for the entities involved was "not what we would have expected to have found for business entities of this size and complexity".

The investigation had also made them aware of another Hubbard company called Hubbard Management Funds (HMF) which had added complexity to their investigation.

HMF was now also under statutory management and both the assets and investments of the company and Aorangi Securities had been frozen in the interim and could remain so for some months.

"Investors should not expect any return of capital or interest in the short term," the pair said of Aorangi.

"We know this will be distressing for the people who have received regular payments from Aorangi. However we need to fully understand Aorangi's financial position in order to help protect all investors and to fulfil our management role."

HMF has about 400 investors some of which are the same as the 400 in Aorangi.

The Securities Commission, which recommended statutory managers be appointed, began investigating Aorangi after it received a complaint from an investor in February who claimed they did not receive an investment statement or a prospectus before depositing funds with the company.

Aorangi appeared to be a nominee company or contributory mortgage company that transformed into a finance company, a fact sheet issued at the time of the appointment of the managers said.

The managers' report found many of the loans made by Aorangi were inadequately documented, appeared to be unsecured and appeared to be contrary to instructions given by investors that their deposits be lent under the security of a first registered mortgage.

Aorangi has loans of $134 million funded by deposits of at least $98 million.

The managers also said they were aware some security documentation had been prepared for Aorangi in March but it was never registered. No formal disclosure document was ever provided to investors of HMF, the managers claim.

The report into HMF found Allan Hubbard made all or most of the investment decisions for the company including what rate of management fee to charge investors each December.

"We understand investors were not necessarily charged the same percentage management fee.

"The management fee appears to have been variable based on the performance of the investor's investment."

The managers also described the accounting systems for HMF as inadequate.

"We understand Mr Hubbard has maintained the client investment records manually by way of a handwritten cashbook and journal entries, which are then posted to an electronic ledger account."

The managers said because of the nature of the accounting systems it was not possible to accurately value HMF but they estimated it to be worth $70 million.

They expected to complete a reconciliation of the accounts in the next two weeks.

The managers said they were also working through the implications of the transferring of some assets held by the Hubbards to six charitable trusts which were set up in March.

A second report on the investigation would be released by the middle of next month.

Allan Hubbard could not be contacted for comment last night.

One Hubbard supporter, investor Hilary Muir, said this week she was "incensed" that government officials now ran her investment.

"Mr Hubbard and wife Jean are as honest as the light of day, [they] have impeccable integrity," the Geraldine woman said.

PRELIMINARY FINDINGS

Statutory managers have found:

* The lack of adequate paperwork had impeded their progress.
* Many Aorangi loans were inadequately documented, appeared to be unsecured and to be contrary to instructions given by investors.
* Another Hubbard company, Hubbard Management Funds, has been placed in statutory management.
* Aorangi and Hubbard Management Funds remain frozen and could remain so for some months.