Loans to Hubbard entities historic - SFC

Allan Hubbard. Photo / Supplied

South Canterbury Finance loaned money to two entities under investigation, its chairman says.

Bill Baylis, appointed chairman of the Timaru financier on June 9, said he was aware of historic loans to Allan Hubbard's Aorangi Securities and Te Tua Charitable Trust. Hubbard is South Canterbury's president for life.

But South Canterbury's own investigations found no current outstanding loans to the businesses now being investigated, Baylis said yesterday.

He was commenting after a report emerged that in 2005 and 2006 South Canterbury lent money to Aorangi and Te Tua, two of eight entities under statutory management and at the centre of a Serious Fraud Office probe.

"I knew that in the background there had been some transaction. We had loan officers go through to see whether there's something current and they say there's none. But I was advised there was lending between them. We don't have a lot of time to spend looking backwards," Baylis said.

South Canterbury's board and management have expressed shock at Government actions but have reassured investors.

The Government moved on Sunday to place Aorangi, seven charitable trusts and the affairs of Hubbard and his wife under statutory management. The Serious Fraud Office is investigating Aorangi Securities in response to concerns raised by the Registrar of Companies.

South Canterbury said it was surprised at Commerce Minister Simon Power's actions against Hubbard.

"But we want to assure our investors that our company is specifically excluded from the statutory management order," they said, adding that the Treasury had confirmed that eligible investors could take comfort from the Crown retail deposit guarantee.

The SFO flew a team of Auckland investigators to Timaru and yesterday visited the offices of Aorangi Securities.

SFO chief executive Adam Feeley joined forensic accounting experts there. The SFO has now taken control of Aorangi's offices, with four SFO staff sifting through documents in what Feeley called an unusual investigation.

"We're copying hard drives and securing documents," he said from Timaru. "We had two aims in coming here: establishing a good relationship with the statutory managers ... and securing all the information. We're probably going to be through that in the next couple of days. Then we will take stock of who we might be interviewing."

It would be several weeks before the SFO could comment meaningfully on timeframes, he said. "This is an investigation of major importance to our financial markets and the need for a thorough and fair investigation cannot be compromised by the understandable desire for early answers."

Feeley flew down because he wanted to meet statutory managers Trevor Thornton and Richard Simpson from Grant Thornton.

The SFO investigation is in response to concerns from the Registrar of Companies about millions of dollars of investors' funds deposited with Aorangi, whether there was proper disclosure and whether the money had been dealt with in a manner consistent with representations made to investors.

Feeley defended the SFO against a Timaru Herald editorial which called the Government action "unprecedented in both its severity and scope", accusing it of doing what recessions and countless business cycles had failed to do: putting Hubbard out of business.

Feeley denied a persecution campaign. "We are here to investigate serious and complex fraud. The information we received from the registrar gave us cause to believe that."

IN STATUTORY MANAGEMENT
* Allan and Jean Hubbard - all their financial assets
* Aorangi Securities Ltd
* Te Tua Charitable Trust
* Otipua Charitable Trust
* Oxford Charitable Trust
* Regent Charitable Trust
* Morgan Charitable Trust
* Benmore Charitable Trust
* Wai-iti Charitable Trust

Source: Simon Power's office

AORANGI SECURITIES
* Mortgage and loans owed to it: $126 million
* Cash at bank: $2 million
* Client deposits: $88 million
* Surplus: $40 million

Source: Allan Hubbard statement