SFO confirms Hanover probe, fraud suspected

Adam Feeley, head of the Serious Fraud Office. Photo / Dean Purcell

The Serious Fraud Office (SFO) today confirmed that it had been conducting an investigation into Hanover Finance for the past three months and it has reasonable grounds to believe fraud may have been committed.

SFO chief executive, Adam Feeley, said accordingly the probe had now been elevated to a "Part II" investigation under the Serious Fraud Office Act.

"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," he said.

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

Feeley said that the SFO had commenced issuing notices last week under section 9 of the SFO Act to over 30 individuals which would require their compulsory attendance at interviews and the production of documents relevant to the investigation.

"Given the volume of notices which are now being issued, it was inevitable that our investigation would now become a matter of public knowledge."

Feeley said that the scale of the Hanover collapse was such that it was not feasible for the SFO to investigate all aspects of its failure.

"We are focusing on some very particular transactions, and specific individuals within Hanover management and their board."

Feeley said that having considered the Securities Commission report and the complaints of a number of persons, including Allied Farmers, the efforts of the SFO investigation was best focused on several 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."

Feeley cautioned that the public should not expect quick results from the inquiry.

"It would be both unrealistic and unwise to think that an investigation of this complexity could be completed in a matter of weeks. This will be a lengthy inquiry and the only certainty from it is that any decisions reached will be the end result of a comprehensive and well-managed investigation."

When approached by the New Zealand Herald for comment about various investigations last week, Hanover released a statement through Chapman Tripp lawyer Roger Wallis on behalf of independent Hanover director David Henry.

It said that Hanover Finance was "co-operating with various regulatory authorities and their information requests."

The Securities Commission earlier this month released a statement saying it had nearly completed an investigation into Hanover and might lay criminal charges against directors in the New Year.

The commission said given public and media speculation, it was in the public interest for it to clarify the status of its investigation into Hanover Finance.

"Commission staff are near completion of their investigation into Hanover Finance Limited, United Finance Limited and Hanover Capital Limited," the Commission said.

"The investigation has been complex and involves a team including investigators, forensic accountants, financial analysts and lawyers. Commission Members, who have been kept informed of progress of the investigation, will meet before Christmas to decide whether criminal charges will be laid against directors of the companies."

"Although no decision has yet been made, it is likely any charges will be laid in the new year."

Property financier Hanover froze NZ$554 million owed to 16,500 investors in 2008. Investors' subsequently approved a moratorium proposal that pledged to pay them back over five years. Then a year later, in December 2009, Hanover investors agreed to swap their Hanover debentures for shares in Allied Farmers.

- NZ HERALD ONLINE / INTEREST.CO.NZ