Sth Canterbury probe promised by Labour

The aftermath of the car crash that killed South Canterbury Finance founder Alan Hubbard. Labour is promising a full inquiry into the collapse of the company if elected. Photo / Dan Tasker

The Labour Party said it would conduct an inquiry into all aspects of the failure of South Canterbury Finance if it controlled the Treasury benches after this Saturday's election.

Labour's Finance spokesperson David Cunliffe and commerce spokesperson Lianne Dalziel said the collapse of South Canterbury Finance (SCF), which has so far cost the taxpayer more than $1billion, represented New Zealand's biggest corporate disaster and most expensive taxpayer bailout

Cunliffe said Finance Minister Bill English and the Government had mismanaged the collapse of the company, costing the taxpayer at least $700m more than was necessary.

In 2010 National declined a recapitalisation deal that would have limited further liability to around $500m.

Instead total confirmed losses may already have reached as much as $1.2 billion and are still climbing, Cunliffe said.

Dalziel said the inquiry needs to cover the causes of the failure, the role of the government's Retail Deposit Guarantee Scheme and whether there were depositors who made deposits to fall within the scheme knowing that SCF was due to collapse, why the roll-over of the scheme was approved by the Government; whether the timing of the receivership was appropriate and whether there was a recapitalisation alternative to receivership that would have limited taxpayer exposure.

In addition the inquiry would need to consider the decision to place Allan and Jean Hubbard and their related companies and trusts into statutory management, Dalziel said.

At the time the Government stepped in with $1.7b, John Key and Bill English made it clear that the expected eventual loss would be reduced to about $600 million once the company's assets were realised over three or four years for around $1.17b.

Dalziel said she had one example where property worth $2.91m was sold for $1.84m.

"This was less than a month before the receivership. The balance of the subdivision valued at $4.04 million was sold to the same company for $1.3m on the first day of the receivership," she said.

In September, former South Canterbury Finance, chairman Allan Hubbard died from injuries sustained in a car cars. His wife Jean, who was driving, survived.

"While the Government has had Treasury analysts and independent consultants trawling through the books in the months leading up to the receivership, and the Serious Fraud Office had Alan Hubbard in its sights before his untimely death, nobody has been ensuring that the losses are being reduced to minimise the impact on the New Zealand taxpayer," Dalziel said.

"Everyone has been looking at what happened before the receivership, but no-one is looking at what has happened afterwards," Dalziel said.

South Canterbury Finance was placed into receivership in August, 2010. The receivers, Kerryn Downey and William Black of McGrathNicol, are in the process of selling the company's assets and operations.