Mark Hotchin's day in court looms next year

Thursday 15th December 2011 1 Comment

The securities market watchdog, the Financial Market Authority, will file civil proceedings against directors and promoters of failed finance company, Hanover, next year.

The authority said the claim will relate to statements made in Hanover’s 2007 December prospectus and subsequent advertisements and results from a lengthy investigation which has left former Hanover boss Mark Hotchin in limbo. The FMA’s focus is on a period when some $35 million was deposited with the finance company.

Hotchin gained permission from the High Court earlier this month to increase his court-ordered $1,000 per week living allowance, which he has been forced to live under while the FMA investigations were occurring. He complained at the time at the length of time the FMA investigation was taking.

In February 2008, rival lender Lombard Finance & Investments entered into a confidentiality agreement with Hotchin and fellow Hanover shareholder Eric Watson, to investigate a buy-out of some or all of Hanover’s loan book. A deal, which was to be financed by the now-failed US investment bank Lehman Brothers, was scotched when Lombard fell into receivership.

The Serious Fraud Office is conducting separate investigations into Hanover, which froze repayments in 2008 owing depositors some $296.5 million, and had assets worth more than $550 million.

A subsequent attempted rescue deal, mounted by Allied Farmers and involving a debt-for-equity swap, went sour as the full extent of Hanover’s non-performing loans became apparent.

The FMA’s civil claims will be against Hanover Finance, Hanover Capital, and United Finance.

“This has been a significant investigation for the FMA, focusing on a period in which investor deposits totalled approximately $35 million,” said Sean Hughes, chief executive of FMA. “We have now reached a point in the investigation where we are confident that we have good grounds to commence civil proceedings.”

The FMA is confident this is the most effective regulatory response for themselves and other parties, said Hughes.

The decision is in line with FMA’s Enforcement Policy, allowing it to bring proceedings promptly and cost effectively and to go beyond directors when considering liability.

In 2010 the Serious Fraud Office launched an investigation into Hanover after preliminary enquiries found reasonable grounds to "believe that fraud had been committed."

The investigation into the failed finance company, which effectively sold its loan book in 2009 convincing investors to swap debentures for shares in Allied Farmers in a bid to stave off receivership, was triggered after a Securities Commission report and complaints from several parties, including Allied.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 15 December 2011 at 5:40 pm bob said:

the guy is a dog & will spend millions on lawyers to defend himself [where did he get the millions from...you!] what a sick world we live in,where the rich bastards get away with blue murder.there is an old saying "what comes around goes around" hopefully he will get his cumupanse along with the the real crook eric watson...I think the voodoo dolls should be brought out for these guys