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UPDATED: South Canty's Hubbard under statutory management and SFO probe

Sunday 20th June 2010

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Veteran Timaru financier Allan Hubbard and his wife Margaret have been placed under statutory management over irregularities involving loans valued at $134 million, and face a Serious Fraud Office investigation into unsecured lending made to them personally. 

Commerce Minister Simon Power announced the moves yesterday afternoon. Hubbard's most high profile vehicle, South Canterbury Finance, is unaffected by the move. The Treasury confirmed "all eligible SCF depositors remain covered by the Crown's retail deposit guarantee scheme." 

More than 400 Canterbury and Otago investors are affected by the lending, which a Companies Office investigation found was "inadequately documented," appeared to be unsecured, and was apparently made "contrary to the instructions given by investors that their deposits be lent under security of a first mortgage." 

The Serious Fraud Office is now investigating. Covered by the statutory management order are Hubbard and his wife, and eight entities: Aorangi Securities, and the Te Tua, Otipua, Oxford, Regent, Morgan, Benmore and Wai-iti charitable trusts.

The Hubbards have participated in the investigation, which found that "Aorangi has made 'loans' of approximately $134 million funded by deposits of at least $98 million."  

Aorangi had begun life as a nominee or contributory mortgage company, "but seems to have since transformed into a finance company, raising runds from investors and on-lending those funds," the investigation found. 

A diagram shows investors lending $98 million to Aorangi, which made an undisclosed total of unsecured loans to the Hubbards, who invested the funds in their own right or through related entities, including trusts. 

Loans to other commercial interests were "secured by mortgage in some cases," the investigation concluded. The decision to proceed to statutory management under the Corporations (Investigation and Management) Act 1989, first used to deal with the Chase Corp. collapse of that year, followed a Securities Commission recommendation made on Saturday. 

 The commission had been investigating a complaint in February from an Aorangi investor who was shown neither an investment statement nor prospectus before making a deposit. 

A small group of Cabinet Ministers, including Power and Acting Prime Minister Bill English, moved on the recommendation on Saturday afternoon. SCF has been undergoing major restructuring and realisation of non-performing loans under a newly appointed chief executive, Sandy Maier, and reported an improving outlook to investors in a national roadshow over the past fortnight. 

Issues discovered by the Companies Office have been referred to the Serious Fraud Office for possible Crimes Act breaches, said Power. 

However, yesterday's recommendation from the Securities Commission to undertake statutory management arose from the investor complaint to the commission on Feb. 28. 

Hubbard stepped down from the board of the finance company last month after 30 years at the helm, taking on the title President for Life and saying his first priority was to find a new equity partner for the business.

Trevor Thornton and Richard Simpson of Grant Thornton were appointed as statutory managers.

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