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"Nothing materially untruthful" in Hanover prospectus, Muir says

Thursday 15th December 2011 5 Comments

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Former Hanover Finance chairman Greg Muir says there was “nothing materially untruthful” in the December 2007 prospectus that’s led to the Financial Markets Authority pushing ahead with civil proceedings against the company.

Hanover’s directors will defend the claims when the FMA provides further details and reject the regulator’s decision to file civil proceedings against the former lender’s directors and promoters of the offer document next year.

“Reports from an expert forensic accountancy firm and the company’s lawyers concluded there was nothing materially untruthful in the prospectus and that there is no evidence of any misconduct by the board,” Muir said in a statement.

Hanover’s directors won’t be making any further comment until they review the FMA’s proceedings next year, he said.

The suit follows a lengthy investigation which has left former Hanover boss Mark Hotchin in limbo.

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 buying 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.

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 totaled 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.


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Comments from our readers

On 15 December 2011 at 5:26 pm bob said:
They were cowboys ripping off the unsuspecting public,now we have the a**holes{called lawyers] coming to their rescue.I think the lawyers who are to defend these crooks shoud be put in the same prison as the w**kers who ripped off all the oldies in this country [and now live in a life of luxury]. I'm a lucky bugger,I did not invest with the crooked regime.Happy christmas
On 16 December 2011 at 8:12 am John said:
What does materially and untruthful mean in legalese compared to the prospectus reader? Poles apart I think.
On 16 December 2011 at 12:17 pm paul said:
the rope wouldnt be long enough for these guys . Maybe Muir was taken in along with the others who deposited their money
On 16 December 2011 at 12:37 pm Roger said:
So Muir by applying the adjective "materially" appears to admit their may be falsehood, albeit immaterial in the December 2007 prospectus. It must be asked whether any misstatement in the prospectus did lead third parties to lose funds, and if so, can any such lie be considered immaterial.
On 19 December 2011 at 6:59 pm Allan said:
Weasel words from weasels desperatly trying to convince us that really, no really, it was not their fault.
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