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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