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Statutory manager freezes another Hubbard investment vehicle

Tuesday 13th July 2010 3 Comments

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The government-appointed statutory manager over Timaru millionaire Allan Hubbard and part of his empire has frozen the assets of another investment vehicle, saying it has “added another complexity” to the investigation.  

Three weeks after their appointment, Richard Simpson and Trevor Thornton of Grant Thornton have frozen Hubbard Management Funds, another Hubbard-controlled investment vehicle, which shares some investors with Aorangi Securities, according to the first statutory managers’ report.  

Investments in Hubbard Management are estimated to be worth about $70 million, though the report said the nature of the firm’s accounting system meant that is was impossible to accurately calculate the value. Simpson and Thornton said investors in the vehicle could expect that the portfolio’s value has fallen since March 31.

“Until we have a clear understanding of the status of Aorangi and Hubbard Management Funds, their assets and investments have been frozen in the interim and could remain so for some months,” Simpson and Thornton said in their first report. “Becoming aware of Hubbard Management Funds (an investment management business controlled by Mr Hubbard), of which we were not aware at the time of our appointment, has added another complexity to our role.” 

Last month, the government appointed statutory managers over some of Hubbard’s interests on the advice of the Securities Commission after a complaint was made by an investor in Aorangi who claimed not to have been given a prospectus. Since then, the decision has polarised the investing community, with South Islanders rallying around the man who has propped up much of the region’s economy, while others have bayed for blood in the wake of the finance sector’s collapse several years ago.

Simpson and Thornton condemned Hubbard’s paperwork, saying the lack was impeding their progress.

“The standard of the paper work for the entities is not what we would have expected to have found for business entities of this size and complexity,” the report said.

The report also flagged the inconsistent management fee charged by Hubbard Management, with no formal disclosure document provided to investors before the investment.

In regard to Aorangi, the report said the level of investment and loans to related parties without registered security was concerning. The records showed Aorangi had total assets of $132 million, with some $96 million worth of investments from investors other than the Hubbards, and the managers said the company appeared to operate in a similar manner as a finance company.

“Investors should not expect any return of capital or interest in the short term,” the report said. “We know this will be distressing for the people who have received regular payments from Aorangi. However, we need to fully understand Aorangi’s financial position.”

The next update is expected in the middle of August.

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Comments from our readers

On 13 July 2010 at 8:00 pm D K Crump said:
It appears that the receivers started their investigations not knowing what they were looking for and are now surprised that they are unable to find it. In the meantime they clearly have created chaos and every minute they maintain the freeze is costing money. I hope they are preparing to pay compensation.
On 13 July 2010 at 11:44 pm J Pateman said:
Where are these fools like Simpson and Thornton keep coming from? Even a small amount of research would have told them that Alan Hubbard's integrity and honesty is absolutely beyond reproach. The South Island and South Canterbury in particular owe so much to the genorosity of this great man. And what about the prospective conflict of interest with Securities Commission member Simon Botherway? Of his own making his brother has had bad dealings with South Canterbury Finance when he couldn't pay his loan. And of South Canterbury Finance, did these clowns stop to think of the irreparable damge they are doing to a nationally highly respected company? And where were these idiots when when the likes of Hotchim and Watson (Hanover) and Petrocivic and co (Bridgecorp) were systematically ripping off people for millions and ruining their lives. WHY NOW? Surely Aorangi's books could have been audited without the damaging use of statutory management and it's public implications. I hope that when the ashes settle and it is proven that there was no bad intent, that the heads of some of these fools will roll.
On 16 July 2010 at 6:35 am Duty watchdog said:
I think Simon Power should be asked to resign from his position as Minister of Justice for the way in which the government is abusing their power and publicy trying to bring down the NZ economy by swooping in on the wealthiest fortune in the South Island. We don't want to know that the Statutory Managers job is difficult. I presume they are being paid quite high fees in taxpayers money. Statutory Management has nothing to do with bad paperwork. Therefore it is the wrong response to the complaint that appears in the official statement by Simon Power to justify his decision to implement the statutory management procedure. Inefficient paperwork in any company can be regularly controlled by the right authorities without assets being frozen. That is if the right authorities are doing their job correctly.
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