Hubbard used own money to prop up funds, report finds

Allan Hubbard's companies are in worse shape than expected. Photo / Sarah Ivey

The fourth report by statutory manager Grant Thornton has revealed more bad news for investors in Aorangi Securities and Hubbard Management Funds.

Grant Thornton's Richard Simpson, Trevor Thornton and Graeme McGlinn yesterday released the latest update on Allan Hubbard's business interests since they were placed into statutory management on June 20 by the Government.

The report reveals there was a 75 per cent shortfall in income for Aorangi Securities for the September 30 quarter and the cash received so far is "less than half" of what would have been needed to meet interest payments to investors before the managers stepped in.

The managers also said the latest shortfall was part of a trend which had previously been "masked" by Hubbard contributing his own assets and cash to the company.

"In the past Mr Hubbard has been able to use his own assets and cash to make up the shortfall in the income of Aorangi.

"However, given Mr Hubbard's position, there is uncertainty whether investors can rely on this support in the future."

Total loans and arrears for Aorangi were now up to an estimated $3 million and the managers were working with Hubbard to sell some of Aorangi's assets.

"From the approximately 50 loans and farm investments, we hope to realise $20 million by the middle of 2011," they said.

A move by Hubbard to transfer Aorangi's dairy farm assets to charitable trusts would also be undone because the managers had found the transfers were of "doubtful validity".

A $24 million investment by Aorangi in Te Tua Trust was also looking doubtful with the managers predicting just $6.88 million may be recoverable in a "worst case" estimate.

"The state of Te Tua's loan records is very poor."

Investors in Hubbard Management Funds have also been told they may get only 60 per cent of what their investment was valued at in a report they received in March and will likely have to wait until next year to be paid any money.

The March statement valued the fund's investments at $82 million, but as of September 30 managers said the assets were worth only $50 million.

A shortfall of $13 million in investments and $6 million in cash was found, although $8 million in excess shares was also discovered.

The managers said the quality of the reporting by Hubbard was of "serious concern".

"Many [investor] statements include shares and investments which do not exist, so it is impossible to hand over the investments to investors."

The managers said the HMF's situation was complicated by "extensive related party exposures" and the pledging of assets to other parties.

So far the reconstruction, reconciliation and verification of HMF's assets alone had cost $603,471 taking into account the work by Grant Thornton, its legal advisers and independent adviser costs.

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Ministry behind 'survey'

A mystery "survey" targeting investors in two Allan Hubbard funds is part of an investigation by a firm hired by the Ministry of Economic Development.

On Wednesday, statutory manager Grant Thornton warned investors in Aorangi Securities and Hubbard Management Funds about an "unauthorised survey" after investors complained. The managers said investors were phoned by someone who said they were contracted by the ministry to undertake a survey using contact details supplied by Grant Thornton.

But the statutory managers said they were not involved. "Neither the MED nor Grant Thornton have any knowledge of this survey, nor do we sanction it," the company said.

But yesterday the ministry admitted it was behind the calls.

"It has now become apparent that there has been some confusion on the issue of a 'survey' being undertaken about Aorangi Securities and Hubbard Management Funds," said MED communications director Kate Camp. "The investor who raised this issue was in fact contacted by an investigator appointed by the Registrar of Companies ... The investigator is an employee of Indepth Forensics."