Hubbard hits back at 'misguided' Govt action

Allan Hubbard. Picture supplied

South Island multimillionaire Allan Hubbard says government officials are "misguided" in placing seven of his companies under statutory management.

Hubbard's company, Aorangi Securities, his wife, Margaret, and seven of their charitable trusts were yesterday placed under statutory management in relation to unsecured and undocumented loans.

The matter was also referred to the Serious Fraud Office for possible breaches of the Crimes Act.

More than 400 investors and about $130 million were involved in Aorangi and the trusts.

Companies are put into statutory management to prevent fraud and reckless company management and to protect investors.

South Canterbury Finance, with which Hubbard, 82, was closely associated, was not part of the statutory management order.

South Canterbury Finance has withdrawn its prospectus for raising new funds from its website, since any material change in the company's situation requires that the prospectus be withdrawn and rewritten to reflect the change.

Don Trow, Emeritus Professor of Accountancy at Victoria University, told Radio New Zealand the statutory management decision was a big surprise, with Hubbard having an "extraordinary" reputation.

"Chartered accountants in the profession are very proud of what he's done in the community," Trow said.

"A wonderful gentleman, and, of course, he may not be in the wrong in any way. We just don't know, we need clarification of the circumstances."

An Aorangi Securities investor from Waimate told Interest.co.nz he had invested NZ$200,000 in Aorangi and had never seen a prospectus. The investor, who declined to be identified, expected the investments were secured as he had delegated the oversight of the investment to his accountants at Hubbard Churcher in Waimate.

"I was told it was in a trust fund," the investor said. The funds were initially paying 9 per cent, but the interest rate had been reduced recently to 8 per cent. He was being paid quarterly and expected the next payment after June 30.

When asked about his initial reaction to the news of the SFO investigation and the statutory management decision, the investor said: "I thought heck!. The dirt's hit the fan now."

"If he goes down then jeepers, it will be a big financial blow to everyone around here," he said.

In May, Hubbard, the controlling shareholder in South Canterbury Finance and at that time the chairman, announced he was stepping aside as a director of the company.

He had decided to become "president for life" of South Canterbury, a position the company said had been created to reflect Hubbard's special role and contribution to the company over several decades, and which continued to endure.

Moving into the new position would enable Hubbard to put a greater focus on finding a new equity partner for the company and help the drive to improve liquidity, South Canterbury said.

Hubbard said he was confident steps being taken by the company would restore it as a leading provider of finance for business and development beyond the traditional banking sector.

An important task was to find an equity partner for South Canterbury Finance to achieve an orderly succession and underpin the long term future of the business.

In a statement to clients, Allan Hubbard today apologised for what had happened.

"I am sorry that this action was taken by a government official with little consultation with myself and can only conclude that the government official has been misguided in his action."

Hubbard said he had operated Aorangi Security as a mortgage company for over 30 years and interest had been paid quarterly and the clients have suffered no loss of capital and have had a prompt return of capital.

Aorangi had mortgages and loans owed worth $126 million and $2m cash in the bank.

Client deposits were worth $88m which meant a surplus of $40m.

"The $40 million surplus belongs to myself and family and all our equity has been subordinated to client interest, ie, the Hubbard family stands any loss before clients do.

"The Crown seems to believe that your capital is at risk under my management and have appointed a statutory manager whose job is to realise all the loans and repay you your capital. This will take time as it is not possible for borrowers to repay loans at short notice."

However, there were sufficient funds to pay interest due at June 30.

"If for any reason you do not receive your capital back in full and provided it is within my resources I will meet any shortfall.

Hubbard said that in the past month he had been working on finding a solution to South Canterbury Finance affairs and hoped to arrange an agreement with an overseas company, subject to confirmation by June 30 to inject a large amount of capital which would place South Canterbury Finance in a secure position for the future.

"I don't believe in the history of New Zealand that any person has acted more honourably than myself."

South Canterbury Finance chief executive Sandy Maier issued a press statement this morning saying he "welcomed the clear statement from Commerce Minister Simon Power that the Company is specifically excluded from the statutory management order encompassing some of the business interests of Allan and Jean Hubbard."

"We are deeply shocked and surprised by the decision to put statutory managers in control of certain business interests of Allan and Jean Hubbard and other entities related to them," said Maier.

"The matters now under investigation are separate from and not related to South Canterbury Finance."

The statement goes on to note that since the initial announcement by Power, Treasury had confirmed that eligible investors in South Canterbury Finance would continue to enjoy the benefit of the extended retail deposit guarantee through to its expiry on December 31 2011.

"We will continue to vigorously pursue the turnaround in performance of the Company now in motion," said Maier. "This will include the processing of thousands of notices from investors who have demonstrated support for the Company by extending the maturity date of investments that were due to mature in the next few months."

Maier said the process already underway to source new equity funding would continue. "We will work with the Statutory Managers to complete the process as originally envisioned." he said.

Commerce Minister Simon Power announced the statutory management yesterday and said the Hubbards were personally placed under statutory management because they were so closely related with the businesses.

The seven charitable trusts included in the statutory management were Te Tua, Otipua, Oxford, Regent, Morgan, Benmore and Wai-iti.

The Hubbards were involved with Aorangi and the trusts as depositors, managers and borrowers.

"These decisions have been taken to protect investors and the matters are now in the hands of the statutory managers and the Serious Fraud Office," Power said.

NZPA / INTEREST.CO.NZ /NZ HERALD