Fran O'Sullivan: Hubbard's A-team won't be cheap

Statutory management has effectively put Allan Hubbard in a commercial strait-jacket. Photo / Supplied

How did Timaru businessman Allan Hubbard assemble a top-flight team of lawyers and public relations practitioners to defend his reputation and protect what's left of his dwindling commercial empire?

TV3's recent 60 Minutes documentary portrayed a rather shambolic Hubbard - bewildered by the Government's decision to single him out for the failure of South Canterbury Finance.

But behind scenes a stellar team has been deployed on what is probably the biggest reputation management exercise mounted on behalf of a single Kiwi businessman.

The "Hubbard team" does not come cheap.

Among them:

* Russell McVeagh's Tim Clarke who is the "go to" Wellington lawyer who has been investigating a potential legal challenge to the Government's decision to impose statutory management on Hubbard, his wife Jean and a bunch of Hubbard-associated entities including an investment company, a financial fund and various charitable trusts.

Not long after the statutory management was imposed on June 20, suggestions emerged that a judicial challenge would be mounted. So far, nothing has publicly emerged on that front.

* Long-time public relations expert Sue Wood who has a backroom role. Wood is not prepared to speak publicly about what she is doing on behalf of Hubbard and is also keen to ensure that other Hubbard teamsters - such as Clarke - stay off-limits to media.

But the former National Party president is understood to have been instrumental in the careful social media strategy that has been employed to ensure Hubbard supporters' maintain their rage against the Government for putting the founder of South Canterbury Finance into what is effectively a commercial strait-jacket.

* Public law practitioners Chen Palmer. The Wellington-based lobbying firm recently circulated a letter to Commerce Minister Simon Power on behalf of 71 Hubbard investors asking him to terminate the statutory management of the Hubbard companies. The letter was copied to all other Cabinet ministers.

The Hubbard team would surely be driven by several imperatives. First, challenge the assumption that lay behind the Government's decision to impose statutory management on Hubbard.

Second, create enough "noise" that any player contemplating action against Hubbard - particularly if fraud allegations were raised - would think very hard as to whether intent could be proven.

When the Government appointed Grant Thornton as Hubbard's statutory manager it justified its use of the draconian mechanism as necessary to prevent fraud and/or reckless company management.

Judging by the contents of the three subsequent Grant Thornton reports, it seems obvious Hubbard was placed in his commercial strait-jacket because officials wanted to prevent him from shuffling more assets around the various entities in his financial empire at a time when various entities faced a potential solvency issue.

But the upshot of this move was that Hubbard was placed in the invidious position of having to approach the statutory managers to enable him to access his own accounts so he could defend his position.

The Grant Thornton reports are silent on just what financial resources the statutory managers have released to Hubbard and his wife Jean so they can meet their basic expenses - let alone enable Hubbard's legal team to work on his behalf.

It is possible that long-time Hubbard associates may be helping the 82-year-old. But investors - who stand to lose a considerable amount of the face value of their investments in entities like Aorangi Securities and Hubbard Management Funds - should seek clarity on this score.

At issue also is whether the statutory managers are/or will make reasonable disbursements so Hubbard can mount his own defence if Serious Fraud Office director Adam Feeley does decide there is sufficient evidence to warrant a prosecution.

The SFO director received a full report on the issue two weeks ago. But Feeley has since asked his team to undertake more investigations before a decision is made to either take a prosecution, close the investigation or pass the issue back to other authorities to take action on any regulatory breaches.

Where the Hubbard supporters do have a point is in questioning the overall implementation of the statutory management process.

Judging by the three Grant Thornton reports, the statutory managers have had a difficult time peeling away the layers of the Hubbard empire. The latest report indicates the Hubbard Management Fund's main portfolio was worth $47 million at September 17.

But there are complex issues involved and the statutory managers are seeking court directions. Meantime, $18.5 million in related party loans has effectively gone west. Aorangi investors will lose out on $10 million which had been loaned to South Canterbury Finance's parent Southbury Group.

But if the statutory manager's reports were accompanied by pro forma balance sheets, investors would have a deeper appreciation of just what has happened with their investments.

Where the process has been deficient is in failing to categorically spell out that the statutory managers are basically in receivership mode.

The phoenix is not going to rise from the ashes. That is the message Hubbard investors need to hear loud and clear. The Hubbard supporters' over-egged claims are not going to make their investments whole again.