Faith in Hubbard faces stern test

A march in support of Allan Hubbard and his wife Jean was held in Timaru yesterday. Photo / Sarah Ivey

Hilary Muir, a Geraldine resident and loyal investor in both South Canterbury Finance and Aorangi Securities, is a Mainlander standing behind businessman Allan Hubbard.

Allan and his wife Jean are "as honest as the light of day, have impeccable integrity, work for no reward", she says.

She is one of thousands of South Islanders rushing to support the Hubbards - criticising Government moves to mount a fraud investigation and take the rare step of putting the couple into statutory management and applying the same treatment to eight of their businesses.

These include Aorangi, of which Muir is one of only about 400 investors.

Two Facebook pages set up to back the couple had about 3000 supporters as of yesterday.

"Witness Mr Hubbard's declaration he would not accept a knighthood if granted him - but serve others in their time of need or for the purposes of handling financial matters," Hilary Muir said.

"I am incensed that government officials now run my invested monies when I did not ask for that intervention and am happy to say I did not request their so-called 'protection of investors'.

"I would now request that the Serious Fraud Office pull out and begin investigating other firms that have gone bust and left countless investors unpaid because of their demise," she said.

Some Auckland financiers were scoffing at the Hubbard fan club, calling it "well-intentioned but foolishly wrong".

"Isn't it funny how people can be clearly irrational when they don't know the facts? They like the idea of the Government conspiring against a helpless elderly man on dialysis," said one.

Others were scrutinising old accounts and finding them alarming: South Canterbury loaned two of the eight businesses being probed more than $1 million, its 2006 accounts showed, despite reassurances from the board there were no current dealings.

Accounting adjustments or impairments were being viewed as "huge f*** ups" by Auckland accountants who questioned related party transactions and property loans granted with generously-suspended interest payments.

A string of worrying signs from the business in the past few months prompted people like Bruce Sheppard, ex-chairman of the Shareholders Association, to predict Finance Minister Bill English would soon be running South Canterbury Finance due to its Government guarantee.

What went so wrong for this South Island behemoth?

Born in 1928, Hubbard grew up poor in a Dunedin working class family during the Great Depression.

The son of a plumber, he left school after standard six, later continuing his education at night school. Eventually, after passing his School Certificate and UE, he went to Canterbury University and qualified as an accountant.

He went on to set up Timaru accounting firm Hubbard Churcher & Co and when money was scarce and seed capital for businesses hard to come by, he financed many South Island industries.

A member of the "Tartan Mafia" by virtue of Dunedin being his city of origin even though he lives north of the Waitaki River, close business associates have included the late Howard Patterson of Otago, "Spud King" Alan Pye with masses of land, and Canterbury investor Humphrey Rolleston.

It was Patterson, Pye and Hubbard who teamed up to buy out Brierley Investments' 66 per cent stake in Tasman Agriculture.

Hubbard funded many dairy partnerships and backed various irrigation schemes vital to run them, including the Ophua Dam.

Via South Canterbury Finance, the company he chaired for decades until a boardroom shake-up this month, he has been one of the main financiers behind the South Island's transformation from grain and sheep into dairy.

In November 2005, he talked of an NZX listing for his business but that never happened, although some debt securities now trade on NZDX.

His life contrasts strongly with Auckland financiers such as $30 million Hanover house-builder Mark Hotchin, Blue Chip's Mark Bryers and high-living golfer, Bridgecorp's Rod Petricevic.

A generous benefactor, he drives a 1971 VW, and he and wife Margaret (who is known as Jean) live in the same Morgans Rd house worth $265,000 where they brought up their daughters.

Hubbard, awarded honorary doctorates from Otago and Lincoln universities, has given away millions including to Greenlane's The Parenting Place, funded mostly by his $6.5 million donation, and to Henderson's Bible College where he gave $5 million for a new library.

A director of about 200 companies, he formed businesses outside South Canterbury Finance, many taking their names from the region: Aorangi Securities named after the South Island, Wai-iti Charitable Trust named after the road to Caroline Bay, Benmore Charitable Trust for the road near his house as well as the McKenzie Country hydro dam, and Otipua Charitable Trust.

South Canterbury Finance grew to have 30,000 investors, many proud Mainlanders but it also spread throughout the country, making it New Zealand's biggest financier.

The benign patriarch was in charge and no one was mentioning fraud investigations in the same sentence as the charitable, modest-living, hard-working 82-year-old undergoing kidney dialysis. The agribusiness rich-lister had an estimated $27 million in 2000, $650 million in 2008 and $550 million last year.

It was not until Sunday afternoon's bombshell announcement of statutory management that the Hubbards had all their assets frozen, leaving financial experts saying it was worse than bankruptcy because the couple could not spend a cent without approval.

Seven charitable trusts were plunged into statutory management alongside Aorangi, then Commerce Minister Simon Power raised the issue of fraud.

Maier quickly distanced South Canterbury from the fiasco, saying Hubbard was not on the board and not a director and South Canterbury was not in statutory management. What he expressly avoided saying was what Hubbard still was the controlling shareholder of the parent company.

Hubbard hit back, saying he would not have been put into statutory management and investigated by the Serious Fraud Office if Prime Minister John Key had been in the country to sort things out before they got out of hand.

He told Radio New Zealand he had been denied natural justice and the Companies Office had not given him enough time to show that "everything was kosher" with the loan documentation around Aorangi.

Adam Feeley of the Serious Fraud Office and a team of three forensic accounting experts flew down to Aorangi's offices, Feeley defending the raid, saying he was investigating "serious and complex fraud".

Mainlanders supporting Facebook's Leave Allan Hubbard Alone and Help Allan Hubbard pages, organised an 11am rally in Timaru yesterday, lashing out at the authorities and calling to run the Government goons out of town although Feeley said he'd already left Timaru on Tuesday night.

Hubbard was being compared to a poodle or a loveable labrador this week by critics who said the previously-impotent investment authorities had suddenly turned into a pack of attack dogs. Years of inaction against some of the country's greediest charlatans was allowed yet now Hubbard was being torn apart, said some, such as Doug Hill of Christchurch.

He wanted to know why why the state was being "so heavy on someone who has generated no harm compared to those who have? Is this a case of an easy target being abused? It just seems strange that a person with a long history of paying their bills and seemingly putting the interests of others on a plane equal to their own is being treated with what appears a level of public aggression that should have been applied to other finance company bosses," Hill complained.

About 400 people gathered in Timaru yesterday to show support for the Hubbards. Bill Baylis, South Canterbury chairman, denied speculation that Hubbard was in Wellington on Thursday to attend the company board meeting but said it was wrong to think the businessman was permanently attached to the dialysis machine.

"He's only on that two to three hours, three days a week. Things are being exaggerated," Baylis said.

Feeley says it will be weeks before the Serious Fraud Office can announce its next move.

"We understand the desire for quick answers, but it is ultimately more important that there is a thorough and balanced investigation into this matter," he said.

What is statutory management?

Simon Power Commerce Minister said the main objectives of the Hubbard statutory management was "to prevent fraud and reckless company management, to protect investors and to enable the orderly administration of a company's affairs".

He invoked a law that lists the powers of the statutory manager which are exceptionally wide.

According to the terms of their powers, statutory managers Trevor Thornton and Richard Simpson of Grant Thornton can now:

* Have powers over all Allan and Jean Hubbard's business affairs.

* Run the eight Hubbard entities in statutory management.

* Suspend payments of debts due to be paid by the Hubbards or their business interests.

* Pay creditors and carry on the Hubbards' businesses.

* Sell their assets without the Hubbards' authority.

* Put any of their business interests into liquidation without their agreement.

* Quit any property, assets or shareholdings the Hubbards have.

* Stop the Hubbards from transferring any of their assets to anyone else or removing them from New Zealand.

* Seek sanctions if assets are transferred: penalties are a maximum three years' jail or $50,000 fine per person.

* Trace property which they deem has been improperly disposed of.

* Exercise powers equivalent to being a director and shareholder of a company.

* Apply to the High Court for directions about the exercise of their powers.

* Seek penalties of two years' prison or $50,000 for someone who destroys, alters or conceals records.

* Be granted additional powers allowing them to go further, if the High Court allows it.

Source: Corporations (Investigation and Management) Act 1989, Part 3.