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Papers claiming Hanover Finance was involved in $15 million worth of undeclared related party loans were filed in the High Court yesterday.
Levin forensic accountant David Petterson has filed an affidavit, detailing a multi-stage loan structure that begins with Hanover and flows through to companies associated with property developer Mark Cooper which are building condominiums in the United States.
Petterson claims one of the companies involved in the deals, MAC Property Finance, is beneficially owned by Hanover founders Mark Hotchin and Eric Watson.
Brentwood Finance, also involved in the structure of the deal, is owned by interests associated with Hotchin and Watson, he said.
Hanover's financial statements don't mention MAC or Brentwood Finance.
"My affidavit is in support of an application for discovery of the records of MAC Property Finance," Petterson said.
But Hanover denies that the deals come under the relevant financial definition of related party loans.
Chairman Greg Muir said they were normal trans-juristictional business practice. Brentwood Finance was an intermediary company and had no control over the loans, nor did it benefit from them.
Companies Office records show MAC Property Finance is owned by John Heimsath, who Petterson said was formerly group CEO of the Cooper group of companies.
Muir said there was nothing unusual in the fact that Hanover, as the lender, had helped prepare Mac's accounts.
"We are very confident that there is no related party transaction there. This is a piece of work by someone trying to use this action inappropriately and we think it's best dealt with in the courts rather than us try and litigate it through the press," Muir said.
In a separate action, Cooper and an associated Californian company have filed documents with the Los Angeles Superior Court alleging the interest rate charged on the loans was usury.
But Muir said Hanover had information that finance companies were exempt from the Californian usury laws.
