Where we stand on Allan Hubbard’s statutory management
By VoV | South Canterbury Finance | Sunday 29th August 2010
VoV has remained silent until now on the issue of South Canterbury Finance.
Allan Hubbard has his supporters, and a vocal number of them have been protesting against the statutory management imposed by the Government on Mr & Mrs Hubbard and nine trusts and companies they run. The Hubbards are also under investigation by the Serious Fraud Office, another matter that his supporters are unhappy with.
They say the Government’s approach is divisive and unfair and that it has provided no evidence to justify its actions. They have asked the Government to extend the same compassion toward Mr Hubbard that he has to investors over the years.
And that, I believe, is the crux of the matter.
Mr Hubbard appears to be a nice man. A gentleman. He lives in Timaru and is/was the South Island’s wealthiest man. He is a major philanthropist. Despite his wealth and 82 years of age, he drives a VW and arrives at work at 6:30am every day. And he is on kidney dialysis.
It pulls all the heart strings… On top of liking him we can admire his success, his generosity, his work ethic and his non-ostentatious lifestyle, and feel sorry for him with his medical condition and the predicament he finds himself in at his age.
Does that mean we should join the chorus of those protesting his innocence and the unfairness of the Government’s actions?
VoV believes it would be hypocritical to do so.
We have campaigned for the Government to take action against finance companies and protect investors, and we have protested about the Government’s lack of such action. It would be hypocritical of us to now protest about the Government doing the very thing we have campaigned for.
Yes, it should have taken action to protect investors in other finance companies and hasn’t, but that is another issue.
Bridgecorp and Capital+Merchant failed before the Government stepped in to guarantee finance company investments. South Canterbury Finance is by far the largest finance company the Government has had to guarantee, with $1.9 billion of assets and 30,000 investors owed about $1.3 billion. This perhaps explains why it was so quick to take action on this occasion.
VoV only wishes that self-interest wasn’t the only thing spurring the Government into action.
Investors have collectively lost much more than the Government stands to lose with South Canterbury Finance, but because we are a once-removed group of disparate individuals, we have less visibility and are way down the priority list.
South Canterbury Finance, on the other hand, could potentially cost the Government a quarter of a billion dollars or more. One entity. One lump sum. So the Government understandably moved to protect its investment.
Allan Hubbard stands accused of:
- Lending $134 from Aorangi Securities Ltd without adequate documentation.
- Not having the required investment statement and prospectus.
- Aorangi invested $83 million of investors’ money in farms, of which $59m is to farming businesses associated with Mr Hubbard.
- Many of the farms are struggling and of the 51 loans on them, only 17 will be able to meet their obligations in September.
- $24m of investors’ money was lent to Hubbard’s Te Tua Charitable Trust. The statutory manager says many of the loans are interest free and some will not be recoverable.
- Of the $23m in mortgages Aorangi lent to businesses, $10m is to Southbury Group, a company associated with Mr Hubbard.
- Overstating the value of Hubbard Management Funds (HMF) by at least 25 per cent by reporting non-existent investments and cash balances.
- The statutory manager says the investment profile of HMF is not consistent with what would be appropriate for a typical investor in HMF. “There is a lack of blue chip investments and the composition of the fund’s portfolio generally means that the fund is high risk in nature.”
- The Serious Fraud Office is investigating possible Crimes Act breaches.
VoV is not qualified to judge or even opine upon the validity of these accusations. It is impossible for us to know the full facts until afterwards.
All VoV will say is that the Government is doing what it feels it must to protect its investment. It would be wrong for us to let emotion cloud our judgement and join the chorus of those protesting against this.
Our feelings of affection for Allan and Jean Hubbard should be compartmentalised. We must let the statutory management run its course and see what is turned up.
I wish the Government had acted in a similarly decisive way in the past. We now know it can act decisively when its own money is at risk. Perhaps the bureaucracy has finally awoken and will act decisively in future cases where investors’ money is at risk. Let’s live in hope.
Tags: Allan Hubbard, Aorangi Securities, Hubbard Management Funds Southbury Group, SCF, South Canterbury Finance
Sunday 29th August 2010 at 3:04 pm
I agree with much of what you have said, BUT, it is not the governments money! It’s our money-taxpayers! If they didn’t go after the Hubbards’they would be accused of not learning, how do they win?
Sunday 29th August 2010 at 3:14 pm
Ruth, you are perfectly correct – it is our money. I suspect the bureaucrats probably think of it as money in their accounts for them to spend, unless of course they have to use it to bail SCF out.
Sunday 29th August 2010 at 3:16 pm
Much has been made of the character and generosity of the Hubbards. But from what I read there has been a great deal of slipshod management similar to what many investors have suffered over the years. I say thank God the Government has stepped in to help the matter being reconciled and sorted out and put back into order. After all we have been robbed by ‘experts’ in dozens of cases and undoubtedly most of the managers are so called gentleman but these gentlemen have proved to be imept at thieir job and debonair with everybodys money except their own. Too bad the Government have taken so long to act in this case.
Sunday 29th August 2010 at 3:19 pm
Well said. The difference between Mr Hubbard and the directors of companies such as Hanover or Capital + Merchant, seems to be that he is a genuinely nice man with a record of generosity and a humble lifestyle. Sadly, that does not mean that his companies are necessarily well run and nor does it assure their viability. We all feel sorry for the South Canterbury (and associated company) investors, but at least some of them will recover their money under the government guarantee. Would that Vestar clients had had a similar safety net!
I suspect some of the more vociferous supporters of Mr Hubbard will be feeling somewhat subdued, unfortunately.
Sunday 29th August 2010 at 3:24 pm
Thankyou for that Vern. I agree with all that you have said. While I feel extremely sorry for Mr Hubbard I am sure the SFO would not be doing this investigation unless they have some serious concerns regarding these companies.