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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news that former ASB banker Stephen Versalko has been convicted of fraud and sentenced to 6 years in prison after stealing NZ$18 million from 30 wealthy ASB clients over a 9 year period.

Versalko was running a classic Ponzi scheme and hiding it from ASB’s systems. He was only found out after a client saw a documentary about New York Ponzi schemester Bernie Madoff and got curious and worried. The client talked to another ASB banker and the fraud was quickly identified. Versalko used the money to buy luxury properties and a portfolio of investment properties. He also spent NZ$3.4 mln on two prostitutes, althought NZ$1.2 million of that was extortion from one of the prostitutes. Meanwhile, he was also using new money being invested to pay the interest on previous money invested — a classic Ponzi scheme. The NZHerald has more detail here on how the “pathetic creep” stole the money and why his wife was not in court yesterday.

The SFO summary of facts shows that funds were taken from ASB client accounts to Versalko’s personal accounts or a “ghost” account created in the name of an existing client. Versalko was able to manipulate the ASB computer system so that none of the transfers were recorded on bank statements.

Wayne Kiely, a senior investigator at Paragon New Zealand and a former head of security for New Zealand Post and Kiwibank, was surprised at how long Versalko managed to get away with the fraud. While it can be hard to detect a “cunning operator” like Versalko, Mr Kiely said tighter checks and balances could have prevented the fraud.

“That’s the big question: If the money went into an ASB account, and they didn’t pick it up in an audit, then something is terribly wrong. There also should have been controls in place about employees opening accounts. You can only do something like this if you’re in a position of trust.”

But how did he get away with it for so long while operating under ASB’s noses? How well was he supervised? He called himself ‘Mr Invincible’. ASB has repaid clients the lost money and says it has changed its systems to stop a repeat. The full ASB statement is below.

Meanwhile, the government is setting up an Australian style Productivity Commission as part of its coalition agreement with ACT. It will cost NZ$5 million to run.

Finally, Finance Minister Bill English has signalled tax cuts in the May 20 budget are likely to be smaller than expected because Treasury’s forecasts of revenues from property tax tweaks are lower than the Tax Working Group’s estimate of NZ$1.3 billion, Radio Live and Radio NZ have reported.

ASB statement below.

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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news the NZ dollar strengthened to new highs against the US$ and Euro overnight.

The Kiwi$ rose to a two month high of 71.6 USc and a 2 year high of 52.1 euro cents as our interest rates appeared relatively more attractive than US and European rates.  This followed news that US producer prices fell 0.6%, which was more than expected.

This reinforced expectations that the US Fed Funds rate will stay “Exceptionally low” for an “extended period”.

The makes the NZ$ relatively more attractive, given our rates are expected to start rising from the middle of 2010.

The NZ$ also rose vs the euro as fears returned about the Greek situation. German officials said no rescue deal was done for a summit next week.

Meanwhile, the Bank of Japan has loosened monetary policy again by doubling a loan programme for banks because of its weak economy This also makes the yen relatively less attractive than currencies like the New Zealand and Australian dollars.

The NZ dollar rose to a 2 year high vs the Euro. It is up to 52.1 euro cents from 39 cents a year ago.  This makes life very tough for NZ exporters to the eurozone.

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David Chaston details the key news overnight in 90 seconds at 9am in association with the BNZ, including The US Fed has held its official rate target at 0.25%, but it was not unanimous, with a key member dissenting again. He warned of the risks of low rates over an extended period, saying this could be causing imbalances and a tougher policy response in the future.

In Europe, S&P has backed away from downgrading Greek debt after Euro Zone ministers moved to adopt a bailout framework – taking the immediate sting out of the Greek crisis – but possibly raising the stakes when other countries come under budget deficit pressures..

In fact, EU officials have warned the UK that it wants to see faster cuts in the British deficit – and they say it matters not that the UK is not in the eurozone – the Brits need to do this because they are in the EU and have signed up to Brussels policy. Apparently, EU officials don’t believe the optimistic British forecasts, and say the planned deficit reductions are just not good enough.

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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news Moody’s has warned the United States that its AAA credit rating will be endangered within a few years unless it gets its budget deficit under control.

The warning follows similar comments from the other 2 big ratings agencies Standard and Poor’s and Fitch. They are worried America’s interest payments will exceed 15% of income with a few years. America is unlikely to be downgraded any time soon, but this will keep the upward pressure on interest rates for the long term.

Meanwhile, there are revelations from a receivers report that Lehman Brothers used vehicles known as Repo 105s to systematically hide US$50 billion of debts from its creditors and regulators. Legal action over allegations of fraud are likely for its key executives.

Meanwhile, trade tensions are growing between America and China. America is due to declare China a “Currency Manipulator” within weeks, which could trigger sanctions. The pressure is being felt in many places, including with Google, which is set to withdraw from China within days over plans to stop censoring search results.

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Bernard Hickey details the key news over the weekend in 90 seconds at 9am in association with the BNZ, including news that Strategic Finance was put into receivership late on Friday. Campaigners who had been pushing for receivership were happy, including John Lacey, known as ‘The Jackal’ for his tireless campaign. Here’s what he told the Sunday Star Times.

“I worked hard for this,” he said. “I don’t drink, but I’m taking my wife out for a steak.”

He heard the news in the car park of Work & Income in Nelson, where he has worked as a security guard since his savings were frozen by Strategic in August 2008. The former accountant, nicknamed “the jackal”, had campaigned for 18 months to have receivers appointed and felt vindicated.

“The jackal’s done his job,” he said. “I had their arses in a thorn bush and they had nowhere to run.”

Lacey, who is owed NZ$379,000, believes investors will see less than 50 cents in the dollar back. Here’s what he told the DomPost.

The receivers should appoint a liquidator and forensic accountant to investigate Strategic’s transactions and sell the company’s assets in a “timely manner” rather than in a firesale, he said.

“If people aren’t repaying their loans, get someone in there who’s an 800-pound gorilla to start kicking the little chimpanzees’ derrieres and make them pay.”

Meanwhile, there’s more news on where some of the money behind Mark Bryers and Blue Chip Investments might have gone. The Herald on Sunday reports that Bryers had a secret trust known as the Sebastian Trust, which was named after his son. Bryers was still paying out cash from the trust months after the collapse of Blue Chip Investments.

Meanwhile, talks will begin in Melbourne today over a multilateral trade deal with America and 7 other nations including New Zealand, the NZHerald reports. Those nations include the United States, Peru, Chile, Singapore, Brunei Australia, Vietnam and New Zealand America seems keener on these bilateral and multilateral deals than deals through the WTO.

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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including  news the RBNZ held the OCR at 2.5% yesterday and signalled it would not hike it until the middle of 2010, as expected.

But it increased its inflation forecast and said it may not have to increase the cash rate as much as it has in the past because of higher bank funding costs. The RBNZ said it expected these higher costs to remain high for the foreseeable future because of heavy government borrowing globally. This means variable rates are likely to remain cheaper than fixed rates for longer.

Westpac and ANZ have cut their longer term mortgage rates, but they are still more expensive than short term rates. See all mortgage rates here.

BNZ economist Tony Alexander told the DominionPost he expected the OCR to rise 3% by early 2012, which would push variable rates up to 8.6%. He says variable looks a cheaper deal than fixed for now, but to think about fixing some time soonish.

Borrowers should stick to floating mortgage rates, despite the expectation that they would gradually rise. But in coming months, borrowers should think about moving into a one or two-year fixed term rate, because the average rate should be lower than floating rates over that period.

Meanwhile, Marac Finance was granted an extended government guarantee overnight. It is the first finance company to get the guarantee. Many finance companies will be watching nervously over the coming months, including South Canterbury Finance.