Statutory manager sees "alarming gap" between Aorangi's income and amount owed to investors

Statutory manager sees "alarming gap" between Aorangi's income and amount owed to investors

Accounting firm Grant Thornton, statutory manager of Allan Hubbard, Aorangi Securities, Hubbard Management Funds (HMF) and other associated interests, say Aorangi investors won't be getting any "significant" amount of money back before Christmas and Hubbard had over stated HMF's position by at least 25%. 

(Updates add further detail, background and Southbury link; Allan Hubbard's disappointment at not seeing statement first).

In their second report to investors statutory managers Richard Simpson and Trevor Thornton say Aorangi investors should get a small repayment in October from a small amount of available cash. But given the accounting records and governance are "very poor", they don't expect to complete their job before Christmas. In fact, final resolution and realization of the assets may take “several” years.

"There is an alarming gap between the income Aorangi is presently receiving from its loans and investments and the amount it needs to pay out to its investors."

They say much of the NZ$96 million received by Aorangi from investors has been reinvested by Hubbard into minority share interests and mortgages over shares in about 25 dairy farms. Many of these farming businesses are struggling and unable to make payments to Aorangi.

"Any payment at this time will be treated as a repayment of capital and will be dependent on the amount of funds paid to Aorangi by borrowers from the investments in the farms."

HMF position over stated, non-existent money allocated

On HMF the statutory managers say they believe annual statements prepared by Hubbard and sent to investors have over stated the investors’ position by at least 25% as of March 31. The value is likely to have fallen further since because of the high risk nature of the portfolio in a tough period for share markets. Investments have been allocated to investors in excess of those actually held by Hubbard Funds Management.

“The statements sent to the investors by Mr Hubbard for the year ended March 31 show a value for HMF of about NZ$82 million,” the statutory managers say.

“Shares and other investments in excess of NZ$13 million which do not exist have been allocated by Mr Hubbard to investors within the HMF portfolio.”

Furthermore, uninvested funds on hand of NZ$6 million were reported to investors by Hubbard at March 31, but the cash available on that date was less than NZ$350,000.

“Investments have been allocated to investors in excess of those actually held by HMF.”

As for Aorangi, Simpson and Thornton said the problem they faced was that Hubbard has allowed Aorangi to accept deposits from investors on call and to invest those funds in investments or loans which are nearly all long term in nature.

With dairy farm sales volumes at historic lows, there is little opportunity to free up capital. Simpson and Thornton say they don’t yet know the exact value of Aorangi’s investment in the farming industry, with valuations likely to be finished by the end of September.

The statutory managers said NZ$1.4 million of Aorangi’s loans have been identified as no recoverable and Aorangi has invested NZ$83 million in farming entities, NZ$24 million in Te Tau Charitable Trust, which is also associated with Hubbard and under statutory management, and NZ$23 million in other commercial entities. Of the farming investment, NZ$59 million has been made in businesses associated with Hubbard.

“Also of concern is the way investments have been structured meaning many Aorangi investments rank behind all other creditors of the farming ventures. This is far from ideal.”

During March Hubbard had to mortgage his own assets and introduce his own cash to enable the March interest payment to be made to Aorangi investors.

Hubbard 'can't help'

Although “heartened” by Hubbard’s pledge that his investment in Aorangi could be used to help off-set potential losses, it doesn’t look likely he’ll be able to help much.

“Given the current position of Mr Hubbard, we are of the opinion that he will not be able to contribute further funds to support Aorangi as he has in the past.”

The statutory managers say Aorangi investors’ prospects rely heavily on the future of the dairy industry being profitable. Talks are udnerway with some of the farming business partners to see if they're interested in buying out Aorangi's interests.

Meanwhile, the statutory manager's report reveals Aorangi and HMF have NZ$10 million each invested in Southbury Group, another Hubbard owned company that's the parent company of South Canterbury Finance.

No prospectus

The statutory management came after the Companies Office referred a number of matters relating to Aorangi Securities for investigation by the Serious Fraud Office (SFO) for potential breaches of the Crimes Act. This followed a complaint by an Aorangi investor who had not received a prospectus. The SFO is expected to reveal the next step in its investigation next week.

The Companies Office found that NZ$98 million in funds lent to Aorangi by 407 Otago and Canterbury investors had been lent on either directly or indirectly to trusts and interests associated with Hubbard and his wife, contrary to instructions that they be lent as first mortgages secured by property. 

In its first report on the statutory management, out last month, Grant Thornton said Aorangi investors shouldn't expect any money back any time soon, and said it was concerned about a lack of paper work after discovering an "intricate and complex intermingling" of affairs.

The first report also revealed an additional NZ$70 million invested in HMF had been frozen and Grant Thornton was also concerned about inadequate records for these funds. The report also noted the uncertainty of security and priority of Aorangi investors could require court direction.

Grant Thornton's next report is due at the end of September.

Hubbard disappointed

Allan Hubbard said in a statement sent to TVNZ that he was disappointed not to have seen the report before it was made public.

"It feels more like an attack on me and my wife Jean and all we are trying to do, every day is help the investors," he said in the statement.

"Five weeks ago I submitted a proposal to the statutory managers and Registrar of Companies in respect of the Aorangi and Hubbard Managed Funds investors and they haven't even given me the courtesy of a response to that proposal," he said.

"I have to say that I am very disappointed that while they have continually told me to refrain from speaking about these issues in public, which I have respected, the statutory managers ambush me in the media in this way."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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37 Comments

Hmmm, sounds like old father Hubbard has been giving his investors the boot........

''they believe annual statements prepared by Hubbard and sent to investors have over stated the investors position by at least 25% as of March 31. Investments have been allocated to investors in excess of those actually held by Hubbard Funds Management''

No wonder the Hubbard cultists (many of whom no doubt are those on the 'right side' of those nice interest free loans he was dishing out) have been trying to get the investigation shut down. The more they uncover the worse it gets.

that's a long bow your pulling there........... at worst a confused and now bewildered old man with a penchant for slaying windmills. 

72 to be precise. No doubt Madoff's lawyers would have been gagging to push the 'confused and bewildered' defence at his trial.

While I would agree with you on that andyh..........Ii believe Maddoff was every inch the con man he was found to be 

His conviction had the best basis you can get.......premeditated intent to defraud.

Hubbard is yet to be found guilty on that charge.......and it is the most serious.

Don't get me wrong on this .....ego ...mismanagement...a refusal to accept defeat....and creeping senility don't make for good investment opportunities.

Don't underestimate the size of this man's ego because of the outward appearance of Public Humility.............. and in that there may be a con.

Agree...... entirely ....and I'm sure they will do due diligence in searching for any history  to support intent to defraud...

His demeanor to me over the past wee while suggested a man not facing reality and still believing he could overcome the situation...... at that point there may have been intent to deceive............ to gain deferral.

This is great so soon on the heels of that letter from investors to government ministers saying that there's no need to investigate, etc etc. I hope a few of them will be reconsidering their loyalty to Mother Hubbard....

Don't forget that there must be an awful lot of folk down there who have done well out of Hubbard's 'business model' - ie those favoured individuals who received the interest free loans etc. They are no doubt desperately rallying around to try and get the investigation shut down before more is revealed. They dont care a fig for the original investors in Aorangi who's money has been tossed in their direction - they only care that the gravy train has been shut down (and boy will they not want to pay the money back - in all probability because they cannot)

In many ways these people are the worst sort of hypocrites.

It was only 70 investors - the rest obviously wouldn't sign the letter.

Picture the history books:

Once a bustling regional centre, Timaru is now a ghost town. The town was mostly funded by a massive PONZI scheme, and by the time it was unravelled, there was not much economy left...

“The statements sent to the investors by Mr Hubbard for the year ended March 31 show a value for HMF of about NZ$82 million,” the statutory managers say.

“Shares and other investments in excess of NZ$13 million which do not exist have been allocated by Mr Hubbard to investors within the HMF portfolio.”

Correct me if I am wrong but isn't this plain and simple FRAUD?

At least one of the investors thought their money was in a trust account run by H C Partners, there was no choice involved.

Why HC is not being investigated is a mystery to me.

The government will be able to solve this problem quite easily.  Just sell these farms to Chinese buyers at inflated prices.  Voila problem solved!

Auditors? Were there any? Or were they Hubbard's accounting firm?

Come on Tribeless, Mark Hubbard etc - come out and do battle for your hero

Janie Annear, where are you, or are you too busy trying to see through the egg on your face?

Haha, serve you right for not registering.

A Freudian slip perhaps? He himself may not be received, but the company he invested in may well be..........

Don't clutch at straws - it looks bad.

Face the facts: paying out more interest than is being received = PONZI Scheme.

Red Dog - obviously you don't mind being lied to regarding the status of your investments.

Might I suggest that might put you at a disadvantage when investing your hard earned cash, though I daresay there are many shysters who would just love to have you as a client.

I hope for your sake (and for the other investors) that the loss is only 25%. Somehow I doubt that.

I am sure you are right Andy C (Andy's often are).

Who were the auditors who signed off on these financials ?

What a celebration of un-informed opinion we have going on here today!

wait and see..

If you are waiting for some good news about Hubbard, you might be waiting a long time.

Well just go back to the Faye Ritchwhite debacle Winston....you'll see the SFO tried twice to pull a budget big enough to take em on and both times the lads buried them in lawers.

Cut n dry ........the sfo could not compete the last budget pulled together I recall was 15mil and Richy.... as legend goes just sneered and said bring it.

They(the SFO) at behest of the Govt of the day withdrew.

No Jeff ........John Boy helps you in..........not out.

Our country's new slogan: Rob Peter to pay Paul.

Who is this Peter as I wish to rob him at my earliest convenience.......... I may elect not to pay Paul therefore effecting a second robbery ........my legend would grow...... I would get a tin hat ...... people would tremble............comics of my adventures would abound.....

If only robbery was like it used to be.....?

He could leap from that chair guns blazing and go out with some dignity....alas poor Yorick ..I knew him not.

For the millionth time, why on earth would a powerful influential person get the SFO in - anyone in their right mind would have simply asked saint Alan for the money back. (After all, he had never missed a payment. [sarcasm intended])

Tum T .......I think when you hear he was to be canonised you mistook that for Sainthood.... it read Cannonized from a real cannon.

Ooopps, my mistake.

You mean to say he is not a saint?? But he never missed a payment??!!

The SFO has A budget Anon..... they have to target very specific encounters they can win....and justify their existence at the same time.

You ever want a laugh ring em up and ask how's the Faye/Ritchwhite thing going.... 

Winston Peters brought the WineBox inquiry and has been hounded/ridiculed for it ever since.Little crooks go to jail in NZ. The big crooks don't.

Friday Smile........Daddy shark is taking the boy out on his first hunt........cruisin

                             Hey  pop...what's that smell in the water....?

                           Well.. that be humans in the water.... musta fell out of a boat or   some

                             such.

                         we gonna eat em pa....?

                           Yup ... but first we gotta do a wide circle with just our fin tip out the water

                             like..............................................so.

                          Then we gotta do a real close circle and rub right up against em with our

                         fins all the way out the water...like so............................. 

                       then we eat em..................nash nash sever oooze globule frenzy....!!

                        Hey pop why did we have to do all that stuff.... wit the circling n whatnot...?

                        Why couldn't we just eat em straight up.....?

 

 

                   IT'S CAUSE YA GOT TA SCARE THE SHIT OUT OF EM FIRST...!      

where u live Sam......?

Excuse me, the statutory managers were trained in the days of manual ledgers.

More clutching at straws.

At best, AH had lost the plot and didn't know what he is doing. (At best).

Are you being deliberately thick?

The report was not released by the SFO. It is they who can lay charges, not the statutory managers

Hubbard doesn't seemingly need anyone elses help in bringing shame to his name, he is more than capable of doing it himself it would appear.

I'm not an Economist @ 6.37 :     Actually, just quietly, it can be said that anyone acting to perpetuate unmitigated physical exponential growth on our finite planet, is guilty of foisting a ponzi on our offspring.

Last I heard, ignorance was not an excuse.

Just a thought.