Securities Commission says Botherway played no operational role in any Hubbard investigation

Securities Commission says Botherway played no operational role in any Hubbard investigation

Simon Botherway, a Securities Commission member facing a complaint to the Office of the Ombudsmen from supporters of Allan Hubbard over an alleged conflict of interest in the regulator’s role in placing Hubbard into statutory management, played no operational role in any investigation of Hubbard, the Securities Commission says.

Securities Commission general counsel Liam Mason told interest.co.nz that board members of the Securities Commission, such as Botherway, don’t play an operational role in investigations.

“Their role is to oversee the performance of the Commission's functions, and to consider certain statutory decisions as required under the law,” says Mason.

Botherway, the former executive chairman of Brook Asset Management, has been under fire from both supporters of Hubbard and the opposition Labour Party. The 'Stand by Hubbard' group recently produced an email copy of a letter sent to them by Chief Ombudsman Beverley Wakem. In it Wakem says she has decided to investigate the reasonableness of the Securities Commission's policies and procedures relating to the disclosure of actual and potential conflicts of interest, and the extent to which these procedures were followed in the Hubbard case.

And Labour's finance spokesman David Cunliffe has called for Botherway to step aside while the Ombudsman's office conducts an inquiry.

Mason says that in the course of an investigation into Securities Act compliance, after a complaint from an Aorangi investor who had not received a prospectus, certain matters were referred to the Registrar of Companies by Securities Commission staff. Registrar of Companies Neville Harris then decided to appoint inspectors under the Corporations (Investigation and Management) Act 1989, Mason said, adding that at the same time the Securities Commission asked the Registrar to appoint the inspectors under the Securities Act.

A report was then prepared by the inspectors. Mason says this report was provided to the Securities Commission to consider questions of statutory management.

“The Commission considered the report on (Friday) 18 June 2010, and made a recommendation to the Government that Aorangi Securities Limited, various trusts, and Mr & Mrs Hubbard be placed in statutory management,” says Mason.

Mason says Botherway was one member of a division of the Securities Commission that formally appointed inspectors under section 67 of the Securities Act, on the recommendation of Securities Commission staff.

“Mr Botherway was also on the division that considered the report of the Registrar of Companies into the company and recommended statutory management.”

Commerce Minister Simon Power announced the appointment of Trevor Thornton and Richard Simpson of Grant Thornton as statutory managers on Sunday June 20.

At the centre of the Hubbard supporters' complaint against Botherway is his brother Barry Jonathon Botherway’s hospitality business, because it was placed in receivership by the then Hubbard controlled South Canterbury Finance in July last year.

The brewer did it, not SCF

However, the first receivers’ report, by Malcolm Grant Hollis and Maurice George Noone of PricewaterhouseCoopers, notes the initial move to appoint receivers was made by New Zealand Breweries on June 26, 2009.

The report says after a refurbishment of Jonathon Botherway’s Merivale Ale House Ltd in late 2008, he was unable to pay creditors and the company entered a creditors' compromise. But the bar traded poorly and it was evident the compromise was unlikely to succeed. Discussions were held with a number of interested parties for the sale of the Merivale Ale House business.

New Zealand Breweries, which held a second ranking general security agreement over the company’s assets, also considered it might be able to introduce a suitable purchaser.

“However, New Zealand Breweries chose to appoint receivers to protect their interests. They appointed receivers on 26 June 2009 to which South Canterbury Finance immediately responded with our appointment,” Hollis and Noone wrote. “Once Merivale Ale House Ltd had been placed in receivership, South Canterbury Finance moved to appoint receivers over the remaining (Jonathon Botherway) companies.”

South Canterbury Finance claimed NZ$7.8 million and New Zealand Breweries NZ$1.38 million.

Mason says the Securities Commission is satisfied Simon Botherway, who is also chairman of the Government's Financial Markets Establishment Board, had no conflict of interest in considering the Hubbard statutory management.

“At a subsequent meeting of the Commission, in the context of a specific discussion about South Canterbury Finance, out of an abundance of caution Mr Botherway canvassed the other members of the Commission as to whether certain business dealings of his brother might raise a possible conflict of interest in relation to a matter pertaining to South Canterbury Finance.”

“The Commission is satisfied it did not, and this has been confirmed by subsequent legal advice.”

Simon Botherway himself told the Timaru Herald in June that he had never had any personal interest either in any of his brother's companies placed into receivership or with South Canterbury Finance.

"I have no issues whatsoever with the way South Canterbury Finance acted with respect to my brother's business affairs," he told the newspaper.

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I guess I'll just have to accept .....Botherway's .....technical.......non- involvement for now then

.....still ..uh ...eh...come on ...eh..? 

Well I know Simon reasonably well...  and I would back his professionalism and integrity every time...

He is in a difficult position - his brother stuffed up and Simon is now the bad guy?  Labour is desperately relying to make this into a big issue as it has nothing to hit the Govt with over the financial market reforms that are going through Parliament...

We will wait for the 3rd report from the Stat Managers to see what they say about Hubbard....  due shortly I believe...  but from the first two reports it would seem that the Govt was completely justified in doing what they did....

BUT what about the inconsistancies involved?

The pending Stat Man report has nothing to do with the conflict Simon has here.

Simon said himself, 5 days after the decision was made to recommend  the Hubbard's Stat Management that he might (?) have a conflict of interest. THEN Jane Diplock waded in and said that it didn't matter,  because Allan Hubbard and South Canterbury Finance were "ancient history". To make matters worse she then waffled on about "Alice in wonderland" as some sort of excuse.

This is reminisant of 2003 when the Securities Commission let Bridgecorp AND Rod Petricevic off the hook for committing the offence under the Crimes Act 242 of "False Statement by promoter etc". Had the Commission prosected that crime instead of fudging the facts, many thousands of investors would have been warned of the ethics of Rod and his outfit.

Ask yourself how many people would have lost their savings to Bridgecorp with that critical information available to them? AND how many advisers,accountants etc would have been fooled into investing their clients money with Rod if he was in clink ?

I am not surprised that Simon Brotherway had no "operational"involvement in the Hubbard case but it is irrelevant.  Good goverance would suggest that the actual powers of putting someone into statutory management should not sit with the "ïnvestigators" which most organisations with such powers recognise - except for Inland Revenue.

Unlike Horace, but similar to most New Zealanders, I do not know Mr B and therefore I have to make judgements based on perception and it is my perception is that he had a conflict of interest and he should have recused himself and the other members of the Securities commission should have also realised this.  It also calls into question his suitability for the new financial authority.  To the great unwashed his great claim to fame was his opposition to the appointmnet of Lindsay Pyne to the Telecom board.  He is to be commended for this but sainthood is still some way off, in my opinion.

As to Horace's comments about the statutory managers reports justifying the Governments actions nothing could be further from the truth.  These reports have indicated some poor record keeping etc but the reason Hubbard was put into statutory managemnet was FRAUD and they have not found any and nor has the SFO and they will not find any - everyone knows that.

The ends does not justify the means.

Re Simon Botherway-Agree that we seem to have deniability throughout NZ business and judicial society.What don`t these people understand about individual responsibility. Maybe because the  population is relatively small, the ruling elite figure that "everyone knows we`re honest," so we don`t have to worry about seeming conflicts of interest.I say yes you do ,you self congratulating pampered few.

Well the point is that the Sec Com can't put anyone into Stat Management...  its the Minister wot dun it...  And given the rarity if such events in NZ's past it would have to be a pretty convincing argument for the Government to take such a step - the risk of getting it wrong, which you firmly seem to believe is the case, is just too great...

Perhaps you should read the latest Chalkie column available in the Stuff website... a very timely and interesting perspective on the while Alan Hubbard saga....

Just because you think he is a saint doesn't mean that he is...

Here's a link to the Chalkie column that Horace refers to - http://www.stuff.co.nz/business/opinion/4178093/Hard-investment-question...

Also a question for those who believe there was a conflict of interest:

Do you believe that the Securities Commission recommended - to the Governemnt - that it put Allan Hubbard in statutory management because one of its nine board members' (see them all here http://www.sec-com.govt.nz/about/#6) brothers' owed money to South Canterbury Finance through a receivership instigated by New Zealand Breweries?

No I don't Gareth but that does not change the circumstances in so far that being seen to have conflict of interest should have resulted in self disqualification by Botherway in the interests of good judgement and transparency.

He may not have acted...legally improperly...... but his involvement shows either an arrogance on the part of all concerned or an extreme case of poor judgement.

as I said before   I guess I'll have to accept it...but ....you know...eh uh eh uh come ooooooooooo...n eh uh..?

There's also the possibility that it didn't even cross his mind at the time...

Not a Chance in Hell Gareth.............I admire your willingness to give the benefit of doubt here........but come on......

And so at no time did his brother ever discuss by telephone or other contact ......the sum in default .......that led to a wind up.....or any business that surrounded this circumstance....prior to Hubbard being placed in statutory management .

I ........mean......come ......on.......slipped his mind I'm sure.

If this was a question of legality...you would be right ...no question.....but it's just more of the same ..."don't snivel peasant".....Ad nauseam 

In corrupt small town New Zealand, come on!!

Botherway would have access to any and all information he wants.

Securities Commission is just as rigged as the Takeovers Panel

Yep, the big problem with NZ is that it is a small place...  once you are involved in the capital markets you can just about be connected to everyone within 2 degrees of separation... oh wait, what was used by a mobile phone company recently....

But just because Simon or anyone knows someone else doesn't mean they are corrupt - and by the way the Takeovers Panel works reasonably well...  Its the Sec Com that has had the cultural problems....

Another example of stupid intitutionalised clumsiness and/or incompetence. The fact you are having this debate speaks for itself. The fact Botherway hasn't stood down speaks for itself. The fact wise heads in the commission haven't acted speaks for itself. The terminology "operational role" is a loaded statement in itself. Regardless of what side of the SCF fence Botherway is on he should stand down. The risk is the commission and all future investigations by it will forever become tainted. Can't some wise heads prevail. Otherwise the debate will expand, take on a life of its own, take on wider implications etc etc. Wake up someone. Chop this off at the knees.

Ivan, I have edited your comment.

Please note the blurb above, under the story, especially the bit that says: Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments.

Cheers.

Gareth - I have been doing a little investigation of my own and discoverd this old documentary on SCF's business model... interestingly put together my Monty Python  :-

1- http://www.youtube.com/watch?v=ecFBcpY9NHI and part,

2- http://www.youtube.com/watch?v=iakR7sB0skw&feature=related

please watch both to see how it really ends.

Cheers Mouse. Lengthy but amusing.