Allan Hubbard's statutory manager, accounting firm Grant Thornton, has just released its third report on Hubbard, Aorangi Securities, Hubbard Management Funds (HMF) and other associated entities.
(Updates add further detail, background).
Here are some of the main points:
- HMF main portfolio worth NZ$49 mln at Sep 17, can't make repayments until High Court direction obtained
- Investors' funds in HMF were probably pooled with others, rather than the expected individualised portfolios
- Grant Thornton expects to recoup just NZ$1 mln from NZ$19.57 mln worth of related party loans by HMF
- Hubbard statutory managers applying to High Court for directions in relation to Hubbard Management Funds
- NZ$10 mln Aorangi loaned to South Canterbury Finance's parent Southbury Group lost due to South Canterbury Finance receivership
- Aorangi investors to get 3c in dollar payment during October. Asset (farm) sales at market value could see Aorangi investors get up to another 20c in dollar by mid-2011.
- The statutory managers say they are encountering difficulties with the collection of loans related to the Te Tua Charitable Trust, which owes about NZ$25 million to Aorangi but less than half is expected to be recovered, and have insufficent records to allow them to contact some borrowers who have received money from Te Tua. Furthermore, some borrowers are overseas and Grant Thornton wants to use a private investigator to help trace them.
- Rent payments have been received for the last two months for a tenanted property owned by Te Tua for which no rent seems to have been paid for the last 12 years. The statutory managers say they are talking to their lawyers and the tenant about the apparent rental arrears.
- "During our investigations we have noted that third parties have recorded security interests or charges against some HMF investments to secure liabilities related to Mr and Mrs Hubbard and other entities they are associated with. Should all of these charges prove to be valid, the overall assets available to investors would be reduced by approximately NZ$7.57 million."
- The HMF portfolio appeared to have been "constructed on a high risk-high return philosophy."
The statutory manager's next report is due at the end of October.
SFO decision nears
The Serious Fraud Office (SFO) is investigating and SFO director Adam Feeley expects to decide within weeks whether to charge Hubbard or close its investigation.
Hubbard, his wife Jean, Aorangi Securities and seven charitable trusts associated with the Hubbards were placed in statutory management by Commerce Minister Simon Power, following a Securities Commission recommendation and investigation involving the Companies Office, on June 20. The Registrar of Companies referred a number of matters relating to Aorangi Securities to the SFO to investigate potential breaches of the Crimes Act.
Grant Thornton's Trevor Thornton, Richard Simpson and Graeme McGlinn were appointed statutory managers on June 20. In their first report the statutory managers said they had frozen NZ$70 million in HMF, a vehicle they weren't previously aware of where the accounts were hand written.
In late August, after completing its first interim report, Feeley said the SFO would make further enquiries, noting there were now issues in relation to HMF that required consideration.
This came after the statutory managers’ second report which said there was an “alarming gap” between the income Aorangi was receiving from its loans and investments and the amount it needed to pay out to its investors, and that Hubbard had over stated HMF's position by at least 25%.
And last month the freezing of Hubbard's financial affairs also extended into trusts linked to HC Partners, the Timaru accountancy practice formerly known as Hubbard Churcher. The Government has added Hubbard Churcher Trust Management Ltd, Forresters Nominee Company Ltd to the statutory management, plus Temple Bar Family Trust and Barns Charitable Trust. Prime Minister John Key has also rejected calls from Hubbard supporters for a public enquiry into the Government's handling of Hubbard.
The original seven trusts placed into statutory management were; Te Tua Charitable Trust, Otipua Charitable Trust, Oxford Charitable Trust, Regent Charitable Trust, Morgan Charitable Trust, Benmore Charitable Trust, and Wai-iti Charitable Trust.