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Investors in Hubbard Management Funds may lose 40% of their NZ$82 mln invested; records of "serious concern"

Investors in Hubbard Management Funds may lose 40% of their NZ$82 mln invested; records of "serious concern"

Statutory Managers for Hubbard Management Funds (HMF) and Aorangi Securities say investors face significant losses on their investments and that the quality of the financial reporting by Allan Hubbard "is of serious concern to us".

Hubbard and South Canterbury Finance are being investigated by the Serious Fraud Office.

Statutory Managers from Grant Thornton, Richard Simpson, Trevor Thornton and Graeme McGlinn, made the comments as they issued their fourth report into the affairs of HFM and Aorangi.

"Investors in Hubbard Management Funds (HMF) could receive only 60% of what was on their March 2010 statements and it could be well into next year before they will see any returns," they said in a news release issued with the report.

"There is likely to be an overall shortfall of NZ$30 million based on the current state of HMF," the report says.

Grant Thornton plans to seek court direction on how the money should be allocated between investors.

Farmers who may never be able to meet obligations to Aorangi

As for Aorangi, the statutory managers say total loan and investment arreears are now estimated at NZ$3 million. They say they are working with Hubbard on the disposal of some Aorangi assets and trying to "rectify" loans that aren't meeting their obligations.

"From the approximately 50 loans and farm investments, we hope to realise NZ$20 million by the middle of 2011. This will include refinancing a number of loans and selling properties where Mr and Mrs Hubbard are the sole owners."

"We will also be working with farmers who have been unable to meet their interest obligations to Aorangi and who may, in fact, never be able to do so."

Big loss on Te Tua Trust, transfer of NZ$2.7 million from Presbyterian Support Services

Meanwhile, the state of Te Tua Trust's loan records was "very poor." Of Aorangi's NZ$24 million investment in Te Tua, a "worst case" estimate was that just NZ$6.88 million was recoverable.

The report also highlights the transfer to Te Tua from Presbyterian Support Services SC Inc, at face value, of NZ$2.7 million worth of debentures held in finance companies that are either in receivership or liquidation. Whilst hopeful some recovery on this will be achieved, Grant Thornton says it's likely to be minimal.

The statutory managers' say they are negotiating with the tenant in a property owned by Te Tua, where no rent has been received for 12 years, over the arrears and the future lease of the property.

"We have been advised that the roof on this property may now need a full replacement."

Of a total of 104 Te Tua loans, 25 are not being serviced, they have no address or contact details for nine further borrowers and 11 loans are likely to be written off.

The face value of Aorangi's assets is NZ$130 million, suggesting significant headroom compared to the NZ$96 million owed to investors.  However, the statutory managers say they have "serious concerns" about the recoverability of the assets. Aorangi could suffer a writedown of NZ$28 million when a loss on a NZ$10 million loan to South Canterbury Finance's parent Southbury Corporation is included.

'Doubtful validity' in equity transfers to charitable trusts

They also note that in March this year Hubbard transferred a number of his equity interests to charitable trusts.

"We have investigated this arrangement and have concluded that these transfers are of doubtful validity. A number of shareholders in these companies have taken action to reverse these transfers, as they required the consent of all shareholders. A formal annulment process is under way and all shareholders of each company will be contacted with regard to the annulment."

"There are a number of associated tax issues that need to be addressed because of these unauthorised transfers."

On Aorangi the statutory managers say they, their lawyers and other advisers have raked up NZ$769,189 of costs between their appointment on June 20 and September 24. As for HMF, they say their costs are NZ$603,471 but note Hubbard himself would charge investors a management fee they estimate would be in the range of NZ$1 million to NZ$1.2 million annually.

The statutory managers, appointed by Commerce Minister Simon Power on June 20, said: "This is one of the most complex cases we have ever seen and as a consequence it has taken an enormous effort to protect the interests of investors. We have had to reconstruct much of the documentation to bring it up to a standard to enable us to manage the loans and investments."

 See the full release below. See the full fourth report here. The next report is due at the end of November.

Investors in Hubbard Management Funds (HMF) could receive only 60% of what was on their March 2010 statements and it could be well into next year before they will see any returns.

Statutory managers Richard Simpson, Trevor Thornton and Graeme McGlinn, of Grant Thornton New Zealand Ltd, in their fourth report on the statutory management of Aorangi Securities, Hubbard Management Funds, Mr and Mrs Hubbard and associated charitable trusts, said that the documentation they received reported HMF’s total value at March 31 was $82 million.

“However, our review of the assets owned by HMF and allocated to investors confirmed a shortfall of some $13 million of investments and almost $6 million of cash when compared with a summary of all investors’ statements,” the managers said. On the flip side, there were excess shares valued at $8 million.

“The quality of the reporting by Mr Hubbard in the statements issued to investors is of serious concern to us. One of our main tasks has been to understand precisely what assets HMF owned, and to assess the market value of these assets.

“We achieved this by meticulously verifying the shares and their market values, in consultation with Mr Hubbard’s advisors.”

Of equal concern to investors is that the statutory managers are very likely to have to seek a court ruling on whether the fund is considered a pool or made up of individual investor portfolios.

“If we require a court ruling, it could take many months before we receive that decision. In the meantime, we will be actively managing HMF to protect and enhance investors’ interests,” the managers said.

The report also reveals that Aorangi’s borrowers and investments paid only a quarter of the $3.25 million expected by September 30, 2010.

“This shortfall has been a trend for sometime. The cash received to date is less than half what would be required to meet Aorangi’s interest obligations to investors on the pre statutory management interest payment regime.

“Total loan and investment arrears are now estimated at $3 million and while, in the past, Mr Hubbard has been able to use his own assets and cash to make up the shortfall in the income of Aorangi, there is now uncertainty whether investors can rely on Mr Hubbard’s support in the future given his changing financial position,” the report says.

The statutory managers, with the support of Mr Hubbard, are actively trying to rectify loans that are not meeting their obligations while also hoping to realise $20 million by the middle of 2011.

The managers say that of Aorangi’s $24 million investment in Te Tua Trust, a worst case estimate is that only $6.88 million may be recoverable.

“The state of Te Tua’s loan records, which are very poor, is also of serious concern.” The report breaks down the 104 loans into nine categories. In the report, the statutory managers give details of their costs of managing HMF and Aorangi, noting that a significant effort has been involved due to the state of the records.

They say that in Aorangi’s case they have had to reconstruct much of the documentation to a standard that allows them to manage the loans and investments. Grant Thornton will shortly establish a Question and Answer section on its website for investors while the statutory managers are also beginning to work with a liaison group of six investors.

This group will report back to other investors on their regular meetings.

(Updated with further detail).

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No wonder he was reluctant to take a holiday, he was worried what he was doing might be uncovered

Don't think your headline that HMF investors could lose 40% of their money invested is correct.  The report says that the realisation may be only 60% of the value at 31 March 2010 which was $82m.  I am not sure what the cash figure was for the investments made but I thought a figure of $25m was mentioned.  Therefore investors would still be well ahead if that was the case.

Despite the good work that the statutory managers are doing to "mend" the damage that Mr Hubbard's poor recordkeeping has caused it still appear that they were appointed illegally because at the time they were appointed there was no fraud evident. From an article I read Mr Hubbard said that the report to the Minister indicated that Aorangi had been placed into statutory management because it was insolvent in the opinion of the ROC and the SC.  That however is not a valid reason for placing into statutory managemnet under the relevant legislation.

At the end of the day I can only see this costing the taxpayer big time.  Governmnet had no role to play in this.

Well this is turning out to be a gold mine for the statutory managers, just as I knew it would be. It is very difficult to have full control/oversight over a complicated mess like this, and in my experience lawyers and accountants find any way they can to overbill their clients.

How many "business meetings" (coffee breaks) is the taxpayer indirectly paying for?

$1.3m and counting

I'm an accountant and I take exception to your characterisation. We do everything we can to keep our clients' fees fair and reasonable. When you consider the complexity of this case and think about the number of staff involved in unravelling this web of deceit and incompetency, I can easily how the cost is what it is.

Need a fair few to do the grunt work but 3 partners as statutory managers eems excessive and is one reason why the bill is mounting.  Thankfully GT is not one of the big 4 otherwise it would be astronomic.

I am an accountant too and my company encountered GT several years ago. My experience was not good in fact I almost came to blows with one of the corporate insolvency specialists. We survived and have gone from strength to strength. GT would have obliterated us and destroyed investor wealth. The reality is that GT as the SN will attempt to paint an awful picture, milk the situation and play on public perception, at both the tax payer and investors expense. I certainly wouldn't bet my best silverware on the accuracy of the likely payouts predicted by GT (or should I say guesstimates) Corporate receiverships in the past few years have been disastrous in respect of NBDT. Apart from Provincial receivers have performed poorly opting to flog off assets at massive discounts. As the market for buying receivables has dried up they have simply written loans off as uncollectable, overcharged investors and given up. Check the gazette and you will see who is chasing debts and chasing aggressively. Its not the likes of GT its those surviving NBDT and I bet they are still doing very nicely! 

I worked for GT in recovery very very briefly.

The above comments are absolutely true. GT use insolvency as a total milking exercise. One liquidation I remember could have been rapped up in less than 6mths instead the partner deliberate wasted time, invented an excuse to commence litigation with his mate in a law firm to futher just to drag the situation out.

Further asset disposals are absolutely abhorent. Often to related parties, often well well below true value.

In recovery no one is there to bash you about with respect to fees, justify time or justify actions. You are given the powers to be a Director without any responsibility.

It seems to me Alan Hubbard bought into his own myth.

The Statutory managers are a joke.

It is only their perception of valuing the portfolio that has created the 40% loss. Hubbard had a long term small stock and agri asset portfolio that had been successful for yesrs.

Even if the SM's are correct the resultant 60% of the portfolio being protected is a success story compared to almost all of the other investment vehicles since the credit crunch.

Startegic finance - lost 88%

Hanover Finance - lost 100%

Blue Chip - lost 100%

Most other finance companies lost between 50 and 100%.

And Hubbards portfolio also includes small holdings in dairy farms which are hard to value and the dairy sector is in a low period at the moment.

Why are the SFO and Securities Commission still targeting Hubbard when Hotchin and Jock Hobbs and co et off scott free when they have lost all of their investors noney and taken hundreds of millions out of their companies??

Grant Thornton are a joke and rorting fees out of thsi. if theyw ere honest they wouild say " we have revalued the book down 20 or 30% - there is nothing wrong here and we should return the company to Hubbard or his advisors "

I bet bet they don't because of their greed and lack of ability to find real work out there in a tough market.

You Southerners are just bloody imbeciles the way you go on on about Hubbard on this blog site and ,no doubt, others!

How can you say as you do above that Hubbard was a better investor/manager because he ONLY LOST 40% of his investments or biz operations compared with higher numbers for Strategic Fin etc.

What warped thinking is that ??... it's typical of the "hooray henry" moleskin trouser and drizabone thinking that you rich hillbillies and old school- tie crazies get into down there something in the water maybe.??

get over it...Hubbard tried and lost due to muddled thinking and lack of understanding of modern world watch those farmers that have been sucking off  Big Al's tit on loans that they've never paid back.

wait till the boys turn up at the farmer gate and say" pay up or we sell you up."!.. how cruel and lacking in compassion you lot will bleat .no doubt!

naive ain't the word for all this nonsense....don't look now southern dude et comes the 21st century!!!!

Rob. I take my hat off to you. You, as I remember, where right at the front of the ' let's wait until we see the figures before we cast stones at Hubbard, shall we ' posters. And rightly so. The facts are emerging, and you, and all of us, are entitled to pass judgment in the light of these revelations.

Thanks Nicholas..Yes, I was a flagbearer and an investor with old Allan but it really annoys me when i see THE FACTS  which clearly show what ill-management and personal Hubbard Hubris that was goingon , once the Stat.Mngers pulled the blinds up and the light streamed in on this whole sorry debacle.!!!

Rob you seem to be an irrational thinker mate.

I am comparing the Hubbard 40% loss to the total loss for theHhanover and Strategic finance portfolios. You like most NZ sheep just look at the new item of the day and don't look at the overall market that the finance companies and investment funds were working in. What I am saying is if you  froget about the strange valuation methods of the SM compared to what the fund was always set up for, then if it was indeed a 40% loss ( obviously no one is crowing or proud of this result ) it is still extremely better managed than the likes of your family up north - Strategic Finance and hanover Finance which from anyones opinion would hav eto be categorised as NZ's worst finance comapny frauds in history.

Before you become irrational again Rob - I said worst frauds  - not worse losses

Completely agree with you SD. This attitude is standard human condition it seems. As R.O.T.N states he was an investor, so has an emotional attachment to the case. The real issue here is that whay was SCF taken into administration and susequently investigated with the govt pulling the strings, when other companies you mention who embezzled many times more investors money, get away 100% free and easy as it stands?

Wake up NZ you are being conned and lied to at every single turn, and you can't even see through the holes.

Note: I am not a SCF, Hanover, Strategic or any other finance company investor. I am also from the north, not that it matters

First you refer to "losses " and then your terminology changes to " frauds"....yep, definitely summin' in the water in the south!

Bravo Southern Dude.  Bernard would do well to follow your annalysis rather than go for the sensational and incorrect headlines.

Luckily we can trust the government (which ever) they aren't in the back pocket of the Property Council (or anyone).

Get real Southern Dude and Mark Daly, fraud can still be fraud, you just do it legally. That is AHs mistake, he didnt follow the rules. Its all in the fine print you know!


there's going to be a whole lot more of this as the next decade rolls out. This is a permanent game of musical chairs now - beats me how many didn't see it coming, and can't see it now it's here.

All wealth is based on resources, thus so too is all investment. We tapped the best, most concentrated, cheapest gotten, fastest flowing, closest, tastiest, resources first. We ramped into them all at an exponentially increasing rate, and of course the return, quality, concentration, flow-rates and thus return, fell off.

At the point of maximum flow/extraction rate it is reasonable to assume that the quality is also trending to below average - sour oil, deep oil, orange roughy, depleted aquifers, nitrogen issues, etc etc.

If that was the basis for wealth (or return on investment) then the halcyon days are demonstrably, scientifically, over.

Energy being the lifeblood, thus the key, of all of them. None of the others happen without it. Which is why people like me have spent the last few decades tracking it. And why I wouldn't have 'invested' anything in anything this last decade....

So if it wasn't Hubbard, it would have been someone else, and it will be more and more on average, as time goes on, and the goal-posts move away faster and faster, from more and more punters.

Why is is so hard to understand?

All civilisations have existed because of a surplus of food.

Nitrogen(inorganic fertiliser) comes from oil. No oil = less food = less people.

Belle and Rob of the North

So you are gloating over the hanover and Strategic Finance fraud because they did it legally

For your info Hubbard has not been charged despite months of investigation and luckily in NZ - you are innocent until proven guilty. If Hubbard was guilty of a crime then based on what the Statutory Managers are publicising and the length of the SFO investigation, they would have charged him.

You ca't have one group of Auckland jocks innocent and one inTtimaru guilty - if you base your judgement under the same rules

Be consistent please.


Who knows yet. Maybe Hubbard did it legally as well, that why he han't been charged. Does that make your , or any investors, bank balance feel any happier?

Well it could be when they (the investors) bring a class action against the Government for illegally putting their investments into statutory management.

More evidence of southern cross-breeding is apparent in that mad comment!

In a perfect world, Southern deluded- dude, your comments may be relevant.. but all they are now is naive and perhaps a non-applicable "truth" is not fair and at this stage those big Fin. Co's you refer to are being sorted through the courts on fraud charges...but be careful what you wish for as the SFO are yet to decide whether to charge Hubbard on fraud?

what are you going to if and when that happens?

bleat about conspiracies?

you keep playing the man and not seeing the ball...whilst your loyalty and sentiments are admirable you need to come to your senses and see Allan Hubbard as only  being judged in the public commercial arena such as this... and not for his personal life or muddled altruistic and neo -christian beliefs?!

go well, good man!!

Rob of the North

Maybe I have missed the news but to my knowledge Hanover and Strategic are not being sorted through the courts on fraud charges - do you know something noboby else does?

And thanks for admitting that Hubbard has not been charged with fraud yet so until he does he is innocent isn't he.

What are you going to do if he is not charged ?? bleat that he should have been because you are the expert - yeah right

My whole pitch is he is innocent until charged and proven guilty - isn't that a fact?

And that there are other worse cases of fraud that should be being investigated more vigourously that Hubbard

But at the end of the day if Alan is charged and proven guilty then - they will be the facts - until then you have no right to judge the guy - do you - unless you are the big guy in the sky - which you are definately not.


Get your head out of your posterior mate.

Are you from Malaysia?

You're right... I meant Bridgecorp directors and all the others like Nathans Five Star;not Strategic etc as you have pointed out...but their day will come!

As for my right to judge Allan Hubbarb; it is no different from your judging him it's just my judgement doesn't coincide with your blinkered and cultist Hubbardite get down on your knees and say " Who's your Daddy?"

Gee no wonder these investors didn't want an investigation.  When the news is this bad, one would prefer not to know about it.

Southern Dude, fair point, AH has not been found to be fraudulent  at this point. I certainly wouldnt gloat seeing some of these other company directors go free, when they probably lost as much money or more as AH. Its shocking that they are not held to account. As Nicholas says, is it any better that AH may also have done this legally? It seems to me its a fine line between fraud and 'just business',  a line the SFO must get very frustrated with. Knowing they cant get these sods, despite seeing quite intimately what they have got up to.

I feel that recently a line has been drawn in the sand with Adam Feely as boss, and he is going to 'get' as many crooks as possible... the possible just may not be as many as we would like.

"Its shocking that they are not held to account."

Account for what? All the fools who invested without so much of a actual investing clue? or the ones who never read what they sign other than THEIR projected interest figure? Many of these firms were 'pyramid schemes' and for such schemes to REALLY work you need lots of "Mugs"  and NZ has plenty

most of the investors with Hubbard are probably lifelong business associates and "habitual investors". They have probably been getting excessive returns double or treble bank rates for decades.  The only mugs are those sticking everything in the bank at rates less than or equal to inflation and watching savings disappear down the toilet (or across the ditch to Aus). I confer with previous comments - the appointment of statutory managers appears on the face of it to be illegal. From what I have read GT appointment was an error and the precedent  frankly unjust.


If this is all legal -then I will be leaving this country that I love dearly but which is falling apart at the moment. At least Australia has better laws and indiscretions result in prompt action and pemalties - that is why white collar crooks over there are not as prevalent as here in NZ ( on a per capita basis that is )

And I fully agree that ADam Feeley is doing a great job with limited resources - but he needs to nail the bigegr crooks at Startegic and Hanover to get a pass mark from me.

stop being tragic. sou6thern dude...go to bed and admit defeat!

There is a story in the Indian Panchatantra tales.

Two foxes were fighting over some food. A monkey came to settle the fight and suggested it be given the chance to apportion the food between the fighting foxes. They agreed. It cut the food into two, thought one was bigger than the other, took a bite out of the larger. Then measured again, saw the other bit had become larger now, took a bite out of that. This process of weighing, taking a bite continued till no food was left for the foxes and the Monkey went home sated with a full stomach.

A quote from Mr Hubbard from teh Timaru Herald 

Mr Hubbard said it was impossible for investors to lose money in Aorangi as he had provided $40 million of equity."Aorangi should never have been put in statutory management. It is solvent and the decision was based on a false report to the Securities Commission. If you want to uncover Watergate in this country, that is it there."

Call me a conspiracist, Hubbardite, etc whatever you like - but he is right

There's an old saying " a fool and his money are easily parted"

For Hubbard to be topping up Aorangi with his own personal monies shows he's a lousy business man and a fool. How did those personal cash injections show up on the annual reports...nowhere, i bet!

Why would anyone invest into those parameters?

more conspiracy---this week it,s nz,s version of watergate---no wonder he,s got so many loyal believer,s---with these talents he should be selling cars

What right dioes the Statutory Manager have to liquidate Hubbards managed funds? - none

The investors are not complaining and fully understand Hubbards investment Strategy.

The current market is the worst time to sell most of the assest even of that was appropriate. Grant Thornton's role is rightly or wrongly ( wrongly I believe ) to assess the situation as to whether the conapny has been managed properly and that no funds have been pilferrred by the fund manager. They are not liquidators, nor do they have the skills to do that.

The Govt need to close this SM down and leave the investors to a fund that they are happy with.

 GT have appointed the terrible "vampire squid" or otherwise known as Goldman Sachs of New York to handle the sale of the assets internationally!

Southern Dude

GT do have skills as receivers/liquidators but a statutory management is neither a receivership or a liquidation and that has been their mistake (or one of them).  It seems a lot of money has been spent trying to prove that HMF is overvalued but what is the purpose of this?  Certainly in no way does it protect the investors.

So what we have here is a statutory management incorrectly/illegally imposed and then GT as statutory managers incorrect/illegally acting as receivers.  I hope that GT has their professional inurance premiums up to date.

I can now place my thoughts and facts wherever I like there is such a mess in that blog with far too many daily issues and no structure – result:  increasingly no real debates and progress. Bernhard, I hope your blog doesn’t suffer lack of quality or did it already ?

 About peak oil- sad !

Mark Daly

I agree with you except down here in the south, their receivership team including McGlinn are very average and not respected - may be diferent in Auckland.

If I was an investor or Hubbard, I would be instructing the best Solicitors now to sue these mongrels for destroying wealth. And I would include the Government in that legal case as they instigated it in the first place

Agree dude.  I'm from Wellington and their receivership team is very good especially Richard Simpson but I suspect he i being overruled by the ChCh mob.

Stop whispering to each other Southern Dude and  Mark  Daly.....we can see you consulting the cultist handbook for the next moves!!

Get a life Rob

we obviously floored you Rob.

Normally you can't sut up on this site Rob

Jeez you Hubbadites are something else. The evidence mounts almost daily and yet you lot simply  finger-point more vigorously in another direction to distract attention from his misconduct.

If Hubbard ate babies you lot would claim the kind old fella was just doing his bit to help overpopulation..........

You guys keep bantering on about the evidence mounting.

If the evidence is so compelling Hubbard would have already been charged. The SFO and Securities Commission have had enough time ( and in your opinion enough evidence ) to investigate and charge him - except they haven't and have swapped form one company to the next desperately hunting for evidence that they can nail him on.

IIt is the anti Hubbardites who are retarded not those who defend Hubbard to the extent that he is innocent until proven guilty. If he is ever charged and found guilty - fair cop.

But until then shut the ferking up. The Statutory Management reports are not reporting fraud. It is just media frenzy on one mission - to discredit Hubbard.

Meanwhile the real crooks in NZ - Jock Hobss and the Strategic Finance gang and Mark Hotchin and Eric Watson get off scott free. Why aren't all of you self righteous anti Hubbardites leading a crusafe for justice there??

Or to stop those mad southerners from marrying their sisters?

this raise,s a few questions--35000 investors--25500 have their payments transferred to their nominated bank a/c--9500 are paid by cheque as the trustee has no bank a/c details for these recipients----this is 27% of total--quite substantial---why the non disclosure---some of these cheque recipients also complained of being paid by cheque---did they expect cash? i think that your  tax dept will be having more than a casual glance at this lot  ---

Bad research P Wilkie

Quite a number of the investors reinvested their investments on a constant rollover and quite a number were old people ( as has been very publicly stated ) who are old fashioned and still get more pleasure getting their daily mail than direct in to their bank accounts - most old people ( particularly rural based ) don't engage in internet banking etc.

And I must state once again all of you anti Hubbardites are wrong - Hubbard has not been charged with any crime and definatley no likelihood of fraud.

sd--most elderly persons are pensioners and pension payments are credited to bank a/c,s by winz  are they not ?

Gosh ! last..some balanced input !

Thank you "sore loser" for that incisive commentary...could you send me a carbon copy in the mail so I can really get into the depth of it ?

Yr 2000 120,000 (gains reinvested) 2010 March 420000 - GT = ?

Aren't these finance company people wonderful?

In the interests of accuracy, and for the record, and in response to Mark Daly's repeated reference to the incorrect (unlawful) placement of The Hubbard entities into Statutory Management on the grounds of "Fraud" under the Corporations (Investigation and Management) Act 1989 No 11 (as at 24 November 2009), Public Act,  Section 4 of the Act reads as follows .. Section 4 of the Act applies to any corporation that

(a) may be operating fraudulently or recklessly, OR MAY be APPLIED to
(b)(1) to protect the interests of creditors OR
(b)(2) protect the interests of beneficiaries OR
(b)(3) for ANY other reason in the public interest

Mark Daly appears to have read this clause as requiring each and every sub-clause to be satisfied ie (a) AND (b)1 AND (b)2 AND (b)3 .. Each sub-section of the applicable section 4 of the act has an OR connector and not the AND connector which makes a difference to the interpretation. It would appear that sub-section (b) (3) has been met and satisfied and not sub-section (a)

Well I don't agree that (b)(3) applies - the pubic have no interest in this private company - the assets and the investments were all private sector.

What do you think is the public interest in this matter?

I think , Kate, it means that if any ONE of these clauses are activated then that is sufficient grounds.?

Yes you are correct that section 4 means that the entire Act can apply to the Corporation but it is sections 38 to 40  that must be complied with to be placed in statutory management.   You will note that the Act contains other provisions that teh statutory management provisions. As pointed out earlier section 39 requires fraud or reckless trading to be present.  Operating fraudulently or recklessly us defined in section 6 of the CI Act as:

 Meaning of operating fraudulently or recklessly

  • For the purposes of this Act, a corporation is operating fraudulently or recklessly if—

    • (a) It contracts debts which the officers of the corporation did not, at the time the debts were contracted, honestly believe on reasonable grounds the corporation would be able to pay when they fell due for payment as well as all its other debts (including future and contingent debts); or

    • (b) It carries on any business or operates in a reckless manner; or

    • (c) It carries on any business or operates with intent to defraud its creditors or members or the creditors or members of any other person, or for any other fraudulent purpose.


      Therefore in my view section 4 is irrelevant in to statutory management provisions in sections 38-40, the specific overriding the general.  I am not dicounting that the statutory managemnet was imposed either under paras (a) or (b) of section 6 but I doubt the correctness of such imposition.

      You'll do well to recall that the SM was originally imposed because the SC felt that Aorangi was not isuing a proepectus and was required to do so and/or it was a contributory mortgage companyand was not acting as such.  I believe that the Minister also stated that he was concerned that the the investments were not properly secured.  All that has gone out the window now but  the original basis for imposing the statutory managemnet  does not appear to fit in with the legislation contained in 38-40 of the CI Act and therefore is the law has been applied incorrectly (in my opinion of course)


When a private entity becomes "too big to fail" and has to be bailed out by the government it automatically becomes a matter of public interest ..' or public concern .. and while the bail out was SCF only and not subject to the Statutory Management it was the related-party movement of funds between SCF and the private Hubbard interests that warranted the lock down until such matters are cleared up .. (b) 3 definitely applies

Me thinks Chen&Palmer would make a bit of a dog's breakfast of that 'long bow'.  But, maybe it would fly as I haven't been following what evidence there is/was of related party transaction(s) between Aorangi and SCF.  

Just to expand a bit further on the above.  Section 4 allows an investigation to commence, documents to be requested etc if any of paras are met.  To put into statutory management however requires compliance with section 38 which states:

 Grounds on which corporation can be declared to be subject to statutory management

  • The Securities Commission shall not make a recommendation under section 38 of this Act in respect of a corporation unless it is satisfied on reasonable grounds—

    • (a) That the corporation is, or may be, a corporation to which this Act applies; and

    • (b) That, in the case of a corporation that is, or may be, operating fraudulently or recklessly, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—

      • (i) Limiting or preventing the risk of further deterioration of the financial affairs of the corporation; or

      • (ii) Limiting or preventing the carrying out, or the effects of, any fraudulent act or activity; or

      • (iii) Enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way:

    • (c) That, in the case of a corporation referred to in section 4(b) of this Act, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—

      • (i) Preserving the interests of its members or creditors or beneficiaries or the public interest; or

      • (ii) Enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way.

    Section 4 will come into play for the purposes of paragraph (a) but note there is an änd"between it and paragraph and you go no further if under paragraph (b) the corporation is not operating fraudulently or recklessly.  That is you can not take into account further risk deteroriation, public interest etc etc

Yes, Mark. There is an 'and', but there is also a "may be". Your assertion that "is" is the qualification is undone by those words.

"may "

2..Used to indicate a certain measure of likelihood or possibility.

I wasn't making that qualification. I understand that the possibility of fraud, depending on what the facts show may warrant statutory management.  But as I said previously from comments made by Mr Hubbard about the report it seems that Aorangi was put into statutory management because it was insolvent - which in my opinion doesn't meet the requirements of section 38.  And in reply to Iconoclasts proposition you can't be put into statutory management on the basis of some vague public interest concern

That's the crux of the whole problem with you southern're so focussed on the word " fraud" that you keep missing the words "or operating recklessly (sic)" which is what this whole thing is about .

If you don't think Hubbard was operating recklessly in both Aorangi or SCF then all of us are wasting our time talking to you !

As you both rightly point out, he hasn't been charged with fraud.

How could the stat.mangers charge him with fraud before they'd looked at the books etc which is what they're doing?  My bet is you guys will strike the double soon whereby Hubbard will be found to be BOTH  reckless and fraudulent.....and finally I thank the National Govt for their business acumen in the way they've handled this whole sorry saga and also for repaying me my investment .

Operating fraudulently or recklessly is defined for the purposes of the Act as I set out above.  If there was one thing about Mr Hubbard that we all know it is that he fully believed he could met all his commitments.

What makes for a good lawyer or accountant? A person who can no longer tell the difference between right and wrong.

Agreed No.6.  Luckily I am neither.

I posted that badly, Mark! My inference is that Hubbard probably started off knowing the difference, but lost that skill in the complexity of "what is legal, and what is not". ( eg: all the paper shuffling). I doubt in the light of this debacle, he even now, recognises that.

Possibly although one of his downfalls has been the lack of paperwork.  He may have proceeded on the basis of his belief in his own inherent honesty but the lack of paperwork to record what has gone on makes it difficult to prove this to others.  We all slow down as we get older and he is no different.

I understand that Allan Hubbard was a qualified accountant..does that help with clarification?


Non applicable truth and seperate realities are all very well when you're not involving others but when you're heading a billion dollar empire then that excuse just doesn't cut it!

It would be a much nicer world if we could go back to the days of a handshake and a "man's word" was his bond but in the 21st century we now swim daily with the sharks and financial evolution demands that we adjust or get eaten.

Actually, if anyone should be charged out of all this is that amateur CEO, Lachie Mcleod but Hubbard was warned of that by the board and ignored it!

RIP big did your go brew the jug and relax!


Your memory is failing you old son

Aorangi was placed into SM well before the receivership of SCF. It was placed into SM because of a mysterious , never declared complainant.

And SCF was being run by Sandy Maier and an independant board - Hubbard had no influence at all. When I say Sandy Maier was running SCF - as we now know he was lining up the sale for Ngai Tahu and xxxxxxxxxxxx.

So you seem to be on another planet today - maybe the spring air is tainting your logic.

The case of SCF and the Hubbard Empire (HE) should be of more than passing interest to all (for numerous reasons, and particularly those in the professions). I dont have a vested interest and have never been associated with any of the Hubbard entities. My interest is in how the responsible authorities handle and ultimately resolve the issues. I'm a forensic accountant, economist, consultant. With several years with a government department in enforcement of a couple of Acts of Parliament and various Regulations. The Act controlling the Statutory Management is not not well written law and largely untested. I wouldn't want to be involved in enforcing it. It's a mess. But its intent is clear. Section 4 defines who it applies to. Sections 38 through 40 define the application of Statutory Management which is merely one form of administration of this Act. Section 38 defines how it is to be initated by Orders in Council. Section 39 defines the grounds on which SM can be applied. Section 40 requires publication/notification of those grounds. Someone has that notification. Was it gazetted?. Or was it done privately to the Hubbards alone? AH has to have been notified of the exact grounds. The crucial part is the reading of Section 39 subsections (b) and (c). One is they are discrete, seperate, and not joined. However a very good Barrister could make a living out of that trying to exploit the vagueness of it in which case Mark Daly would be correct. However the intent is clear. They (b) and (c) are seperate. And the purpose of the application of the act is to lock down the Hubbard Empire. So far there hasnt been any claim or evidence of fraud. The application of the Act is for reasons other than fraud. I doubt if the "reckless" even applies. On the evidence published so far it "appears" the lock-down is for the protection of creditors and prevention of the movement of assets until such time as they can be clearly identified and quantified. The unknown so far is whether SCF owes HE more than HE owes SCF. A question of who the greater creditor is. As in the tradition of most of the other finance company failures related-party loans is right at the fore-front.

Take your point but don't agree - has to be operating fraudulently or recklessly to be put into tatutory management the purpose of which is set out in (b) and (c).  Still matter of opinion.

You see, can be done..we got there in the end with fact and considered opinion..thanks iconoclast!