50 charges: will Hubbard survive them?
Allan Hubbard, the shrewd, conservative, Timaru accountant, built his reputation on trust – often borrowing from and lending to people on the basis of an old-fashioned handshake.
That trust was shattered in the space of a heartbeat when authorities began probing his company, Aorangi Securities, last June and later Hubbard Management Funds (HMF).
Yesterday the Serious Fraud Office laid 50 charges of fraud against Mr Hubbard, 83, while sparing his wife Margaret (known as Jean) and former or current directors of the two companies.
For more than 30 years Aorangi Securities was one of Mr Hubbard’s lending vehicles for his wealthier clients.
Yet besides its now hapless investors, few people outside his inner circle knew anything about it.
Nor did many people know about HMF, an investment management business with funds in several NZX-listed companies.
Indeed, it wasn’t until statutory managers got hold of Mr Hubbard’s books did the SFO learn about HMF, which by all accounts turned into a basket case when the global financial crisis hit.
Even Mr Hubbard’s investors didn’t know HMF existed in its current form until March 2010, when their investment statements arrived on freshly printed HMF letterheads.
Aorangi took in $96 million of investor funds while HMF managed about $80 million.
Certainly, thousands of South Canterbury Finance investors had no idea of these sideshows as they flocked to place their money in the finance company based on Mr Hubbard’s reputation.
It has since become clear that the same “peculiar” approach to business shown in the statutory management reports also took place at South Canterbury Finance.
The infamous Hyatt Hotel shenanigans, for example, venture capital loans to start up biotechnology companies, and Mr Hubbard’s personal management of South Canterbury’s “B Stock ledger” stacked full of related party loans, did not make good reading for the taxpayer owed more than $1.5 billion under the retail deposit guarantee.
Perhaps most telling of charges laid yesterday was the alleged theft by a person in a special relationship.
SFO chief executive Adam Feeley made it clear that Mr Hubbard's frugal lifestyle did not amount to a defence.
“We have to consider matters such as whether deceit has occurred; the losses caused by that deceit; and whether the facts meet the prescribed elements of one or more criminal offences,” Mr Feeley said.
This is an extremely sad day for Mr Hubbard and his followers, for he truly is an altogether different creature from some of his other finance company director counterparts.
Mr Hubbard was born into an impoverished home in North Dunedin on March 23, 1928, and started work as an office boy at Trustee Executors in 1944, where he stayed eight years.
He founded chartered accountancy firm Hubbard Churcher and Co in the early 1950s, and formed South Canterbury Finance in about 1960 – after buying a Timaru finance firm – and in the same year bought his first farm.
He famously got about in an old green Volkswagen car he bought in 1968, while he and his wife lived in a modest house in Timaru. They still do.
Last year Mr Hubbard was dropped from the National Business Review Rich List, having had his wealth estimated at $550 million in 2009.
He was the majority shareholder of Southbury Group, which owned South Canterbury Finance, but the 82-year-old was forced out of the chairmanship of South Canterbury in late May 2010.
Southbury Group and a related company Southbury Corporation were both placed in receivership following South Canterbury’s demise last August.
Together the two companies owed South Canterbury $184 million. Difficulties recovering these loans and other related party lending were a key factor in the Treasury recently increasing the government’s provision for losses under the retail deposit guarantee scheme by $310 million to $1.2 billion.
In South Canterbury’s last week, Prime Minister John Key, conspicuously absent yesterday, as he was last June, would make this point:
“The degree of back office book keeping and general observance of standard accounting practices at South Canterbury was in line with Mr Hubbard’s other private companies, currently in statutory management and subject to a Serious Fraud Office inquiry”.
In relation to South Canterbury Finance, the Serious Fraud Office is currently talking to witnesses with some interviews pencilled down for next month.