Hanover Six face $30m in penalties in FMA civil action

Three of the Hanover Six: Watson, Hotchin, O'Regan - face up $5m penalties each

Hanover Finance’s investment material painted a picture much rosier than the true state of the books, according to the Financial Markets Authority’s ammunition for civil proceedings.

The FMA’s High Court statement of claim,  first revealed by NBR on April 12, lays bare the full arsenal the market watchdog will use against the six former Hanover Finance directors and promoters.

Mark Hotchin, Eric Watson, Greg Muir, Sir Tipene O’Regan, Bruce Gordon and Dennis Broit will defend 10 civil actions under the Securities Act.

If the FMA is successful on all 10 civil actions, the six men could be ordered to pay up to $5 million each in penalties, or $30 million in total, the statement of claim reveals.

The FMA alleges certain statements made in Hanover Finance’s December 2007 prospectus and its March 2008 extension certificate and advertising were misleading and untrue.

Specifically, Hanover’s December 2007 prospectus contained untrue statements around liquidity.

One area where alleged misleading and untruths are found is in chairman Greg Muir’s statement, which talked up Hanover’s profits levels, which “reflect our close management of the return and risk profile of our loan book”.

The FMA claims those statements were untrue because they omitted material about the deterioration of Hanover’s liquidity between June 30, 2007, and December 7, 2007.

During that time, the FMA claims total secured deposits fell from $825,911,000 to $651,902,000.

Meanwhile, reinvestment rates fell from about 81% to 34%.

Read more details about the FMA’s case in tomorrow’s National Business Review print edition.

See the full statement of claim here.

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16 Comments & Questions

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I hope Greg Muir and Sir Tipene have good insurance or a good indemnity from Hotchin and Watson for the do-do they've been dropped in by those guys

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It seems to be a risky business being a director of a finance company. Which one of the six will apply for legal aid ?

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Any chance you could just summarize the attached 'RAW DATA'?

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Wasn't Watson living the high life in London? He doesn't seem like somebody who would have had any idea what was happening back at Hanover. I don't like his style but I can't see how he could be held responsible. He probably never even showed up to Board meetings and just signed whatever was put in front of him, in the same way as Sir Doug Graham at Lombard.

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Wow, after reading the FMA rap sheet, I think these guys are going down the gurgler in a BIG way! Wait until the SFO have a go and then the investors line up to bring civil suits. I think it is going to get very ugly for these guys and will set the bench mark for actions to be taken against other directors of failed finance companies. $8.5 billion in losses by investors who have plainly been lied to requires a stern response. Due the scale of this mess, an "oops, sorry" plea is not good enough.

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JB

$8.5 billion? Clear that you haven't read a thing let alone understood it. Sure you didn't invest in Hanover without even reading the prospectus?

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The hanover Finance and Strategic Finance directors and Consultant have proven to the market how thick they are.

If they had come out and personally offered compensation back to the receivers ( without prejudice or admission of guilt ) they wouldn't now be getting charged.

For instance the Strategic finance guys shared a reasonable proportion of the past dividends and sale price to Allco ( the cash component ofcourse ) and apologised the investors would have said what fine chaps they are and at least they did their best

But no the greedy plebs just thumbed their noses at all and sundry and have the arrogant view that the investors should have known that the directors and consultant were crossing the line legally and ethically on every deal they did.

So I say to the SFO, FMA and investors, take no prisoners when you all attack these vermin. They never gave investors any respect or due care so why should they and the authorities show any leniency now.

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Quite correct with your analysis here Doctor.

It is becoming quite obvious exactly what these people are.

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Who is the Consultant?

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If "Sir Tipene Regan" wasn't a red flag to warn off investors, I'm not sure what is. His bro' Dover Samuels files Tip's GST Returns.

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Just pay the bill or throw them in jail for misleading the public. Why do we have to wait so long for justice?

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At least they are being charged!

Why didn't the CEO of the 'new broom' FMA initiate a 'new broom' review of the decision of the old (useless) Securities Commission NOT to charge former fellow Directors of huljich wealth Management (NZ) Ltd, John Banks and Don Brash for signing Huljich Kiwisaver registered prospectuses dated 22 August 2012 and 18 September 2009 which contained untrue statements?

How 'dodgy' is THAT - in the 'least corrupt country in the world'?

Penny Bright
'Anti-corruption campaigner'.

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oops! That should have been Why didn't the CEO of the 'new broom' FMA initiate a 'new broom' review of the decision of the old (useless) Securities Commission NOT to charge former fellow Directors of Huljich Wealth Management (NZ) Ltd, John Banks and Don Brash for signing Huljich Kiwisaver registered prospectuses dated 22 August 2008 and 18 September 2009 which contained untrue statements?

Penny Bright
'Anti-corruption campaigner'.

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Penny,
Take off your hat, and your biases.
Brash and Banks did nothing wrong...they were not to know that Huljich had used his own money to top up the fund to improve its apparent performance. And no lost any money!

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You missed by point - $8.5 billion is the sum total of all losses suffered by investors from all finance company transactions. Hanover is a representative case that needs to be addressed in the context of the much bigger phenomena.

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You're all losers

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