'An intricate and complex intermingling of affairs'

Government appointed statutory managers have released a telling first report on Allan and Jean Hubbard of Timaru and their various business interests.

Richard Simpson and Trevor Thornton of Grant Thornton were appointed on June 20. Mr Hubbard, 82, has denied any wrongdoing and has said he had the money to cover the payments before his assets were frozen.

However, the managers say there is an intricate and complex intermingling of affairs, which will take time to work through.

Investors owed $96 million have had their funds frozen and will receive no returns in the short term while investigations continue.

The first report (link here) identifies several issues, including the identification of Hubbard Management Funds, an investment management business managed by Mr Hubbard with $70 million worth of assets.

The report notes:

Aorangi has apparently applied investors money to a combination of independent parties and entities associated with Mr and Mrs Hubbard.

Te Tua Trust borrowed money from Aorangi and provided interest free loans to a range of business people.

A number of charitable trusts were formed in March this year and purport to have taken ownership of some assets associated with the Hubbards.

Some investors, who believed their investments were secured over land, may not in fact have this security.

“The level of investments in (including loans to) businesses associated with Mr and Mrs Hubbard without registered security is of concern. Most of these investments are in or to farm businesses that have loans from banks secured by a mortgage over the assets of the farm.”

Aorangi may therefore only be paid after the creditors of those businesses were fully paid.

A lack of paper work is impeding progress.

“The standard of paper work for the entities is not what we would have expected to have found for business entities of this size and complexity,” the managers said.

“Until we have a clear understanding of the status of Aorangi and Hubbard Management Funds, their assets and investments have been frozen in the interim and could remain so for some months.”

Records show Aorangi has total assets of $132 million.

Investors, other than Mr and Mrs Hubbard, have contributed $96 million to Aorangi.

“From our work so far, it appears over $106 million is invested in (including by loan to) businesses and charitable trusts where Mr and Mrs Hubbard have a direct or indirect financial interest."

"Some investors, who believed their investments were secured over land, may not in fact have this security."

Hubbard Management Funds

The first report says some investors in Aorangi are also investors in Hubbard Management Funds, and investment business operated by Mr Hubbard.

The report states:

“It seems that Mr Hubbard makes all or most of the investment decisions regarding HMF and undertakes communications with share brokers.

“In our opinion the accounting systems for HMF are not adequate.

“Because of the nature of HMF’s accounting systems, it is not possible to accurately calculate the value of HMF at any time. HMF is presently estimated to be $70 million. The actual value of HMF will not be known until the reconciliation is completed as at 31 March 2010 and then updated to 20 June 2010.

* “The funds in HMF have been frozen. No new funds are being accepted for investment and no withdrawals may be made at least until the accounting for HMF is brought up to date.

“Investors in HMF should be aware that, current indications are that the market value of the portfolio has reduced since 31 March 2010."

Charitable Trusts

The statutory managers are undertaking a complete review of Te Tua Charitable Trust’s loan portfolio of approximately 170 loans.

Te Tua Trust was formed many years ago and has provided interest free loans to business people.

“We will be taking steps to recover arrears,” the managers said.

Other trusts under statutory management include Otipua Charitable Trust, Oxford Charitable Trust, Regent Charitable Trust, Morgan Charitable Trust, Benmore Charitable Trust, and Wai-iti Charitable Trust.

“These charitable trusts were formed in March 2010. Some assets held by Mr and Mrs Hubbard have apparently been transferred to these trusts in March 2010. We are working through the implications of these transfers.”