Eric Watson also in Sec Com sights

Hanover Finance co-owner Eric Watson is still in the frame of a Securities Commission investigation that this week invoked unprecedented powers to freeze the assets of his business partner Mark Hotchin.

And the commission has said it will use international agreements to pursue people overseas if necessary.

Sue Brown, the Security Commission’s director of investigations and litigation told the National Business Review: “We’re continuing to look at the roles of all the people involved in the preparation of prospectuses. Mr Watson was a promoter of the offers and therefore as a promoter he is one of the people who could be liable if there were untrue statements made.”

Ms Brown was keen to stress that the investigation was continuing, a decision was yet to be made and her statements were in no way indicative of civil or criminal liability.

However she added that a commission statement concerning Mr Watson would be made “very shortly.”

She refused to answer questions about whether the commission was in contact with Mr Watson’s lawyers: “I don’t think I should comment on that. We don’t normally comment on the conduct of our negotiations.”

Hanover entered a moratorium owing $554 million in 2008. Mr Hotchin and co-founder Eric Watson took $91 million in dividends in the years before the company defaulted on payments to investors.

Hanover investors subsequently voted to merge with Allied Farmers, a deal that has since soured with allegations of inflated loan values and referrals to the Serious Fraud Office.

Mr Hotchin said in a statement through his lawyers that: “As the matter is before the court, and the investigation is said to be incomplete, Hanover and Mr Hotchin do not propose to make any further comment at this time.”

Mr Watson could not be reached for comment.

Asset freezes
Ms Brown said Wednesday’s unprecedented use of Securities Act powers introduced in 2006 to freeze assets in the High Court named Mr Hotchin’s New Zealand assets, as well as several trusts owned on paper by Tony Thomas.

These trusts, a series of numbered companies beginning with Ka No. 1 Trustee, own property connected with Mr Hotchin including his half-built $30m Paratai Drive mansion.

Ms Brown confirmed the order was sought over concerns assets might be appropriated abroad were civil or criminal action to be brought against Mr Hotchin.

Asked if a similar argument could be made in the case of Mr Watson, who also has extensive overseas interests and lives abroad, Ms Brown said: “Yes.”

Mr Hotchin and Mr Watson are also co-owners of OHL, formerly Hanover Overseas, owns several tracts of forestry in Northland.

Mr Watson was valued at $250 million in the most recent NBR Rich List. His domestic assets include Westbury Stud, a palatial six-bedroom estate and golf course presently on the market for $30 million, sole ownership of underwear maker Bendon, a half-share in Viaduct nightspot Soul and 75% of the New Zealand Warriors NRL franchise.

Action could go global
The Hanover pair have in recent years lived mostly abroad – Mr Watson in the UK, and Mr Hotchin in Hawaii, Italy and Australia.

Ms Brown said the commission could still take action if those charged were overseas. “Mr Hotchin is not in the country all the time. So if that were relevant, we’ll obviously be looking at the reciprocal relations we have with other jurisdictions,” she said.

Ms Brown confirmed a close working relationship with the Australian Securities and Investment Commission but preferred not to comment about how far the commission could reach.

The Securities Commission has signed memorandums of understanding facilitating the exchange of information and mutual assistance with comparable authorities in the US, Hong Kong, Taiwan, Papua New Guinea, Sri Lanka, Malaysia, Indonesia, China and Israel.

NBR understands both Mr Watson and Mr Hotchin are on the Serious Fraud Office border alert list.


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"Birds of A Feather" should be plucked together!!

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These guys are best mates and I am sure while Hotchins assets are frozen Watson would have suported him financially , paid his legal fees , living costs etc , maybe not now.

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Watsons got no mates

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The strategy of many NZ business 'leaders' is to asset strip NZ and move offshore to avoid the glare and allow them to sleep better. We have lots of examples (Fay and Richwhite spring readily to mind). The true NZ business leaders are those who live out their retirement here.

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About time Watson appeared on the radar...

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Watson is too smart. I doubt he will have too many issues here. Over time he has promoted many offers and always has a knack of being long gone from the ship, or often he never even boarded the ship - he just takes his pickings from afar. Like it or not he does have the Teflon touch.

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John KEY and National, good move and flush out all the culprits (so-called directors with numerous companies).

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Watson is a deemed director and will be under the same spotlight as his fellow director.

Fay and Richwhite are a timely reminder of a settlement out of court and moving offshore.

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Still, forget the personalities involved, and the brutality of the mob, I don't think it is healthy that the State has this massive to power to destroy the individual. We all lose in the long run:

http://tribelesshispursuitofhappiness.blogspot.com/2010/12/opinion-piece...

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@Tribeless
How do you reconcile that with the fact in July 2008 Hanover Finance, co-owned by Hotchin and Eric Watson, unilaterally FROZE $554m of investor funds, without their agreement, denying investors access to their funds.

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That was not the point of my blog post, pragma. I stated if there is a fraud, it is the proper role of government to prosecute, but I am - and I gave reasons why - extremely uncomfortable with the powers being demonstrated by the State here. Hotchin, A Hubbard now ruined: not a single charge laid yet.

And, the major point of my post on the link - regulation that has come from the finance company collapse debacle will achieve nothing other than suffocating our economy, which we can ill afford. Plus on my blog I gave a credible (?) scenario of how, and the reasons why, under laissez faire, the collapse of this sector may never have happened, as there would never have been the amount of money invested. And how the regulation that is now in place locks into a monopoly the reason for why so much 'stupid' money was invested in this sector - we are already headed for the next round of investor losses, as investors have learned nothing.

How many Vestar advisors are now to become AFA's?

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Tribeless. The point you are making is crystal clear. The exercise of power by the "state" over the individual. Earlier this week, you wrote on NBR, in regard to Hotchin, and the restriction by the "state" on his ability to defend himself. That is understood. The point I am making is that Hanover, in freezing $554 million, exercised the exactly the same power over its investors. How many lives did they "destroy" in that one act. Did you defend the rights of those investors then in 2008 and at the same time, attack Hanover for its exercise of power?

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Watson dicked Josephine Grierson, that's all you need to know about his business ethics.

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You deliberately miss my point again, pragma. Which is that Hotchin was not, repeat, not, my point.

I have sympathy for the investors, but as my blog post made plain, their plight is partly founded on our Nanny State which taught them they didn't have to be responsible for their investments, as in having to understand them, and understand investment risk. And the new regime now reinforces that, and nothing has changed, other than an ethics exam sat my the same advisers who put their clients money into fiance companies in the first place.

As for Hanover freezing client funds, while outside the brief of my post, wasn't that done as a measure to try and safe guard client monies? To stop a 'run on the bank' that would have seen the underlying investments liquidated in a fire sale from which no one would have benefited? It that respect it could be argued it was prudent.

And yes, it has all fallen to pieces since then, because the massive asset bubbles grown by Keynesian mis-macro-management of our planned economies, centrally planned by the State, all burst, as they always have to. And now that same unsound moneyed system, the plaything of meddling politicians who don't have a clue about economic matters, is already growing new asset bubbles: look at the DOW, look at commodity prices. Nothing has changed. The seeds of the next bubbles are sown already, and politicians are watering them well as they seek re-election.

Laissez faire is the answer, but the world has simply lurched to the bigger and bigger state. Our societies may well be set to repeat the brutality and chaos of the 20th century all over again: look at the street scenes in Greece and Ireland.

So yes, I have empathy for the investors, but legislating their continuing ignorance via AFA's and the FMA is the cruelty extended, and visited on the next generation.

The other point you're missing when you talk of Hanover exercising it's power, is that every investor voluntarily had their money with Hanover, no one was standing over them, however, when dealing with the ruthless State, as it is quickly becoming, no individual has any volition at all in the face of it. Government always works through utter, complete, force. Thus the most important thing to humanity is lost: freedom.

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Yes these are hard measures but justified in Hotchins case and questionable in Hubbard's.

A rerard can work out that Hotchin and Watson fleeced their investors at Hanover for huge persona; gain. In Hubbards case it is not the case and 4 months after investigations began and 3 months after Statutory Management no charged have been laid. No serious charges are ever likely apart from Securities Commission minor issues.

Next step for the Securities Commission and SFO - Jock Hobbs and his Strategic Finance directors and Consultant. Strategic will be on par with Hanover in terms of likely charges and the level of crime.

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I would be interested to have Tribeless present some examples of countries around the world who NZ should model.
In this week's media we had the similar thinking and equally pompous Roger Kerr of the business round table giving us a heard it all before speech on the abolition of gift duty.
This move is only going to strengthen the already ludicrous ease in which people can incorporate,issue a prospectus,lend invested funds unwisely,lose the shirt of the investors' backs,and continue to live in a multi million dollar house held in trust.
Hands up who remembers this happening through the fallout of the 1980's financial markets collapse.
This afternoon I had a discussion not with a would be penpushing university professor such as Tribeless but with a bloke who spends his life chucking lamb carcasses into a freezing chamber.
Unlike Tribeless who lives in an imaginary world fantasising about accumulating vast wealth while the peasants swoon at his presence,this person lives at grassroots.
I asked him what he thought in regard to the steadily increasing number of dairies being subject to arm robberies,in parts of NZ where historically such happenings were unknown.
Well he said,a lot of them are young kids with no jobs,who watch TV and are presented with a materialistic society where having the full range of consumer goods is the norm.
In the early days of TV in this country,advertising was restricted,but now if you watch television,it is the adds that are the main focus and the programs which are the fillers.
So the armed robberies will continue as we become more and more a clone of the USA,which is the home of Tribeless' political party.
This is the society which Tribeless embraces.
Just as those selling consumer goods use TV as the dominant advertising media,we had companies with alluring names such as Lombard,Hanover and Capital & Merchant marketing their junk bonds to the unwary.
The people behind such companies are not concerned with morality and do not have any issue with having substantial assets held in trust when the companies collapse.
It is called asset protection.
If Tribeless did not want Mr Quixote mentioning the word Hotchin on his blogsite,he should not have used the word Hotchin in the heading to his article.
It is called sticking to your topic.
High School English.
Why anyone would wish to actually post on Tribeless' blog has me puzzled.
As for Mr Hubbard,as Tribeless well knows,when he is released from his shackles,he will release some of the wealth from his 500 companies and who knows how many trusts,to repay the Aorangi and HMF investors.
I am confident that he is a moral person.

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Actually, Red Dog: I'm not 'into' money, in the way you seem to think. Clear to see the machinations of your own mind though. Before writing such long posts, why not try reading, and comprehending, what the other person has actually written. In every way you are toxic. See ya.

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Incidentally, there has never been a country running under a Libertarian system: and not likely to be in my lifetime - our societies are going entirely the other direction. But you do realise that in all matters that are important, a libertarian is merely a humanist, and classical liberal?

There was a chance of such a free society, but it was one of the lasting evils that Hitler achieved in squashing it. There was a beautiful classical liberal tradition blossoming amongst the Jewish intellectual and busines emigre communities centred around Vienna in the early 1930's, tragically, and inhumanely extinguishied in the gas chambers.

Did you realise that?

And I've been wondering why you are so toxic to me in the face of the notion of an individual's freedom? It's not such a bad concept is it? But then, I did say in my blog post that an informed investor who understood risk would not have invested in the finance companies, as they were getting no premium to compensate them for the risk they were taking, and informed investors would typify a laissez faire market (for the reasons I gave in my linked post), which I realise you would have been smarting at, being a SCF investor, after all. Nothing personal was intended; I didn't know you'd be reading my blog. Sorry if I've caused offense.

But in my post I did give a very good case supporting the finance company debacle would not have occurred under laissez faire, and that the new round of regulation in NZ, AFA's and the FMA, are simply granting a monopoly to the very group who put unsophisticated money into the finance companies in the first place, and that the finance companies, and the asset bubble they created, relied on that very group. Plus the FMA has the real prospect of relegating our ailing NZX completely irrelevant, so destroying one further avenue start ups have of obtaining funding. (I'll be doing a blog post soon on how, because of our over-regulation, a start up like Twitter could never happen in New Zealand. Regulation here has effectively killed innovation.)

Do you think AFA's sitting an ethics exam is going to help? That they won't get around the commission issues? How can an AFA working for a property investment company, say, possibly give unbiased advice? Wouldn't the better idea be to allow a free market environment in which investors informed themselves on risk, and how it works?

Why not debate on my actual argument, and the examples I gave rather than just throwing around cliched nonsense you think you can win some type of uninformed emotive point on, by pandering to the prejudices of the socialist sheeple?

Try reading my blog post again: the link to it is still above. And yes, I realise you'll not be commenting on my blog, for I have a policy of allowing no anonymous posts, and those are your forte. I'm sick of dealing with your cynical, poisonous personality hiding always behind the skirts of Nanny State, so have little interest debating you on NBR's bandwidth.

Life's short, enjoy it - merry Christmas.

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Go Red Dog
The majority of New Zealanders have morals and ethics like you
The majority still have faith in the system - although that is rapidly decreasing under yhe weak leadership of Jphn Key ( I was a JK supporter but he has failed NZ and failed to deliver on what we all voted him in for - teflon man )

Get rid of these guys and then Jock Hobbs and his Strategic mates
Clean up NZ once and for all

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To Anonymous at 08:13 am on December 19, 2010
If Joh KEY is failing to deliver, and as a genuine NATIONAL SUPPORTER, you need not give up that easily. Continue to put in more efforts and comments so as to help not only the Government, but also Nzers as a whole. At least you mean what say.....

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I hope the securities commission makes it as hard as possible for Hotchin and Watson to ever ever be able to run a creditable business again. What they did to thousands of people is certainly starting to have an affect at last. Neither one has got the guts to return to NZ where they are social outcasts. What a shame Hotchin won't ever get to live in his mansion on Paratai Drive. I am sure their families must be so proud of them. Their children are going to carry the shame of what they did as well.

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I wonder if we should be heaping all this opprobrium and vitriol upon Mr Hotchin without giving some thought as to the possible consequences.

Lets not overlook the very sad case of what has just happened to his namesake in the U.S. (Bernie Madoff's son).

Perhaps a more christian and tempered approach to comments would be in order?

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"Perhaps a more christian and tempered approach to comments would be in order?"

You mean, the same sort of "approach", Hotchin showed towards the folk, he ripped off? The type of restrained humility he showed at his 50th birthday bash in Fiji, using other people's money he looted from Hanover? That, what you're saying?

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@Tribeless
You continually state that it was the investors fault for not being educated enough to make wise investment decisions with their money with regards to Hanover.

Hindsight is a beautiful thing for guys like you.

Maybe then you could explain to all investors out there how we are suppose to make decisions on where to put our money.

Usually the prospectus forms the basis of all offers, but now it appears Hanover may have lied and falsified numbers to paint a more colourful picture.

If the investor community no longer has faith in a propectus, think of the ramifications this would have on the industry as a whole.

Businesses need our money, but they have to be honest stating the true facts when asking for it.

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Imagine Public School educated Tribeless as proprietor of a car sales yard.

In walks a bloke who left school at 15 barely able to read and write.

Hmm says the bloke to Tribeless these cars are a bit pricy for me,I've only got $1000 to spend.

Well says Tribeless,no problem mate I will see you right.

Now how about this little Mitsi over here.

$20,000 with $1000 deposit.

Tokyo takeaway just for you.

So let's get the paperwork done.

Now Mr Bloke says Tribeless,lets do the paperwork.

Interest for 5 years at 28 % is $16,494.

Change of ownership is $10.

Documentation Fee $400.

Insurance Policy for loss of Income $2765

Registration Fee to register security $8

Warranty in case of Breakdown $1590

Total Consideration $40,267.

Divided by 60 months equals $671.11 per month.

Mr bloke drives away,another victim of the post Muldoon NZ society.

Ah well thinks Tribeless now I will treat myself to a business lunch,tax deductible of course.

What a good deal for me.

A greenie would say I stitched the guy up but hey its dog eat dog out there and I'm a Liberterian so that means my ideology is that the bloke should have educated himself on how car dealers can stitch you up,and just because he didn't get School Cert and I have a first class honours degree in Political Science,that's tough luck for him.

Six months later Mr Bloke visits a budget advisor because with the car his wife has on hire purchase,the three computers they lease,and his six credit cards,he is in a financial mess,and Tribeless' finance company has just put a repo on him because he is one payment behind.

Well says the Budget advisor,you are living beyond your means Mr Bloke.

Why did you agree to pay 28 % interest.
15% would have been enough.

And he got you to take out a loss of income policy even though you are on longterm ACC and will be on it until age 65.

And this mechanical warranty premium.
The car should be suitable for the purpose for which it was sold.
This means you are covering his butt.

And the documentaion Fee.
He is sitting in his office doing nothing until you walk in,so that is just a rip off.

Since Mr Muldoon got booted out it has been a free for all for sharks who prey on the weak.

The car will only owe him 10 grand so Tribeless will just take it back,sell it for whatever he likes,and the finance company will sue you for the balance.

Sorry mate,but you have to declare bankruptcy.

Your assets are exceeded by your liabilities and you can not pay your bills as they fall due.

Oh well thinks Tribeless,there are plenty more where that sucker came from.

And I can't lose.

I clip the ticket on the sale,both insurance policies and the finance charges.I pocket the doc fee.

I love this libertarian world.

As long as he signs the dotted line,he is hooked.

I am pleased about the outcome of those Bluechip cases.

The financiers were in the right.

Morality doesn't come into it mate.

Anyway,today is Sunday so I have to go to church.

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I only hope the Sensible Sentencing Trust keep a close eye on any verdict Hotchin (and hopefully Watson) receive if justice is done. After all they have been deficient in cases of white collar crooks. The sentence Mary Anne Thompson got was a farce.

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