Hubbard to face fifty fraud charges

UPDATE 3:35pm: The Serious Fraud Office has laid fifty charges against Allan Hubbard after a year-long investigation into Aorangi Securities and Hubbard Management Funds.

The charges were laid in the Timaru District Court and allege theft by a person in a special relationship, false accounting and false statements. The charges carry a maximum prison term of 10 years.

SFO director Adam Feeley said in a statement the investigation had relied on assistance from the Securities Commission, now the Financial Markets Authority, and the Registrar of Companies.

FMA chief executive Sean Hughes said the evidence used by the SFO could give rise to Securities Act charges, but a decision was made to leave the matter with the SFO and the Crimes Act.

“The FMA has therefore closed its investigation into this matter, and has offered the SFO any ongoing assistance which may be required,” Mr Hughes said.

Mr Feeley said Mr Hubbard's frugal lifestyle did not amount to a defence: “Whatever the public may think, in considering whether serious fraud has been committed, the motives or lifestyle of an alleged offender are ultimately irrelevant. We have to consider matters such as whether deceit has occurred; the losses caused by that that deceit; and whether the facts meet the prescribed elements of one or more criminal offences.”

Mr Feeley said the issue of Mr Hubbard's health had been considered: “Throughout the investigation we have been aware of the level of public interest in, and support for, Mr Hubbard, and the issues of Mr Hubbard’s age and health which have been raised by his lawyers.”

He continued: “We are satisfied that, on balance, there is strong public interest in having this matter put before the Court, and any issues regarding fitness to stand trial will be matters for the Court to adjudicate on.”


3.30pm: Allan Hubbard's lawyer, Russell McVeagh's Mike Heron, has confirmed the Serious Fraud Office has laid charges against his client.

Mr Heron said he had not an opportunity to consider the charges, but maintained his clients' innocence. "We understand that consistent with Mr Hubbard's position all along, the SFO is not alleging he has stolen any money nor that he has benefited personally," he said.

"The charges are strenuously denied by Mr Hubbard. They mark the end of a process which, in our view, has been fundamentally unfair and amounts to a clear breach of Mr Hubbard's rights."

Mr Heron said he intended to file an application to stop the prosecution.


2:30pm: The Financial Markets Authority and the Serious Fraud Office were today set to lay charges in relation to Allan Hubbard’s Aorangi Securities and Hubbard Management Funds.

NBR was aware of last minute discussions between Mr Hubbard’s lawyer Mike Heron and the SFO over how the decision would be announced. A press release was due to be sent out by the regulators today.

The SFO announced an investigation into Aorangi exactly one year ago at the same time as the government placed the company, as well as Mr Hubbard and his wife Jean, into statutory management. Another company, Hubbard Management Funds, and nine charitable trusts were also placed in statutory management.

The SFO's general manager of financial markets and corporate fraud, Simon McCarley, was tightlipped: "You'll have to wait for the press release," he told NBR.

FMA chief executive Sean Hughes hinted at an announcement yesterday.

“Early next week, we’ll be making some joint announcements with the Serious Fraud Office in terms of some additional matters where charges are going to be laid,” Mr Hughes told TVNZ’s Q&A yesterday.

On its website the SFO said it had completed the substantive part of its investigation in late November 2010.

However, Mr Hubbard’s lawyers requested that the SFO not make a decision in relation to prosecution until submissions from them were received.

A dispute between Mr Hubbard and statutory managers over how the Timaru financier should pay his Russell McVeagh legal bill further delayed the SFO conducting a final interview.

'Complex intermingling of affairs'

When Aorangi was placed in Statutory management last June it owed approximately 400 investors $96 million.

These funds were lent out to borrowers mostly in the property and farming sectors, with some loans made on an interest free basis.

Initial reports by statutory managers from Grant Thornton described Aorangi as “an intricate and complex intermingling of affairs.”

The first report noted that Aorangi had “apparently applied” investors money to a combination of independent parties and entities associated with Mr and Mrs Hubbard.

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

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

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

Investor losses likley

In March this year, Grant Thornton said Aorangi investors would likely suffer losses despite Mr Hubbard agreeing to subordinate up to $60 million worth of assets, already included in the Aorangi portfolio.

Meanwhile, a hole of $31 million in Hubbard Management Funds (HMF) would see investors face significant losses with a payout not likely until next year.

The March report valued HMF at $48.75 million, 38% less than the $82 million it was valued at in statements sent to investors on March 31 last year.

Grant Thornton issued a statement today, saying they “will not comment on the SFO charges laid against Allan Hubbard.”

The managers continue to administer their obligations under statutory management and will report to investors at the end of this month as scheduled.

Ongoing cases

The FMA lists on its website a number of investigations currently active. Those that also involve active SFO investigations include:

  • Aorangi Securities
  • Belgrave Finance
  • Hanover Finance
  • United Finance
  • Mutual Finance
  • Rockforte Finance
  • South Canterbury Finance

Mr Hughes told Q&A the Hanover investigation was likely to be resolved by the end of July. Mr Feeley told NBR last week the agency was having difficulty matching information with evidence from witness interviews. 

NBR understands the South Canterbury investigation - focussing on the finance company's loans to redevelop the Hyatt hotel - is still talking to witnesses with some interviews pencilled down for next month.

THe SFO said today it has closed an investigation into Mutual Finance.


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52 Comments & Questions

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Why don't you just wait and see who is charged before you speculate on Hubbard.

This is not the first time that you have done this and last time you were wrong.

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It could be D day for Mark Hotchin and Hanover??

Or D day for Strategic Finance or Strategic Finance Nominees

Best to wait until they announce who it is rather than speculate.

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innocent....! woop woop

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Press speculation again!

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Isn't it funny how Russell McVeigh delayed the process because they wanted the Statutory manager to pay their exorbitant fees of $2M and as soon as $1M is paid they may proceed with charging Hubbard.

Surely the investors should be able to claim that money back as it was also unsecured like them - and they shouldn't have a preference over other creditors.

I am not professing to be legally aware but isn't there some issues here??

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I think there are some issues here with preferences given to some creditors of Mr Hubbard at the expense of others. If Mr Hubbard were adjudicated bankrupt (the Statutory Managers say he's insolvent), I don't think these preferences would be happening, and I don't think there is a good legal basis for what they have done. The Statutory Managers have told me they will respond in their report at the end of this month.

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Good on ya SFO go for the only one who has made NO money, doesn't have family trusts and appears to have had no gain at all Meanwhile the others zoom of overseas with their 'profit" and family trust in tact. Why are you not challenging the Family trusts to justify the income as is being done in the USA.

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Excellent 50 charges against the old buzzard, lets hope they make a load of them stick. Lets hear the Hubbadites defend their benefactor now LOL - they all claimed there would be NO charges, well guess what there are LOADS.

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yeas and only Aorangi to start with - wait for the rest.

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Has only AH been charged? What about the other people involved in the mess particularly other Directors & Mgmt of SCF??

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Rightly or wrongly a sad way for this to end up.

I think Alan Hubbard deserved better given the(clearly) good works he has done throughout his life(though that does not excuse the clearly flagrant disregard for the financial regulations he obviously ignored)

One would hope the same zest for justice is being exercised in the pursuit of Hotchin Petrecivic and co(Somehow I doubt it - Hubbard looked - and proved - a much easier target)

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Come on TOM,
Most of the money Alan gave away was not his own!!!
The big displays of philantrophy in recent years were underwritten by 'Mom & Pop' investors and more latterly the NZ taxpayer.

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Agree, don't be influenced by his lifestyle... it looked like it was just a show.

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Read the book Gecko

It was happening long before I was born.

Hubbard isn't a johnny come lately philanthropist. He was doing this decades ago.

And bear in mind(given that I am not on his side in light of the obvious breaches of the securites law) that there was never a default on a SCF Aorangi or HMF loan while his name was above the door. That's fact not supposition like you have just espoused.

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Not by Hubbard Hood, but apparently most of his borrowers didn't bother paying back any interest or principal

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Agree BoJangles(though not about the word 'most')

He (along with his cohorts Pye and co In Dairy Holdings who all seem to have had their snouts well into the SCF trough) had a 'love is blind' fascination with the dairy industry and clearly anyone walking through the door and making a 'moo' sound was immediately inundated with enormous amounts of interest free cash. And the apparent issue is that the cash was not actually Mr Hubbard's but someone else's.

Sort of like a warped Santa Claus really.

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Tom; Isn't it more likely that there were no defaults on SCF Aorangi or HMF loans simply because Hubbard covered them up. Looks like he had been robbing Peter to pay Paul for a long time.

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Sorry Gran Torino - when I said never a default on a loan I meant never a default on an investment repayment.

Course it(Aorangi and HMF) could have/might have been a ponzi scheme....

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My money is on ponzi scheme

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Chorus: We, the idiots from Timaru, are about to go a picketin', again.

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Fair enough but if 50 charges stick to Allan Hubbard then they must be able to stick 100 to Hotchin of Hanover and Jock Hobbs of Strategic Finance.

If they can't you would have to wonder about the integrity of the SFO and FMA

And if they use the excuse that they cannot get any money back from these guys as it is all hidden overseas etc then they are worse than i thought and you would have to wonder whether Hubbards charges are politically motivated.

they all should be charged so that these guys can't have another chance of ripping off the investing public in the future.

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Old crooks and young crooks....all the same

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Well no surprises here. Pretty much what I picked in Oct 2010 (<url>http://www.lostsoulblog.com/2010/10/crimes-allan-hubbard-could-be-suspec...)

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Like many in financial markets I watch with interest, but suspect that this has more to do with Politics (and being seen to support departing Minister Powers) than facts. This just doesnt reconcile with my experience or the experience with all who had dealings with him, and all I can assume is that the lack of paperwork in a form expected by bureucrats filled with young would be / want a be lawyers in hindsight review, is now seen as fraud. Remember there is a expression INNOCENT UNTIL PROVEN GUILTY !! Laying charges is not proven guilty. Its just a bureaucrats view and as we have seen recently bureaucrats often get things wrong.

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I await an apology from "Tribeless" aka Mark Hubbard for the abuse he heaped on those of us who had serious doubts about Hubbard, both here and at interest.co.nz.

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Capitalist - spot on mate, where is Tribeless now? Come on Mark, are you man enough to apologise to all you abused for doubting your Messiah? Where is the mea cupla? Man up fellah.

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“Democracy and Rule of Law should be cherished” - -John Key, Australian Parliament, 20 June 2011.
JK overseas again. Interesting!!

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Good to know I have two more things to disagree with John Key on, but then again isn't he the current incarnation of and apologist for the myths that bind together the social support for the modern state?

The democratic process somehow legitimises the domination of some over others, and all the apparatus of domination. And if the domination is enacted as legislation expressed in neutral
and abstract language then it's 'the rule of law'.

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Good to see something done one way or another.
Looking forward to the details on the charges, the case and the defence.

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Yep, no personal gain here except for the army of those wanting blood out of Hubbard. Ironic that others living the high life and who have done a runner are protected by something called a TRUST.
Yep, the law IS a donkey.

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Hubbard should fire Russell McVeigh

They have been useless the whole way and yet charged $2M. They keep threatening to stand up for Hubbard but never do. Hubbard needs a mongrel like Bruce Stewart defending him - one with balls.

Russell McVeigh are too close to the Government - so close that they are conflicted

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Mr Feeley, how do you go from $31mil to $95 or $97mil?
Where is the missing $60mil?

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Coooooeeeeeee! Tribeless! Mark, where are you, we are waiting?

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Remind me wheres that Bryers Chap is? oh and wheres Hotchin?
and a Watson?we all know where Henderson is hes bankrupt and sailing in Spain,and the list goes on and on and on Hubbard has done what,stayed around cooperated run a very succesful business paid out millions in dividends over 50 years!!! and was a bit lax it appears on ticking the right boxes .... give me strength.......

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LOL these attempts to somehow shift the blame are getting more and more hilarious!

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I feel sorry for Alan Hubbard .. And there's so many inconsistencies here: either Hubbard should not have been prosecuted, or as now he is, then he should certainly not be alone. Especially considering some of the farcical shenanigans on the Hyatt transaction, only Hubbard is to be found culpable for that??

It's hard not to draw the conclusion that already the FMA is mired in back room deals.

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these charges relate to Aorangi and Hubbard Funds Management - there will be more to follow - the Hyatt transaction lies in SCF. That transaction was so blatantly bad, and totally mislead the investing public that more heads must be on the block.

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Gob smacked 5"53pm. No surprises.
What about all the other's that had their finger in the till?
This appears a "cowardly act" by SFO.

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Feeler and Hughes are just lackeys for the Old Boys club. Pick a soft target instead of going after the real criminals in the old boys club. Prosecuting lyers and thieves is obviously way too hard for the likes of Feeley and Sean Hughes.

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If they don't prosecute the Hanover guys and the Strategic guys then these charges are targeted and definitely sponsored by the Old Boys Club and those damn Blue Bloods in Canterbury

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That democracy, freedom and the rule of law should be cherished and fostered - John Key, 20 June 2011.

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How about Mr Fay & Mr Richwhite ?

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It is difficult to decide as to whether Tribeless' attempt at a parliamentary seat in the 2008 election,was noteworthy or futile.
Having moved from the Canterbury Plains to Lyttleton,his personal circumstances may not be as good as what they were.

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why would somebody steel, if he had put 60m of his own money to underscore the interests of the investors....?????why nobody says the truth ,that HMF started with 15 m..and the money trippled nat least?? this is a bad day for NZ...not Allan hubbard...remember someone called Jesus...that one who was crucified..what was he guily of ? same old story..2011 style.

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I think Mr Hubbard is a victim or what NZ once was and what NZ is today. NZ used to be the home of pioneering spirits who used ingenuity to create a country from scratch with nothing to go on.
All those who downcry Mr Hubbard are judging him on today's financial normes and regulations and standards but when Mr Hubbard entered business they just didn't exist. There were less rules and life was just a whole lot easier.
Labour is at fault for not fully monitoring and controlling all Mr Hubbard's financial investments between 1991 and 2008; He seemed to be so successful that no-one asked any questions and in a country the size of NZ, there wasn't enough competition to test the credibility of what Mr Hubbard did. In 2008 the international financial bubble burst and Mr Hubbard was caught up in an international recession on a scale that hadn't been seen in his lifetime.
I'm not sure an 83 year old financial pioneer deserves prison because no-one ever told him before that he couldn't do things the way he did.

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Expat, you're drawing the opposite conclusion from these charges than the authorities intended. Mr Hubbard is only being charged with criminal fraud, and not for any irregularities or breaches of companies, financial reporting or securities laws. All the frauds he's being charged with require intent, mens rea, not just actions or omissions. They are not strict liability offences.

The authorities have above all favoured consistency with the original investigation announcement and seriousness of the alleged wrongdoing being addressed.

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@David Hillary, What do you really think the authorities intend when they threaten an 83 year old with 10 years prison. Do they want to punish him because, he grew old and everyone just let him carry on without asking any questions? Do they want people to stop investing with him from the age of 83 to 93 because if they don't warn people they will continue to give him money? I wouldn't want a 93 year old dentist poking around in my mouth nor a 93 year old surgeon so why do people want a 93 year old financial investor to handle their money. I doubt the financial regulators are really aware of the impact of what they are threatening to do.

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@ Expat, Mr Hillary's been busy kicking the boot in "high places" into to Mr Hubbard for some time ...along with a certain media writer. Natural Justice what?? David Hillary and Nip you should be ashamed! or do you see yourselves as Heroes? : ( OIA

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You simply cannot go around ignoring things like prospectuses. For Hubbard to think he could was pure naiveity.

All of us in the financial sector get irritated with the endless rounds of new rules and requirements we face but there are some things you simply cannot ignore and a prospectus is one of them.

Thirty years ago we might have had a skinful of booze and driven home without a seatbelt on - just because it was accepted (if not acceptable) then doesn't mean we would think of doing it now.

And before Hubbard's mates jump in and say it was only his friends investing in Aorangi it has been stated by bloggers before tha Hubbard Churcher was soliciting money to be invested in those funds.

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@tom, but if the right controls and audits had been in place regularly none of this could have ever got this far and precisely because Mr Hubbard has always been called the richest man in the south island it would be logical that the government would regularly control all of his investments many years before 2010. Madoff was 60 when he was arrested not 82. A good financial institution should be totally transparent all the time, not faced with investigation only 50 years after it started up. There is obviously a big gap in regulatory control for this to only have happened now and Mr Hubbard can't be blamed for believing he was right if not one person in 50 years has tried to stop him.

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Insofar as I know Expat Aorangi and HMF have not been going 50 years and if one does not register a prospectus then how do the Securities authorities and whoever else know that you exist?

He has not been audited or controlled because he had an investment vehicle going, which he was accepting deposits into, which was neither registered, audited nor had had a prospectus produced(ie the powers that be did not know they existed)

I've only been an Accountant for 27 years but I know you cannot do things like that - what is Alan Hubbard's excuse for not knowing it?

Having said all that the powers that be have made a p... p... job of controlling and auditing a lot of other financial institutions that they did know existed. I look forward to just a firm a hand on those responsible as as been exhibited with Alan Hubbard

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@TOM; The retirement age in NZ is 65. Retirement means retreat, slowing down. It doesn't mean senility. It just means that people can't do as much after 65 as they could when they were 45. There is no shame in growing old but older people bring other things to the community besides hard work. Mr Hubbard's case is unique in the fact that he just kept on going and going without anyone at all hearing any bells ringing and saying : Stop this guy is now 70, now he is 75. Now he is 80. NZ waited until he was 82 before any questions at all were asked. While you can't audit every financial firm in the country, Mr Hubbard's age would have been a very good reason to look closer much sooner. It is all way too late now to lay criminal charges or even to expect that a criminal sentence will have a great deal of effect. His time is already over. Sending Mr Hubbard to prison is like locking a grandfather up in his bedroom and not letting him out for meals. Some grandfathers are already bedridden so what is the point?

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