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.