-
The late Allan Hubbard - Source: ONE News -
Related
Statutory management of the Hubbards was the "death knell" for South Canterbury Finance (SCF), with deposits dropping from $2 million a day to just $200,000, confidential documents show.
Memoranda written by the late Allan Hubbard have revealed the impact of statutory management on his flagship finance company.
However, Prime Minister John Key disputed Hubbard's analysis and said SCF was already in default.
Hubbard and his wife, Jean, their company Aorangi Securities, along with seven charitable trusts, were placed in statutory management by the Government on June 20, 2010.
A Serious Fraud Office (SFO) probe was launched the next day and Hubbard Management Funds was later discovered and also put in statutory management.
On August 31, 2010, SCF went into receivership, triggering a $1.6 billion payout under the Government guarantee scheme.
In June this year, 50 fraud charges were laid against Hubbard by the SFO. However, they were dropped after he was killed in a head-on collision north of Oamaru on September 2.
In memoranda obtained by The Timaru Herald, Hubbard revealed the hit on money coming into SCF following statutory management.
"The placing of myself into statutory management had an adverse affect on South Canterbury Finance in that immediately prior to this happening South Canterbury Finance had a daily intake of approximately $2 million and this dropped to $200,000," he wrote.
"The action signalled the `death knell' for South Canterbury Finance.
"I have since learned that the Government is behind moves to have me stand down as a director of South Canterbury Finance."
Hubbard had warned John McPherson, of the New Zealand Companies Office, that SCF was in a vulnerable position.
"I did indicate to Mr McPherson during his visit to Timaru that I was engaged in a recapitalisation of South Canterbury Finance and that any report that affected me could be detrimental to South Canterbury Finance's reconstruction package. This, of course, has proved ... correct."
In Timaru on Friday, Key was asked if the Government anticipated statutory management would have such a large impact on SCF.
"The statutory management, per se, hasn't had any impact on South Canterbury Finance because it's not in statutory management; [Hubbard Management Funds] and Aorangi Securities are."
Key was asked why SCF, with $1.6b at stake, was not put in statutory management instead of the Hubbards' companies, which had about $150m at stake. "There are a number of different reasons," he said.
Firstly, SCF had defaulted, I think, by that point so it was actually effectively in liquidation and ... secondly, that was perceived to be the best way of administering that liquidation."
He said it was also important to remember, in the case of South Canterbury Finance, that it was covered by the deposit guarantee scheme, whereas Hubbard Management Funds and Aorangi Securities were not. At the time of imposing statutory management, the Government said SCF and the Hubbards were not related, "because they're not, in legal sense".
The Government was not trying to push Hubbard out of SCF, he said. "No, that was ultimately a matter for the directors of South Canterbury Finance.
What had happened, the Government in the early days, prior to the liquidation, had actually worked alongside South Canterbury Finance because for quite a period of time the company was very distressed."
He rejected the claim that SCF's potential recapitalisation was ruined by the statutory management.
Key said he did not think that was the case because statutory management was in relation to Hubbard Management Funds and Aorangi Securities.
"There had been a number of attempts by the directors of South Canterbury Finance to bring new capital into the firm but they had all failed."
