The Chair of the Financial Markets Authority Eastablishment Board, Simon Botherway, now has no choice but to step aside pending the outcome of the Ombudsman’s inquiry into the mangament of his potential conflicts of interest in placing Allan and Jean Hubbard into statutory managment.
The public cannot understand how the Securities Commission took this step reportedly on the basis of a single anonymous complaint, timed shortly after Mr Hubbard transferred the bulk of his remaing assets into SCF to protect investors.
Further, the Ombudsman must widen the terms of its inquiry to include questions around any potential or perceived conflicts of interest around Mr Botherway’s long standing business relationships with Mr George Kerr, Director of Torchlight Fund, one of the primary beneficiaries of the taxpayer funded bailout of South Canterbury Finance depositors.
These associations are reportedly of long standing and reportedly included at Spicers Portfolio Management and at Brook Asset Management, as well as in relation to several other funds. Mr Kerr is also a Director of Pyne Gould Corporation, which has announced that it is seeking to set up a “heartland bank” centered on rural South Island lending.
It must be totally transparent that neither Mr Botherway nor any of his interests have any ongoing relationship whatsoever with this proposed new bank.
In short it is imperative that if wide ranging financial markets regulatory powers are to be concentrated in the hands of a single regulator, the holder of that office must be beyond reproach, with an impeccable record, and no possible or perceived conflicts of interest with former, current or potential business associates.
Mr Simon Botherway, who was John Key’s former Deputy at Bankers Trust, must now step aside from from the FMA Establishment Board Chair pending the outcome of a broadened Ombudsman’s inquiry.
Furrther, the Key Government cannot now clear the air on SCF withut a full and independant judical inquiry into the circumstances leading to its recievership and New Zealand’s largest investor bailout.
Now THAT, is a post.
Is this another third strike and I’m out for Key or merely “Yes it is but I and my cronies are above being accountable so ya suck boo to the New Zealand taxpayer and electorate?
Something is definitely rotten in the financial state of NZ.
I think this is a good post but I’ll make a few comments:
1). You’d be hard pressed to find anyone qualified to Chair the FMA Establishment Board that didn’t have business ties to at least one person who invested heavily in SCF…
2). Where you say the “public cannot understand”, those people are supporting Hubbard no matter what is found in the SFO investigations…
3). I don’t see the problem of acting on a single complaint if initial enquires reveal there is a matter to follow up, having worked in law enforcement for 7 years you have an obligation to do so…
But keep digging we have the right to know exactly what has gone on…
A lot of people with no connection to Hubbard are pretty upset that $1,770,000,000,000 got given away by John and Bill. They don’t understand why so much tax payer money has been paid out so quickly and so efficiently when every social service and public servant is being deliberately squeezed tight by the Government.
This is true. But if that business connection extends into the realm of conflict of interest or even the appearance of conflict of interest they cannot hold such a pivotal role. The smell of rot cannot be tolerated.
Great post DC.
Why bother (pardon the pun!) with these red herrings? The AH supporters in Timaru will never be satisfied, as JMH notes above.
There is now ample evidence from the statutory managers that their appointment, and a full enquiry into the Hubbards’ affairs, was justified on the basis of the original complaint.
Grant Thornton published this weeks ago, and an update is not far away. Investors in the Hubbard funds seem likely to be badly out of pocket, and there also appears to be prima facie evidence of fraud.
As for SCF, the real question is why the government guarantee was rolled over in April 2010. There was already evidence then in the public domain of its breach by SCF. This would have justified government re-examining the deal, and limiting taxpayers’ exposure.
The rest of the sorry SCF/AH saga is a tangle of circular lending and related party loans, which will take months to sort out.
IMHO, the government could have limited its exposure, while still treating all parties fairly if painfully, by stopping the party in April 2010 rather than August.
http://www.lostsoulblog.com/2010/08/let-finger-pointing-begin.html
@Jeremy: it would seem that there are several possible steps one might take between following up on a complaint, and the draconian measure of putting someone’s finances under statutory management. To quote Victor from a Bowalley Road post a couple of weeks ago:
“As a Social Democrat, I believe firmly in the need for the state to intervene in the economy to offset market failures, to provide counter-cyclical stimuli, to build up our social capital and to help optimise living standards and social justice.
But I remain opposed to the arbitrary exercise of state power against individuals, to callous, heavy-handed bureaucracy and to ‘Exemplary Justice’ which, almost by definition, is no justice at all.
We can only trust the state with our economy, if the state is just, measured, responsible and humane. It must also, like Caesar’s Wife, be above suspicion.”
@Olwyn, at first I was shocked at the step taken, the power the state has to take control of a fortune a businessman had built up over 60 years was suprising and menacing to me…
I supported Hubbard strongly at the beginning, I was wrong, my support now ends at the point that I don’t believe that he intentionally defrauded anyone with intent…
But I think, the right call was made, check this out:
http://www.business.govt.nz/companies/app/ui/pages/individual/search?q=allan+james+hubbard&roleType=ALL&indEntityTypes=ALL&indDirStatus=ALL&indEntityStatusGroups=ALL&addressKeyword=&advancedPanel=false
Hubbard is (or has been) involved with 534 companies – that is crazy and very dodgy… Watson and Hotchin only have about 300 each and we know how dodgy they are…
In constrast Michael Freidlander – one of NZ’s richest men – only has 8…
There is understandable confusion around the whole SCF/Hubbard mess. This is one of the biggest crashes in NZ financial history, with many people and a lot of money involved.
A clear distinction should however be drawn between the government’s handling of SCF, which I mentioned above, and the statutory management of various Hubbard entities such as Aorangi and Hubbard Managed Funds.
Aorangi and HMF took in cash from small investors and handled it in ways that would have surprised them, had they known. See
http://www.grantthornton.co.nz/Press/statutory-managers-confirm-shortfall-in-hubbard-funds.html
There is no government guarantee for Aorangi and HMF. It is quite possible that investors will end up with 70c for their $1, or less. Only time, and the SM investigations, will tell.
A further report from Grant Thornton, the statutory managers, is probably not far away. Not much point in speculating meantime, though some sympathy for investors seems justified. .
Some useful pints to respond to , thanks;
@ JMH: yes we live in a small country but if we are going to have a merged super-regulator we absolutley deserve the assurance of knowing that the people governing it, whever they are, are absolutley and transparently free fom perceived conflicts of interest.
That challenge is harder if they are current business people and harder if they are “part time” with business interests on the side. But the bottom line cannot be traded away – so if there is no-one qualified and un-conflicted onshore, then recruit internationally (like a rugby test referee).
I do not believe however that it is impossible to find good local candidates. It must mean that at FMA level, regulators will have to recuse from current business dealings, make very full declarations of interest, and stand aside from issues where any possible perception issue could arise. Anything else would be unacceptable given the importance of the role.
@Red Rosa: we are following a number of arguments concurrently here and the one that you and LostSoulBlog raise is absolutely valid (I have also raised it previously and will again). This regulatory issue arose yesterday because the Govt chose to set the FMA Bill down for debate – it coud not be ignored.
Overall there are three high level hypotheses being debated:
– was the Govt prudent and successful in minimising the liability to taxpayers in its handling of SCF? (your issue is a subpoint of this)
– were the actions of regulators and decision makers at all levels transparent, appropriate and prudent? (this post fits within that issue)
– who wins and loses from the result and is that result seen to be fair and appropriate? (see my previous post).
There will no doubt be other arguments but that is a high-level summary of the lines of logic as far as I can see it.
@JMH: I should add that I am speaking here to the public interest rather than to accuse or defend any individual, be it Mr Hubbard or Mr Botherway. (updated)
@Jeremy M Harris
You must find it out that the Sec Com acted on any single anonymous complaint yet when the other Watson and Hotchin had tonnes of sign complaints against yet the Sec Com did nothing!
Also the statutory management reports are just opinion, no data to back up there claims. It more “I wouldn’t do” or “I think”, its all rubbish.
Read the reports, they wouldn’t stand up in court as fact. Why should the reports stand up as fact in the public arena?
@David Cunliffe
You are aware that John Key has direct links to George Kerr. They have shared a few directorships.
Plus when Simon Brotherways brother was bankrupt. Hubbard was the Chairman of SCF at the time.
Also when hubbard was put into statutory management standards and poors instantly downgrade SCF rating because of the statutory management order!
keep up th egood work, David. This is serious stuff but too complicated for the MSM apparently…
@Dorothy – really complicated, and an insight into how the other half lives…
I am disturbed that you have decided to support the views of a minority of disgruntled friends of mr hubbard. I would prefer it if we focussed on why the government guarantee wasn’t removed earlier from scf. It appears clear from the statutory managers report that statutory management was required – fighting over a potential conflict of interest just seems like a waste of focus and time to me. Its this loss of focus that leaves me wondering what labour actually stands for. I’d prefer it if you looked at the big issues: should aorangi be in statutory management? Yes. Should we be quibbling about how it got there? No. Should the people of new zealand have to bail out scf and mr hubbards mates? No
Please focus minister.
@ Dorothy, so true.
Backing the wrong horse here David. Theres some serious questions to be asked re SCF and Hubbards trusts/companies, particularly around related party lending. When you are dealing with other peoples money you have to be super transparent and super honest and I fear that has not been the case here. Lending other peoples money to your own companies at zero interest is not exactly ‘watching their back’ so to speak. I agree with Jeremy it would be impossible to find a fit head for the FMA without some dealings with people related to SCF. I for one think Botherway is totally clean, its only the pig headed Hubbard supporters trying to smear his name.
David,
Botherway and Kerr go back to school days at Christ’s College in Christchurch then onto University doing the same B.Com course before going to Auckland into the finance sector together. They go back long before their co-directorships and business relationships as is evidenced by the Christ’s College Year Books of the time, ’78-’84.
@David, maybe Labour can put forward an SOP for a register of pencuniary interest for committee/board members of the new FMA..? That would allow members to keep their business interests and recluse themselves (or be challenged to do so), otherwise the FMA Chair would command a seven figure salary I would think…
Unless there is already a pecuniary register proposal..? I must admit I haven’t read the Bill…
@ Simon – you must not have read my earlier comment: i am neither supporting Hubbard nor attacking Botherway, but rather demandinng proper discclosure by regulators and good stewardship of public funds
Latest SCF/Hubbard summary below. Interest NZ comments are usually good for gossip, but conspiracy theories have not surfaced so far. Will take weeks if not months to disentangle the whole thing.
http://www.interest.co.nz/news/more-hubbard-entities-put-under-statutory-management
@Red Under the Bed – interested in details of kerr/Key co-directorships.
From NBR website comments
_
Rise – The New Shareholders
The business of dirty tricks!
Why has the business of the Securities Commission & Simon Botherways conflict of interest in non disclosure of his past relationships with George Kerr & past business with SCF been swept under the table?
This needs more publicity, because is stinks of conflict.
Now through conflict, Botherway has probably gifted Kerr with some of these at wholesale prices.
Posted by Richard S at 11:29 am on July 04, 2010
http://m.nbr.co.nz/article/pgcs-torchlight-says-scf-investment-well-secured-125289#comment-46830
David,
It’s a bit funny that after extracting a major admission from the government that the Helicopters NZ transaction was assessed at the time as being in net terms, potentially not beneficial to SCF, and in fact as not being beneficial to SCF (and likewise for its investors and the Crown), that you now describe the transaction as: ‘Mr Hubbard transferred the bulk of his remaing assets into SCF to protect investors’.
Are you trying to grab defeat from the jaws of victory?
Readers may be interested to read this post of mine from June re this transaction:
http://www.lostsoulblog.com/2010/06/rubbing-gloss-of-big-south-canterbury.html
And this admission extracted by David Cunliffe:
http://www.parliament.nz/en-NZ/PB/Debates/Debates/Speeches/8/5/8/49HansS_20100916_00000366-Cunliffe-David-Questions-for-Oral-Answer.htm
I can see this, 90 day right to fire, ACT meltdown and a couple of other things dragging on painfully (for the blue team) into election year
Attack NACT from a dozen sides, apply the strategy of death by a thousand cuts.
John Key went to Christ College?? Not bad for someone coming from a state house!
I found it extremely odd, especially when the obviously dodgy moratorium was announced… I have a mate who lost $300,000 in Hannover – he was begging people not to vote for it…
*I found it extremely odd they didn’t put Hannover into SM (just to clarify)…
This needs to be thoroughly investigated David either by an independent enquiry OR via a public enquiry through the FIA. We all smell a rat here, Why were finance companies included under the GGS? Australia has not done this! Finance companies are NOT banks, they are casino’s for investors who NOW apparently can’t lose no matter what. This is the worst peice of legislation ever created and defines just how unbalanced and corrupt our system has become. Where is the ‘risk’ in a GGS?
I have no monetary interest in any of the Hubbard or SCF entitities but I was born in Timaru and have been watching this sorry saga unfold since it started thanks to the Hubbard Support Team.
I must say that if Statutory Management rules allow the total freezing of all assets and appear to have no timetable for reporting finite information then the rules need to be changed.
Regardless of what Mr Hubbard might have done or not done he is a human being and lives in a country that calls itself a Democracy and subscribes to the rule of law where all individuals are innocent until proved guilty.
This charade which is based on an unsigned anonymous complaint
from a single unknown individual smacks to me of ‘wink wink, leave it to me mate, I have a scheme that will get us what we want’ conspiracy.
I have just watched the footage on TV3 and I must say that Alan Hubbard looks anything but senile and incompetent.
The Statutory Managers last report in these matters was dated 27 August and the stated that they would report again at the end of September. It is to be hoped that that report will contain some concrete facts rather than the generalities that have been their style to date.
Much to say:
@David Hillary – i have a great deal of respect for your analysis David and your excellent blogging on this subject. The Helicopters admission is very useful and will be returned to as part of the question of why a value maximising solution was not sought much earlier, at least by mid 2009 when the Govt knew SCF was in DEEP trouble. However the decision to open up the regulatory integrity leg of the argument was deliberate – reflecting both the tming of the FMA Bill in the House (Tuesday and Thursday this week; plus it is a potentially important line in its own right. We will keep working on the first line after the recess – as i have always said, this is a BIG issue that opens several cans of worms. It is a big burn not a fast burn.
@JMH, Justice and John: you bet there is stuff really wrong here. The more I look into how the money trading class enrich themselves at the expense of real business people and workers sweating to make ends meet in a prolonged recession, the more I want to both puke and fight.
I am not commenting on any individualor company here: I thought I had seen it all, but two weeks solid on this issue has opened my eyes to what looks like systemic issues with our securities markets that will not go away. This is perhaps the tip of a much bigger iceberg. I will blog separaty on this.
Something incredibly fishy here.
Botherway’s credentials must be checked, as it is doubtful that someone that took 7 years to get through Christs College could obtain a CFA qualification.
Further, I believe he is the one that is spreading the misinformation that the noble idea of taking GST off fresh fruit and veg is in the too hard basket.
Baseless, political muckraking that has no grounding in fact.