Allan Hubbard

Wellington, July 13 NZPA - The statutory managers the Government appointed to control the interests of Timaru businessman Allan Hubbard are still unclear about many aspects of the complex web of business entities, three weeks after taking over.

In a rare move, the Government last month appointed statutory managers to Aorangi Securities Ltd and the business interests of Mr Hubbard. South Canterbury Finance, a company associated with the 82-year-old Mr Hubbard, is not in statutory management.

In a report to more than 400 investors in Aorangi Securities, statutory managers Richard Simpson and Trevor Thornton of Grant Thornton said the assets and investments had been frozen and could remain so for some months.

Of the entities under statutory management, the report said:

* Aorangi received money from investors and apparently applied it to independent parties and entities associated with Mr Hubbard and his wife Margaret;

* charitable trust Te Tua Trust borrowed money from Aorangi and provided 170 interest-free loans to a range of business people. Managers will start taking steps to recover arrears;

* six other charitable trusts were formed in March, with Mr and Mrs Hubbard appearing to have transferred some assets;

* Hubbard Management Funds is an investment management business, managed by Mr Hubbard, of which the managers were initially unaware.

"To date, we have seen clear evidence that there is an intricate and complex relationship between the affairs of Aorangi, Te Tua Trust, and the affairs of Mr and Mrs Hubbard and other associated entities," Mr Simpson and Mr Thornton said.

A lack of paperwork had been a problem, and after three weeks they did not fully understand the financial position of the businesses.

"The standard of the paperwork for the entities is not what we would have expected to have found for business entities of this size and complexity.

"As a result, we will need some time to complete a review of the position and to decide what action is needed."

Until the managers had a clear understanding of the status of Aorangi and Hubbard Management Funds, their assets and investments would remain frozen.

"We know this will be distressing for the people who have received regular payments from Aorangi."

The uncertainty of security and priority of investors may need court direction, which would also take time.

All parties had co-operated, and the Hubbards -- who were highly regarded in South Canterbury -- were receiving independent legal and accounting advice.

Aorangi's assets totalled $132m, of which investors other than the Hubbards had contributed $96m. Over $106m was invested in, or loaned to, entities linked with the Hubbards, many to farms which had loans from banks secured by a mortgage over the assets.

Some investors who believed their investments were secured over land may not have had that security, and some of the loans may be impaired.

The managers found that the accounting systems for Hubbard Management Funds, estimated to be worth $70m, were inadequate.

Investors were charged a management fee each December, at a rate decided by Mr Hubbard, and there did not seem to be any formal disclosure document provided to new investors.

Fund performance was provided to investors at year-end, but there did not seem to be a way to show the position of the portfolio on a daily basis.

The managers planned to report again in the middle of next month.

The statutory management arose after the Securities Commission received a complaint from an investor in Aorangi in February.