Recommended.co.nz | Guide2.co.nz | Voxy.co.nz | Gimme.co.nz
Homepage | login or create an account

South Canterbury Finance under SFO investigation

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Oct 19 NZPA - The Serious Fraud Office (SFO) has launched an investigation into South Canterbury Finance (SCF) over a number of related party transactions that may have involved false statements or other fraudulent conduct.

South Canterbury was put into receivership at the end of August which resulted in a massive bailout under the Government's deposit guarantee scheme.

Debenture holders will be paid $1.25 billion tomorrow, following a $350 million payout to bondholders last month.

SFO chief executive Adam Feeley said today that as a result of inquiries made by its newly established fraud detection unit, it had grounds to investigate a number of related party transactions involving South Canterbury.

"Given the scale of the SCF collapse, it would be neither feasible nor productive for SFO to carry out an investigation into all aspects of the failure," Mr Feeley said.

"Instead we will focus on specific transactions which we consider may have been a fraud on the investors in SCF and/or the Crown as the guarantor of investor funds."

Related party transactions were not illegal as such, but there were four transactions of particular interest, he told Radio New Zealand.

"It's fair to say there are some people who appear to have more obviously benefited from the transaction than others, while there are others who have been nothing more than bystanders, and then there are other persons who have given advice on the transaction, and possibly not always good advice."

Related party transactions involved parties common to both sides of the transaction.

"The only thing which is significant around that is where there are common parties, the transaction may not be an arm's length transaction, and in that situation there may be a greater risk profile or there may be less benefit to the lender than might be the case with a normal commercial transaction," he said.

Receivers had initially alerted the SFO to potentially fraudulent loans.

The SFO would co-ordinate efforts with the receivers, the Registrar of Companies, and the Securities Commission, and would use private sector insolvency and forensic accounting specialists.

The investigation was separate from the SFO's investigation into the affairs of Aorangi Securities.

"While there are some persons who are common to both cases, the SCF transactions we are currently investigating have no material connection with the affairs of Aorangi Securities," Mr Feeley said.

Timaru financier Allan Hubbard, who became president for life of SCF, has been placed under statutory management with his wife Jean along with charitable trusts, Aorangi Securities and Hubbard Management Funds.

Mr Hubbard's supporters have claimed he was wrongly treated, and that putting him under statutory management severely compromised confidence in South Canterbury.

Today, his supporters welcomed the SFO investigation into South Canterbury as a "step in the right direction for transparency".

"It is completely incorrect for anyone to suggest that Allan Hubbard made decisions alone at South Canterbury Finance, or that he was completely responsible for the outcome(s)," said Paul Carruthers of the Hubbard Support Team.

Mr Feeley said that subject to receiving any new information from the statutory managers, the SFO was in the closing stages of its investigation into Aorangi Securities.

Among other cases under investigation by the SFO were those involving Nathans Finance, Lane Walker Rudkin, B'On Financial Services, Capital + Merchant Finance, and Belgrave Finance.

It was also bringing 31 prosecutions, including proceedings against persons involved with National Finance, Bridgecorp Ltd, and Five Star Company Group.

About guide2.co.nz : money

Find the latest money news and 'how to' guides on Guide2Money.

Ask our researchers your personal finance questions.

Your Questions. Independent Answers.