South Canterbury Finance: John Key's ponzi scheme

I first reported on this in November, 2012 HERE

As a sign of the times we live in NONE of the material I posted, not the 60 Minutes programme, not the discussions of Paul Carruthers with Vinny Eastwood, is now available.

It has all been removed - every single bit.

Please read the article - this is perhaps the worst case of corruption in this country - corruption from the very top of the country


Comments from Paul Carruthers:

Just to be clear, my interest in the SCF issue from day one has always been about the justice and human rights angle in relation to Allan Hubbard.

Those who know me personally know that my bottom line was always that his age and health condition was enough evidence on it's own to prove that they simply should have found another way if they wanted their hands on it all that much.


The saddest thing I ever heard Allan Hubbard say was "if John Key wanted it that much he should have come and asked me, I would have been happy to retire but I couldn't find anyone I trusted enough to take over from me, and I am worried what will happen to the investors if I take my eyes off it". All of this was completely unnecessary.


The reason why John Whitehead did not appear in court is precisely the same reason why they couldn't afford for Allan Hubbard to appear in court either.


Because it would have enabled the defence lawyers to table as part of the evidence against the Crown, the fact that an email was sent by the Governor of The Reserve Bank to Bill English the day after National took office in 2008, warning Bill English *not* to renew the Crown Guarantee for SCF. The email clearly stated that it was not too big to fail vis a vis the NZ economy.


Bill English completely ignored it.


Instead, while Allan Hubbard was in hospital battling cancer, resulting in the loss of his kidneys, requiring him to adjust to life with dialysis treatment, a process lasting almost two years, the government installed it's own directors on the SCF board.


Allan Hubbard was completely honest in the 60 minutes interview he did about that period, between 2008 and 2010.


He said that the influx of money into SCF during that time was phenomenal and the company grew much larger rapidly.


He also made it clear he was uncomfortable with that process.


And then they accused him of fraud, out of the blue, after a guy John Key employed in 1990, someone he has known since school, was shoulder tapped by John key to work for the Securities Commission.


Meanwhile, Treasury was putting pressure on Allan Hubbard to tip his best assets into SCF as an act of good faith.


Doing so made Allan the only finance company owner in the world to have done so in response to the GFC.


The day after that transaction was completed, John Keys mate at the Securities Commission received an "anonymous" complaint, which ultimately resulted in the fraud allegations against Allan, as well as statutory management, a couple of weeks later.


Of course, John Key's mate forgot to tell everyone his brother had also been bankrupted by SCF the year before, for almost $8 million worth of debt on a string of failed bars and restaurants.


And the rest, as they say, is history.


One of the companies Allan tipped in to SCF was purchased by John Key's next door neighbour for $44 million.


He sold it six weeks ago for $149 million.


I know who really committed the fraud.


It sure as hell wasn't Allan Hubbard.


Remember this all started with them accusing him of running a Ponzi scheme.


Two weeks ago, his investors were told they are getting 99.37% of their money back, four years after his death.

Hardly a ponzi scheme, then.


And the best part is that, even though our taxpayer money was used by John Key and Bill english to pay out the banks for any shortfalls on the sale of SCF's assets, we are not allowed to know anything about the valuations on those assets because the sales of the assets are "commercially sensitive".


How can they be "commercially sensitive" when taxpayer money has been used.


New Zealanders, you have been had.


The only fraud I can see that has been committed here, has not been committed by Allan Hubbard.


The real fraud has been perpetrated by his accusers.

Allan Hubbard was never even interviewed by the SFO.


All of the "evidence" portrayed in the media about him was provided by insolvency practitioners appointed by the Crown, who were paid large sums of money to produce that "evidence".


The former director of the SFO, Adam Feeley, gave away copies of Allan Hubbard's biography away as booby prizes at an SFO Christmas party, while Allan was still under the "investigation" by the aforementioned insolvency practitioners, who were being paid by the SCF to produce the "evidence" the SFO used to charge Allan Hubbard with.


The media were notified that Allan Hubbard was being charged before Allan Hubbard was.


Because everyone made it about money, my message about injustice and improper process was buried and fell upon deaf ears anyway.


But it was always the process which stood to undermine John Key as soon as it is investigated.

I just did the math a lot earlier than most other people.

---Paul Carruthers

SCF trial: Two cleared, Sullivan guilty

Former South Canterbury Finance director Edward Sullivan has been found guilty on five of nine charges relating to the failed South Canterbury company.

Radio NZ,

14 October, 2014

Justice Health, who presided over the five-month trial of Sullivan, Robert White and Lachie McLeod, handed down his verdict in a packed High Court at Timaru this morning.

Listen to Justice Heath ( 24 min 25 sec )

The charges brought by the Serious Fraud Office ranged from theft by a person in a special relationship, false accounting, obtaining by deception and making false statements.

The judge found Sullivan, a director of 20 years, guilty on five of the charges he faced and not guilty on four.

Former chief executive Mr McLeod was found not guilty on all five charges, while former director Mr White was found not guilty on all four charges he faced.

Justice Heath told the court the Crown's case against the three was based on the proposition they evaded or ignored controls they should have adhered to.

The judge said what the Crown suggested was a culture of concealment did not withstand scrutiny. He did not consider the seven transactions which were central to the Crown and SFO's case were representative of a culture of concealment from the public.

"The Crown based its allegations on seven transactions and three other events. I do not consider that an examination of the seven transactions over a period of a little over five years can provide a safe foundation for an allegation of continuos concealment of information from the Government."

However, the directors did respond in a knee-jerk fashion to a downturn in the property market, and the global financial crisis, Justice Heath said.

Sullivan has been bailed until his sentencing on 12 December.

Lives have been wrecked - lawyer

The Serious Fraud Office came under fire today from the accused, their legal teams and Justice Heath.

Jonathan Eaton, QC, who represents Lachie McLeod, said the Crown's allegations that the three men acted dishonestly have been roundly rejected by the judge.

Mr McLeod said the SFO has wrecked the lives of five men, including two whose charges were dropped before the trial started in March this year.

Speaking outside the court today Mr McLeod said there were not words for the sense of relief he felt.

"I knew it was hopefully coming but you can't describe a feeling like that. I'd just like to thank my family, my wife and daughters and all the local support around Timaru and South Canterbury who have come and dropped emails and called for the last four years. It's been fantastic, really."

Mr Eaton said it showed there was no substance to the allegations of dishonesty against his client.

"It's obviously been a long road, at the heat of the allegations were suggestions that there was a culture of concealment at South Canterbury, allegations of dishonesty, which are very serious allegations to make against anybody.

"And the judge, as you've heard, has roundly rejected those allegations, and that's what we've always argued and it's very rewarding for Lachie, and for all the accused that type of allegation has been put to bed."

Mr Eaton said because of the significant expenses of the case, Mr McLeod was likely to apply to recover his costs.

SFO defends prosecution

SFO director Julie Read said while it was unsuccessful in part of its prosecution, it was in the public interest to put all matters before the court.

Listen to the SFO's Julie Read ( 5 min 1 sec )

Ms Read said she was satisfied there was sufficient evidence to warrant bringing the prosecution as the court, not the SFO, was the ultimate arbiter of whether or not that evidence was sufficient to prove the charges beyond reasonable doubt.

The SFO had, in this case, failed to satisfy the court to the required standard in relation to Mr McLeod and Mr White.

However, Ms Read said the case was thoroughly investigated and counsel presented the best possible case to the court.

She said the SFO's role was to investigate and put matters before the court when appropriate, and it did a good job on this case.

She also said disruption caused by the Canterbury earthquakes destroyed some of the documents.

The SFO would make a submission on Sullivan's sentence in December.

South Canterbury Finance timeline

• 22 January 2009 - Treasury is first briefed by Allan Hubbard and Lachie McLeod about plans SCF was making for restructuring and recapitalisation.
• 16 February 2010 - SCF presents to Treasury a recapitalisation proposal.
• 31 August 2010 - SCF placed into receivership owing approximately $1.58 billion, triggering a payout under the Crown deposit guarantee scheme. SCF, had about 35,000 investors and $1.6 billion in deposits, and had been in trouble for at least nine months because of bad loans and mismanagement.
• 1 September 2010 - Prime Minister John Key says the Government intended to sell SCF assets. It's expected taxpayers may have to wait up to four years to find out how much they will get back from their $1.8 billion bailout of South Canterbury Finance's depositors.
• 18 October 2010 - Investigation by the Serious Fraud Office Act begins.
• 2 September 2011 - Alan Hubbard is killed, and his wife injured, in a head-on collision. Mr Hubbard was in statutory management and facing 50 fraud charges relating to private investment vehicles Aorangi and Hubbard Management Funds.
• December 2011 - After a 14 month investigation the SFO lays 21 charges against five individuals following its investigation into South Canterbury Finance Limited. The charges allege a variety of offences, including theft by a person in a special relationship; obtaining by deception; false statements by the promoter of a company; and false accounting. The total estimated value of allegedly fraudulent transactions is approximately $1.7 billion.
• March 2012 - The five individuals are named as: Messrs Graeme Brown, Terrance Hutton, Lachie McLeod, Edward Sullivan and Robert White.
• August 2013 - The SFO withdraws a charge of false accounting against the former Chief Financial Officer of SCF, Graeme Brown.
• October 2013 - The SFO withdraws charges against Terrence Hutton, the former Group Accountant for the company. Mr Hutton faced two charges alleging false accounting in relation to the recording of a $25 million loan advance and a $10 million loan advance.
• 12 March 2014 - The SCF trial involving 18 fraud charges, begins in front of a Judge-only jury at the High Court in Timaru, it is expected to take four months to complete.
• 18 August 2014 - The SCF trial comes to a close after 62 days of evidence, 3000 pages of submissions and after 12 days of closing arguments.
• 14 October 2014 - Justice Heath will deliver the verdict and reasons at 9.30am.

The South Canterbury Finance Three

Robert Alexander White: A retired Timaru accountant was a SCF board member and director 1993-2009. Former partner at Hubbard and Churcher accounting firm since 1971. Mr White was the director for (Allan Hubbard investment company) Aorangi Securities from September 2003 to July 2008.

Edward Oral Sullivan: He retired in 2011 after 43 years at Timaru legal firm RSM Law. Mr Sullivan was on SCF's board from 1990 to 2010.

Lachie John McLeod: He was a former SCF chief executive between 2003 and November 2009.

Related

Crown costs for SCF trial near $1m

Long-running SCF trial wraps up

CEO possibly too loyal, SCF trial told

SCF accused will never recover - lawyer