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

Deep Corruption in New Zealand

On Alan Hubbard's Suspicious Death and the Cover-up


Last November I covered the case of Alan Hubbard and South Canterbury Finance.


The following interview reveals the details of the case and illustrates clearly a very deep corruption that has entered into New Zealand life.


The case of Alan Hubbard has struck a nerve with me, because of what he was, and what he   represented.


Alan Hubbard was from an earlier generation that were able to do business "on a handshake" and could be trusted implicitly. He was a decent man, both at the level of public as well as private morality.


It is people like Alan Hubbard who have made New Zealand the country it was. And it is precisely that way of life that is under assault by people who have no truck with morality and are destroying the very fabric of New Zealand society.




In order to understand this more clearly I ask you to listen to the interview below. 

Part One

Part Two

The Alan Hubbard case

The Alan Hubbard conspiracy: a warning for New Zealanders
by Seemorerocks

This is a story of the town of Timaru, where I was born, of the South Island and of a generation of people like my father.

He was a Canterbury farmer who, returning from the war built up his farm and through simple living and hard work built up a nest-egg to hand onto his children.

I can recall how he would seal a business deal with a handshake, rather than a water-tight contract.

He invested his money with finance companies like South Canterbury Finance and would have placed his trust in people like Alan Hubbard.

Alan Hubbard came out of the same world as my father. He made his money through dairy farming and through sound investments and made a small fortune.

Unlike the financial elite of today (the 1%-ers) he never saw this money as his own, rather as a means of helping others. He often gave interest-free loans to give people in his community a step-up. He was there for others – there are stories of him travelling out at 2 in the morning to talk some farmer out of committing suicide.

He never lived an opulent lifestyle.

In fact he lived in the same simple house in Timaru he had lived in for 35 years; drove a 1970's Volkswagen and withdrew $750 a month to support himself and his wife Jean.

He made his money in Canterbury and his money stayed there too.

These are values which won him the support and admiration of the people of Timaru.

They were values that many of us could aspire to.

And yet, these were the very values that were cruelly dismissed and criticised in 2010 New Zealand. Alan Hubbard was portrayed by government and media as someone with bad business practices, someone who was 'corrupt' and 'senile'.

By the time this story was played out, the lives of perhaps 200,000 mainly older, upstanding New Zealanders were destroyed by the failure of finance company after finance company. The media has been full of the stories of the fraud and greed on the part of those involved in the ownership and management of these companies.

By 2009-10 South Canterbury Finance was bit of a 'last man standing' – the last independent finance company left in New Zealand.

So what happened?

I am no expert in the area of finance (quite the opposite), so I would like to leave you with the sources so you can find out for yourself.

Briefly though,as I understand it, the new National government saw Alan Hubbard as a weak link.

Alan Hubbard had a company, Aorangi Finance which was open to local investors (but not to the general public – so they did not issue a prospectus). He was also the Chief Executive of one of NZ's largest finance companies, South Canterbury Finance.

In 2009 a single anonymous complaint was made to the Serious Fraud Office (SFO) about Aorangi on the basis that the company had failed to issue an investment statement.

This became the basis for the SFO to raise questions about Aorangi and the business practices of Alan Hubbard, who was accused publicly of fraud and placed by the SFO under statutory management.

At the time all his companies were solvent and had come through the worst of the Finance Collapse. He had made the highly unusual step of putting $40 million of his own money into SCF and was already moved from the everyday investment decisions of the company.

In 2009 the government talked about $337 million of “related property loans at risk”.

Yet by 2010, with Hubbard being removed from control of his companies, this had ballooned to a $1.5 billion loss which was covered by the New Zealand taxpayer.

What happened is that John Key and his friends, by destroying the reputation of Alan Hubbard and his companies and putting them into receivership, were able to strip the assets under the guise of protecting investors' assets and subsidising the losses with tax payer money (to the tune of a massive $1.5 billion).

They were then able to put the blame for all this onto Alan Hubbard and his 'outdated', 'quaint' but 'corrupt' business methods.

The fact was that not ONE of these assertions was ever tested in court. 

The SFO removed his records and then, instead of the Crown having to prove their assertions Alan Hubbard was forced into the impossible position of proving his own innocence. Meanwhile the statutory managers were able to feed a compliant media news releases every few weeks that reinforced the perception that Hubbard was guilty of fraud.

Finally, in 2011, just days before Alan Hubbard was due to have his day in court, he was killed in a car accident. 

There is a perception amongst many that his demise was not accidental and I have seen circumstantial evidence (that was shown in confidence and I cannot divulge) that persuades me that this is indeed the case.

Whatever the truth, this outcome was very convenient to the Crown, who were spared the possible embarrassment of Alan Hubbard's testimony and which allowed them to drop the (fraudulent) fraud case.

THE IMPACT ON INVESTORS

There were 40 investors in Aorangi Finance, (a local company that didn't take deposits from the general public)  which was subject to a sole anonymous complaint that came on the very day that Alan Hubbard paid $40 million of his own money into South Canterbury Finance.

This was a company that was solvent, yet by the time the SFO had finished, these people had lost their lives savings.

The impact is well documented in research by Kerry Grass, but here is just one of the victim impact statements:

Victim Impact Statement

“The impact of this situation on all of our lives has been enormous. The worry

and stress endured is unbelievable.

“We invested with Alan after meeting with him in Timaru because we

trusted his integrity and knack of wise investing. He was a well-respected

businessman for around 60 years and was a self-made man.

My parents had known him personally and had happily invested with him

for many years. They supported our decision to put our money with him.

“We have been planning for our retirement (as the government wants us to

do) but when you get to our age and stage in life, it is extremely hard to get

your head around how to start again from scratch. This puts pressure on

any healthy relationship.

“We have no complaints with the investments Allan chose for us. They had

been doing very well. On the odd occasion that we required money out,

there was never any problem.

“I firmly believe that this whole Hubbard ‘set-up’ has been a catalyst to my

mother’s death. Six months ago my mother was driving and gardening. She

had recently developed many stress related problems which seemed odd as

she has always been a very active and well person.

This has been incredibly stressful for both my parents and really saddens me

that this seemed her only escape from an uncontrollable situation. My poor

dad is now living with the consequences of all this.”

Our families are feeling like a ‘by-product’ of a few other people’s selfish

gains. They have misused the system to distort things for their own benefit

and the most frustrating thing is the powers that be have closed ranks and

are turning a blind eye to things that are far worse than what Allan has

been accused of.....

For 60 Minutes documentary GO  HERE
 
For further background on this see the research done by Kerry Grass

Also listen to the following discussion of Paul Carruthers and Vinny Eastwood.

WHY IS THIS IMPORTANT?

This case is important to me for various reasons:

1. It represents a violation of principles of democracy

In the type of democracy we have lived in until recently the details would never have been discussed so widely in the media and the presumption would have been of innocence until proven otherwise.

The violation of these principles has allowed an innocent man's reputation to be impugned and his life destroyed.

There have been some significant examples in the last 4 years of the same process:

• The case of the Urewera terror case where the defendants were found not guilty of the more serious offence but were found guilty and sentenced on the basis of evidence in support of the first case that was thrown out (thereby making that 'evidence' inadmissable)
  
  
• The history of the Kim Dotcom case – the co-operation with the FBI and Hollywood, the illegal involvement of the GCSB and irregularities in how the case was handled
  
  
• A recent case in Nelson where a drugs case against gang members was thrown out because of illegal actions of the police and the blurring of the line between the State (in the form of the police) and the judiciary. 

• Leglislation has often been passed under urgency by-passing public scrutiny by select committe and key decisions have been made by orders-in-council. In general there has been major moves to frustrate or restrict public input into policy

2. The role of the mass media

In the Hubbard case, as well as the Urewera Twelve and the Kim Dotcom it has largely been a case of trial by media.

Details of the case against Alan Hubbard were leaked to the media and gross distortions of the truth allowed to go completely unchallenged. In short, Alan Hubbard was destroyed by a corporate media that shared the interests of the people who led the assault.

This is the media that tries to ensure that the public remains infantalised and unaware of the big crisis/collapse and the corruption of society and its values by the elite.

In short, the media is part of the elite and it is its role to defend the interest of that elite.

3. This was an attack on the South Island 

If one doesn't delve too deeply things can seem to be 'normal' and 'business as usual' for most people.

That is unless you are one of the thousands who have lost life savings, lost their homes and livelihoods.

Many of these people are in the South Island:

• The people, often trusted and elderly who have had their lives ruined through the failure of finance companies
  
  
• Farmers who have been forced off the land through the selling of fraudulent derivatives by the banks – HERE and HERE
  
  
• Farmers who have invested in forestry on the expectation of gaining from carbon trading to see this disappear in a whiff of smoke

• the earthquake disaster in Christchurch has been used to remodel the city along right-wing lines (charter schools) and the like and to destroy resilent and close communities., Money is being spent on convention centres and expensive stadiums while people still have nowhere to live. This is called by Naomi Klein 'disaster capitalism'. A democratically-elected local government body was sacked by central government and elections cancelled.

• Communities on the West Coast have been decimated by the Pyke River mine disaster and subsequently by the closure of a major mine in the Greymouth district

• The Dunedin City Council has been warned about excessive debt when central government encouraged this by pushing the building of a large stadiun for the Rugby World Cup creating debt without any prospect of attracting money back.

A personal reflection

I have a brother who has many good, old-fashioned values. Unfortunately, he has seen as the greatest virtue the ability to conform and to accept and adapt to change uncrtically without for a minute reflecting on the fact that all the cards are stacked against him in this 'Brave New World”

Any questioning of the status quo evokes violent denial because it threatens the very basic assumptions that he has clung to. - so much so that these differences go beyond any concern for a sibling.

This, unfortunately, is the world that we are living in.

The world in which we were raised, with its values of decency and truth are being stomped on.

Alan Hubbard “was generous and that is a bad thing, and this guy was a trusting character and that's a bad thing too"

We might be called upon to make a decision as to what is most important for us – spiritual values and Truth or an attempt to hold on to what we can as the ship we are on sinks.

It is about spiritual transformation in the midst of traumatic change, about 'letting go'.

….

I can feel major changes coming very soon that will leave no one untouched.

This could mean a terrible and tragic end to everything we cling to as humans. But it could herald a complete transformation of human consciousness.

The choice lies with us.

While I have the strength I will keep bringing what I perceive to be true to those who are willing to listen.

Seemorerocks