Financial Markets Authority

ᔥ NBR

Good to see Mark Hotchin finally fighting back against the leaking, whinging FMA. Usually they are the ones first to the news with sneaky little leaks about the Hanover case but this time Mark Hotchin has got his licks in first.

Former Hanover Finance boss Mark Hotchin is challenging the Financial Markets Authority to prove the failed finance company’s investors lost out for any other reason than the collapse in the New Zealand property market and the global financial crisis.

Mr Hotchin took the unusual step of releasing a press statement which he said summarised a Statement of Defence filed with the Auckland High Court on July 31, in response to charges laid by the FMA from an investigation that began more than four years ago.

Hanover froze repayments in July 2008 on $296.5 million of investors’ funds, at a time when it claimed $550 million of assets.

The FMA action only pursues redress for depositors who invested $35 million with Hanover between December 2007 and July 2008.

Remember too that Mark Hotchin, alone, still has all his assets frozen, despite there not being a single criminal charge laid against him. The FMA after years of investigation could only struggle to file a civil case. Despite what the NBR saysWhile the media hated on Mark Hotchin they are literally sucking off Kim Dotcom and lapping up everything he says….and Dotcom actually is charged with crimes, and has been prosecuted for crimes in the past.

You really do have to wonder why the FMA does not seek to lock up the assets of the other involved in the case. I should think that Mark Hotchin has a good case for victimisation.

ᔥ NZ Herald

A judge has told a jury to ignore the mad clamourings of the media intent on lynching directors of finance companies:

A High Court judge has told the jury trying Carol Braithwaite to ignore any prejudices they have about finance companies or finance company directors.

Braithwaite – the former wife of jailed National Finance boss Trevor Ludlow – is the first director from a failed New Zealand finance company to have a case before a jury.

As a National Finance director, she faces one charge of making untrue statements in a company prospectus. She has pleaded not guilty and will defend the charge on the basis that she believed at the time the prospectus was correct.

The charge, laid by the Financial Markets Authority, carries a maximum penalty of five years in prison or fines of up to $300,000.

Justice Pamela Andrews told the jury of 12 that there is no room for prejudice in the case, which started today.

“This trial is essentially about a finance company. You may have heard or read about trials of those who are directors of finance company, you may know someone who has invested in a finance company and you may have your own views about finance companies.

The media in New Zealand have run campaigns against finance directors, especially one director who to this date remains un-charged by any authority save a civil action by the FMA. Mark Hotchin and other Hanover directors have been hounded from the country despite not a single criminal charge ever being laid.

Not only that his assets remain frozen in a case of judicial travesty. Some outlets even gratuitously use the man’s name in order to make their bonuses for traffic from their website so search engine friendly is his name.

How on earth then are jurors in another case actually before a court supposed to put aside any prejudices regarding finance company directors when our media has held print, radio and television virtual lynchings of the same?

Cactus Kate has an opinion piece in the NZ Herald this morning excoriating the dirty underhand way the FMA is dealing with the Hanover case.

Fittingly on April Fools morning, it came down to Sean Hughes from the Financial Markets Authority chest-beating civil proceedings against six Hanover directors and loosely termed “promoters”.

At least one individual claims to have not received the 69 pages of Statement of Claim at the time of Hughes’ very public announcement.

Hanover was deliberately sensationalised by leaks, drip-fed to media and anti-big business bloggers as their conduit. Should you attempt blogging balance, within minutes hatemail hit the inbox invoking your deceased Grandmother’s legacy.

It was billed as the FMA’s show-stopper but sizzled like cold sausages on the Mad Butcher’s gasless barbecue to just $35 million from a 7-month timeframe, an unknown tiny percentage of investors with civil proceedings involving alleged prospectus violations that unless a suitably vintaged professional, no one has a hope of comprehending.

That is interesting, because just yesterday the full 69 page statement of claim in the proceedings was leaked to the NBR (subscriber content)…looks like more underhand tactics from the FMA intent on running the case in the media rather than in the court room.

The FMA played a dirty game freezing whipping-boy Mark Hotchin’s assets back in December 2010. They strategically stretched the truth and patience of Justice Winkelmann in a way the writers of Shortland Street could not beat with Christmas specials as tantalising. Last year more promises until Hughes paraded himself unquestioned by business media on morning television as a big game hunter back from a shoot with the equivalent of the head of an aged tame pet goat.

It is not uncommon for regulators to play with accused through media. They know conservative lawyers advise clients to keep silent. It may be legally sage but lacks commerciality as business is all about investor confidence and telling your story first.

The FMA know the battle that goes on between client and adviser and milked it for all it is worth, knowing the first wave of bad publicity Hotchin received was almost impossible to come back from.

The moment there are market rumours of an investigation your life is effectively stalled and close to ruin.

The family ask questions, friends shun you, bankers stop taking you out in public and even the kids’ schoolteachers start gossip.

And the bottom line is after all the bluster and all the puffery and all the delays from Sean Hughes and the FMA, all they have come up with is a 69 page statement of claim and civil action against the directors and promoters of Hanover.

Cactus Kate suggests the FMA would ahve been better advised to look closely at the asset stripping and destruction wrought by Rob Alloway at Allied:

Precisely what happened to investor value since is where a more worthy FMA investigation should lie. Allied professionally due diligenced Hanover, accepted the deal, cherry picked $100 million of value off the tree and oversaw the ultimate loss of value. Allied then conveniently blamed Hanover after stripping out assets directors wished to keep.

Sean Hughes has been clear that no criminal intent was present in Hanover and pumped these civil pleadings as the “easiest” for the FMA to prove.

A civil action on behalf of a select few investors for 7 per cent of total value of funds invested.

ᔥ NBR

John Bowie channels Cactus Kate on Hanover:

You would have to say the Financial Markets Authority’s civil suit against the Hanover directors is something of a damp squid [sic] after a long three-year wait by out-of-pocket investors.

The anticipation of a criminal trial and the front-page-ranking of frozen Hotchin assets, as if he were the only director, has evaporated like morning dew. The small civil claim, being for a mere $35 million for which the directors may even be covered by insurance, will achieve next to nothing.

All eyes must now turn to Tim Rainey, the Auckland litigator representing something over 2500 investors, to see if he can turn up the recovery heat with his own action. But without the FMA resources to shoot home any liability, investors will doubtless not be holding their collective breath.

It would be interesting to find out how much the FMA begged Hanover to settle out of court so they could claim a victory…I guess we will never know now. The FMA talked large for more 15 months…they delayed and delayed and delayed, and this is all they have come up with, a pissy little civil action…John Bowie is right, this is small beer indeed.

ᔥ Cactus Kate

Cactus Kate isn’t impressed with the limp dick response of the Financial Markets Authority:

The latest in this regulatory debacle appears to be that charges have been laid, on Friday 30th March, a day before accounting year end against six directors totalling a mere $35 million or $5.8 million each. The closest Sean Hughes and his clowns at the FMA could have got to April Fools Day.

$35 million - less than the alleged $40 million cost of the Hotchin house that has become a symbol of the Hanover case. Hughes believes that this prospectus based civil prosecution is the strongest they have.

Once again I ask – how many of those investors even bothered to read the prospectus? Such is the silliness of charges based on a document that most Mum and Dad investors would not have even opened. For example Richard Long was not named as a promoter which is interesting. More Mum and Dad investors would have put their money in based on his recommendation than the prospectus documents. I would be looking to put each investor, or a random cross section on the stand and ask them precisely why they invested in Hanover and then analyze their knowledge of the actual prospectus they allegedly relied on that resulted in that loss.

April Fools Day fell on a Sunday this year. Therefore denying us this complete fairytale ending. Although not quite, the FMA seem to have confirmed the charges on April Fools Day with Sean Hughes appearing on television prior to midday to swing his now rather shriveled excalibur.

Basically it appears that the FMA civil action hangs on a few misplaced commas and poor grammar in just a few sentences:

But what he has achieved here after talking up a game really is the equivalent of a parking fine. Fraud and jail to begin with, now a technical prospectus civil prosecution.

We also have a regulatory authority that appears on television to announce charges to the public after the past six months getting the public used to the simple fact they could not pin a $500 million criminal fraud on Hanover. The magic number being chucked around with all sorts of dirty allegations about Mark Hotchin and Eric Watson.

Mark Hotchin just one of the six directors, suffered 15 months of asset freeze on what seems to be just the trust’s Paritai Dr property left.

Investigations have been ongoing for three whole years to get us to this point.

There will be no criminal prosecution from the FMA. Hughes made this comment today.

I explained to the public back in December that we did not think that this case merited a criminal prosecution. That was certainly the advice that we received, and were comfortable with that outcome.

If you were a woman in a bar and Sean Hughes picked you up promising this much and on return to his home he whipped this out, you’d laugh, run outside and call for a cab home.

Heh, spanked like only Cactus can spank.

Cactus Kate analyses the whisperings of the FMA head, Sean Hughes, into the flapping ears of Fran O’Sullivan:

The FMA has fed this information to the media on purpose in a far more blatant manner than their usual under-handed fashion of a “leak” (wink wink).

It all leads to the conclusion that the FMA are after a settlement with Hanover before this even makes a court room much to the teary eyes over at NBR in Jock Anderson who wants to sex this baby up.

Such a tactic in law is not one of a confident party with a bullet proof case. The FMA need Hotchin’s scalp and those involved in Hanover in a far uglier fashion than a cash settlement. The FMA have sunk to such depths that they are willing to use the media to put information into the public about more than just the bare bones of progress of an investigation while it is still occurring.

That the FMA has now dragged all the other directors and even possibly those down to Richard Long into the debacle, tells me that the emphasis is not so much on Hotchin anymore but the entire outfit including auditors because they cannot nail Hotchin’s backside hard enough to any wall.

The FMA and Sean Hughes in particular are acting like the playground tough guy who is more than a little afraid to actually have a dust up. They are strutting around and trash-talking and hoping that their victim quivers into submission. I saw this plenty growing up and attending an all boys secondary school.

What usually happens is one of the victims steps up and smashes the trash-talker in the gob and then much blubbing ensues.

Let’s look at the facts from a play-ground point of view.

• The bully has been trash-talking for more than a year. Still no charges have been laid, none even specified. The victim of their attacks is none the wiser as to what they have actually done wrong, yet the bully is trash-talking it all out in the media.
• So far all they have done is talk, no punches have been thrown, none even feinted. If they could have laid criminal charges they would have by now. They certainly wouldn’t be talking about a far lower lower threshold of civil charges
• After talking big a week ago about maybe, possibly  laying civil charges, they are now whispering that perhaps a settlement might be a good idea.
• Not only that they are now talking about going after a few more people as well. Trash talking on more victims.

These are not the actions of a regulatory body that is sure of its case. They are the actions of a big talking bully that talked big but the facts don’t fit the talk.

In the play-ground there are two types of bullies. Those that give you the bash, and those that talk about giving you the bash. The ones that actually give you the bash never talk about what they are going to do, they just do it and everyone knows what the outcome is going to be. The ones that talk about it can usually bluster and threaten for a short period of time and then someone usually calls them out and sorts them. The second types disappear from the playground and order is restored.

The FMA has talked big in the press, they have talked big in the court, but the time for talking is over and it looks like, increasingly, someone is going to call them out. I wonder if that might start with Winkelmann J?

First it was Adam Feeley making a fool of himself with grandstading in the media and now it is Sean Hughes.

On monday the NBR published an article about the length of time it is taking to progress cases by the SFO and FMA [NBR subscriber content]. The head of the FMA is obviously not a busy man because he found time in his busy schedule to go and put a comment on the article.

Honestly where do these guys get their good ideas from? Are they taking public relations advice from Andi Brotherston?