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Serious Fraud Office investigates South Canterbury Finance

October 19, 2010

SFO investigates SCF By BEN HEATHER – BusinessDay.co.nz Last updated 11:18 19/10/2010

 

The Serious Fraud Office is investigating South Canterbury Finance (SCF) for allegedly not disclosing tens of millions in loans while it was covered by the Crown Guarantee Scheme. Chief executive Adam Feeley said the SFO has grounds to suspect SCF failed to disclose to investors, and later the Government, at least four significant loans to related parties.

SCF allegedly funnelled tens of millions of dollars of investors’ money out of the company to related parties. Some of these suspect transaction took place while SCF was covered by Crown Guarantee Scheme and could have affected its acceptance, Feeley said.

“If you had several loans in the tens of millions that would have an affect on guarantee in the billions,” he said.

The SFO will investigate whether SCF deliberately failed to disclose these loans to Government when it was accepted into the guarantee scheme last year and also when it was granted an extension in April.

“It’s whether these loans should have been disclosed and if they weren’t whether it was deliberate fraud.”

SCF was placed into receivership in August, with the Government deciding to pay out $1.6 billion to investors.

The suspect SCF loans stretch back to 2005, with each involving numerous transactions to related-parties. Feeley would not comment who received these loans but said it was not any of the Allan Hubbard or any of his related-entities already under statutory management.

While the investigation was not directly linked to an investigation into Hubbard’s Aorangi Securities, problems with SCF, Aorangi and SCF’s parent Southbury were similar, he said.

“It has also been apparent that South Canterbury Finance, Aorangi Securities, Southbury and many other companies have had similar interactions.”

The SFO investigation was not related to the release of hundreds of Treasury documents last week detailing the final days leading up to SCF’s collapse.

“We have been looking at this since the point of receivership.”

The investigation would be given priority and progressed as quickly as possible, with the SFO working in tandem with the Registrar of Companies, the Securities Commission and private specialists, he said.

In June, Allan and Jean Hubbard were placed into statutory management along with several related-entities, including Aorangi Securities.

Reports into the affairs of those entities have detailed massive inconsistencies in the loan book and exposure to risky investments.

Feeley said the SFO was in the closing stages of its investigation into Aorangi Securities but would not give a timeframe.

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