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Hanover was ‘responsibly governed and managed’, says Watson

Article – BusinessDesk

April 30 (BusinessDesk) – The failed Hanover Finance group of companies was “responsibly governed and managed,” according to shareholder Eric Watson, who was today cleared of any criminal wrongdoing when the Serious Fraud Office decided not to prosecute …

Hanover was ‘responsibly governed and managed’, cleared Watson says

By Paul McBeth

April 30 (BusinessDesk) – The failed Hanover Finance group of companies was “responsibly governed and managed,” according to shareholder Eric Watson, who was today cleared of any criminal wrongdoing when the Serious Fraud Office decided not to prosecute any of the lender’s former owners or directors.

SFO acting chief executive Simon McArley said there were serious questions over Hanover’s behaviour, including how it disclosed its financial position to investors from late 2007, its solvency at times when dividends were paid up to the 2008 moratorium, the propriety of transactions in the lead-up to the freezing of payments to investors and the accuracy of how the company’s assets were valued.

Still, those questions didn’t meet the bar for the white collar crime investigator to proceed with a case that could prove beyond reasonable doubt that an offence had been committed, he said.

Watson said he wasn’t surprised by the decision, which he called “the right and only possible decision,” and questioned how much money the investigation cost the taxpayer.

“I have been confident from the outset that the Hanover companies were responsibly governed and managed,” Watson said in a statement. “This decision of the SFO after conducting such a thorough investigation is an important landmark and follows the FMA’s decision announced last year that its own investigation uncovered no basis for any criminal proceedings.”

The Financial Markets Authority is pursuing the former Hanover directors and promoters in a civil suit over the period between December 2007 and July 2008 when $35 million was deposited with the failed lender, and the SFO will provide information and evidence to assist that claim.

Watson said he still has “absolute confidence in the calibre of Hanover’s directors and in their governance during what proved to be unprecedented market events not constrained to finance companies or to New Zealand.”

Hanover Finance froze $554 million of funds for its 17,000 investors in July 2008 after running into financial difficulties before convincing them to accept a disastrous deal where their debt was swapped for equity in Allied Farmers the following year.

In February 2008, rival lender Lombard Finance & Investments entered into a confidentiality agreement with Mark Hotchin and Watson to investigate buying some or all of Hanover’s loan book and debenture stock. A deal, which was to be financed by the now-failed US investment bank Lehman Brothers, was scotched when Lombard fell into receivership.

The SFO spent 32 months investigating Hanover in what it says as the “most extensive and challenging of the finance company investigations.”

McArley said he consulted with Crown solicitors, leading criminal Queen’s Counsel and the deputy Solicitor-General in making his decision not to go ahead with the prosecution.

The decision is the second time the SFO has abandoned a high-profile case, having decided the failed property investor Blue Chip group could be seen as operating in a “moral vacuum” but didn’t cross the threshold for a criminal prosecution.

Watson was an investor in Hanover, but was at no time either a director or officer of Hanover.

(BusinessDesk)

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