Official complaint and OIA request from Hubbard supporters

The following submission was sent to the Chief Ombudsman today, Sunday 6th February, 2011.

The Office of the Ombudsmen will confirm that there were 256 signatures on this submission.

--------------------------------------------------------------------------------------------------------------------------------------

The Chief Ombudsman,
Ms Beverley Wakem,
The Office of the Ombudsmen,
Wellington.

Sunday, 6th February 2011.
Dear Ms Wakem,

Further to our last email, we wish to sumbit the following complaint and request for information under the official information act.

We note your references to cases considering bias and conflicts of interest, more particularly to the general principles that need to be determined. We have now had the opportunity to consider your response and accordingly ask that your judgement consider the information provided below.

A conflict of interest includes a situation where the conflict may be reasonably perceived, potential or actual. Conflicts include interests of public duty versus private interests. The foundation of the rule against an appearance of bias lies in protecting public confidence in the Government, including its administrative duties and actions. Without the appearance of impartiality, Government administrative action loses its legitimacy and brings Government into disrepute.

Given that conflicts of interest policies generally rely on self-disclosure, self-disclosure itself relies on a person performing their duties with a high level of integrity. If the Securities Commission elects to deal with conflict issues by brushing them under the carpet, ignoring them or denying that they ever existed then those very actions compromise NZ's financial markets.

If members of the Securities Commission do not undertake their public duties with the highest level of integrity (or at least having public perception of doing so) then the operations and oversight of NZ's financial markets comes into question. It is therefore absolutely necessary that their actions are seen as fair, orderly and transparent.

In investigating these conflict issues it is paramount that your office be seen to act independently. Your Office, however would appear to be misreading the principles for 'bias and conflict'.

We (the Hubbard Support Team) remind you that Allan Hubbard was the Chairperson and majority shareholder of SCF at the time SCF took receivership action against Botherway's brother. Following South Canterbury's Finance's actions for receivership Simon Botherway's brother was later adjudicated bankrupt. We note six days following the bankruptcy declaration (www.insolvency.govt.nz) the decision to place Allan Hubbard into statutory management was made. Bankruptcy in itself is a significant infringement on any individual. A bankrupt can not travel out of New Zealand or engage in business unless they first seek official authority. Nor can the bankrupt apply for credit unless they first disclose their bankruptcy to the creditor.

Your Office has determined that Simon Botherway was not required to disclose these circumstances as a "potential conflict". That your Office came to this determination is astounding.

In reference to the Saxmere case, the test for bias provides that a person should be disqualified “if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide”.

We also refer you to paragraph 48 of Justice Tipping's finding in which he states that “[a] matter should be disclosed in any case where it is possible that the observer might reasonably think the judge could be biased as a consequence of it. The judge or the court can then consider the responses of all the parties to the disclosure and assess what course to take on that fully informed basis.”

We rely on the principles of this case to evidentially support that the conflict should have been disclosed and ultimately Simon Botherway should have been disqualified from the Commission's decision making on the commercial and personal affairs of Allan Hubbard.

Despite your determination we are of the view one cannot independently rule on a conflict of interest issue unless they are fully informed of what the issues are. In providing the information below we accordingly ask that your Office re-examine their findings.

To invite you to independently verify the following statements –

Allan Hubbard and South Canterbury Finance LtdSouth Canterbury Finance Ltd has been operating for over 80 years and evolved to become one of the largest privately owned lending and investment companies in New Zealand. Prior to the statutory management decision SCF was receiving significant investment interest from the New Zealand public.Allan Hubbard was of course the 'face' behind SCF, the Chairman and a life-long member. Simon Botherway and George Kerr Conflict IssuesSimon Botherway was part of the four-member division from the Securities Commission which recommended to Commerce Minister Simon Power that the Hubbard’s, Aorangi Securities and seven charitable trusts be put into statutory management.

Botherway is the former business associate of George Kerr. Documents from the Companies Office show Mr Kerr was the chairman of Brook Asset Management until 2004, while Mr Botherway, who was the founder of Brooks Asset Management, was also a director until July 2008.

Both were involved in Sterling Grace Management Group and Tempus Capital until it was dissolved in 2007.

Kerr is also a significant shareholder and acts as an underwriter of Marac and Pyne Gould Corporation (PGC).

Kerr, through his investment Torchight Fund had a vested interest in the demise of SCF. In the views of a PGC investor,"Torchlight Fund may have invested in South Canterbury Finance (SCF) hoping for a receivership to put itself at the table for the sorting out process". http://www.nbr.co.nz/article/torchlight-gets-money-seen-table-scf-fallout-129401

George Kerr stood to gain financially from the decision to place Allan Hubbard into statutory management. George Kerr has a history of close business ties with Simon Botherway and Allan Hubbard. An ordinary prudent person would see the past business partnership and relationship between George Kerr and Simon Botherway as a conflict and disqualify Botherway from the decision panel.

'Heartland Bank' ConflictThere are two regionally based and NZ owned small retail banking operations within NZ, namely TSB Bank (based in the Taranaki region) and SBS Bank (based in Southland). There are NZ owned, small retail banks based in the Canterbury region.

On 1 June 2010 PGC announced its intention to enter the merger with MARAC, the Canterbury Building Society and Southern Cross Building Society. http://www.nzx.com/markets/NZSX/PGC/announcements/3761221/Pyne-Gould-Corporation-Limited

PGC stated it hoped its merger with the new bank would give the bank scope to grow, with a goal of doubling the asset base within five years. The PGC annoucement confirmed the principals of the merger saw the advantage of a small retail bank being based in the Canterbury region - "We see a significant opportunity in entering the banking market as it is clear to us that New Zealanders and New Zealand businesses are seeking an alternative to the incumbent banks in the markets we intend targeting,".

SCF was of course already operating as a finance company in the Cantebury region (albeit not calling itself a bank). SCF was clearly, therefore, a commercial competitor to this new bank.

PGC's announcement confirmed it expected to be the largest shareholder and PGC also confirmed its focus for the bank was to target "rural customers and small businesses" Rural customers and small businesses in the Canterbury region were of course existing customers of SCF and SCF at the time was one of NZ's largest privately owned finance companies.

The market announcement made by PGC on 1 June 2010 increased the strength of the existing conflict between Botherway, Kerr, and Allan Hubbard.

We remind you that several days following the PGC announcement, an official acting on behalf of the Securities Commission contacted Mr Hubbard to inform him they would be visiting his office to inspect company records. Notice of this inspection was less than one business day.

An ordinary lay person would expect the Securities Commission to have managed the ongoing conflict of Simon Botherway and immediately have sought to disqualify Botherway from any official role that linked him to the personal and commercial affairs of Allan Hubbard.

Within two weeks following this official visit, Cabinet voted that Allan Hubbard be placed into statutory management.

Keeping in mind the significant role of George Kerr in the 'heartland bank' merger (http://www.nzx.com/markets/NZSX/PGC/announcements/4430331/Ongoing-Disclosure-Notice-George-Kerr) and keeping in mind the close business associations of George Kerr and Simon Botherway, it is clear that Simon Botherway should have been disqualified from the Securities Commission panel.

We ask that your office re-investigates the reasons why this did not occur.

KiwiBank Conflict IssueThere are three New Zealand-owned small retail operations -- the state-owned Kiwibank, based on the NZ Post Office network, and the regionally based TSB Bank and SBS Bank, both of which have small retail networks.

The statutory management decision made by Cabinet was commercially sensitive and the sensitivity also applied to Kiwi Bank, an entity that is Government owned and one in which Bill English, as the Minister of Finance, has a vested interest.

We accordingly ask your office to investigate how this conflict was effectively managed.Habeas CorpusThe leading interpretation of the meaning of arbitrary detention in New Zealand was given in Neilson v Attorney General:

"Whether an arrest or detention is arbitrary turns on the nature and extent of any departure from the substantive and procedural standards involved. An arrest or detention is arbitrary if it is capricious, unreasoned, without reasonable cause; if it is made without reference to an adequate determining principle or without following proper procedures."The statutory management decision has effectively made Mr and Mrs Hubbard prisoners of government appointed officials. Since the date of statutory management all their personal mail is opened by the statutory managers and access to their private bank accounts has been forbidden. They have lived under these conditions for the past eight months. They are an elderly couple aged in their 80s.

These conditions were set upon them without an opportunity to first reply to concerns that the Securities Commission had raised in their investigation report.

The right against arbitrary detention is enshrined in section 22 of the Bill of Rights Act 1990 which reads "everyone has the right not to be arbitrarily arrested or detained".

Request for Re-Investigation

We have highlighted some crucial information relevant to conflicts of interest issues that your Office would appear to have overlooked during its investigation.

We further ask that you note the following –

• Your letter confirms the Securities Commission is governed by both a “formal” and “informal” conflicts of interest register. You also state that Members of the Commission are provided agendas via email including an opportunity to update the “potential conflict of interest register”. You advise this process allows Members to consider any potential interests that may exist in regards to Commission papers and agenda items.

• Your letter confirms the pre-disclosure process has been purposely built to give ample opportunity for potential conflicts to be disclosed. We have highlighted the words potential conflicts as that is the name of the Commission's informal register.

• Your letter confirms that once the meeting is convened a further opportunity is given for Commission members to disclose any conflict of interest. Again Mr Botherway failed to make any disclosure (potential or real).

• In essence your letter confirms on a consistent basis Mr Botherway failed to disclose what is clearly a potential conflict of interest.

• It was only after Simon Botherway was contacted by a reporter did he then elect to disclose to the Commission that he had a potential conflict.

• That the Commission then considered the issue (after the statutory management decision had already been made) and found there was no conflict is of little relevance given that at that time they (the Commission) would have been publicly criticised had they found there was a conflict.

• We refer you to an earlier Government decision to appoint Simon Botherway as the Chairperson of the establishment Board of the Financial Markets Authority (FMA). His appointment to lead the policies and structure of the FMA indicates the weight that Simon Botherway's advice would hold with other Commission members.

• The conflicts of issues policy adopted by the Securities Commission is heavily reliant on self-disclosure. Disclosure of potential conflicts therefore relies on a Commission member's integrity, openness and honesty, including adequate disclosure in a timely fashion.

• That Mr Botherway failed to disclose his brother's adverse relationship with South Canterbury Finance and/or Allan Hubbard causes an independent observer to view that judgement with sinister tones.

The common law rules on bias are also reinforced through sections 25 and 27 of the New Zealand Bill of Rights Act 1990. A further reference for bias and conflicts can be found in Muir v Commissioner of Inland Revenue [2007] 3 NZLR.

The fact that your Office has failed to identify these circumstances as a perceived and real conflicts of interest brings into question the independency of your Office.

Nevertheless as New Zealand citizens we rely on an independent Government body fulfilling its duty. Those duties include being held accountable when mistakes have been made.

To enable a democratic country to function effectively accountability by Government is mandatory.

Government vested interestThis is a matter that holds strong public interest and the Serious Fraud Office (SFO) are continuing their investigations. The Hubbard Support Team has noted the likelihood of public embarrassment for the SFO should the SFO not find any wrongdoing and therefore the pressure the SFO is likely to be under to lay charges.

Should charges be laid the integrity and independency of the SFO investigation will come under close scrutiny. Integrity issues include the original and anonymous complaint, as well as the motivations of any officials and how conflicts of interests were managed.

The rights to natural justice are enforced by Section 27(1) of the Bill of Rights Act -
Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person's rights, obligations, or interests protected or recognised by lawShould any charges be laid we advise you of our interest to stay any proceedings until your investigation has concluded.

Please note that this is the address for reply.

Yours sincerely,

We, the 256 undersigned investors and concerned citizens of New Zealand.
Stand by Hubbard
Support Team

© Scoop Media