The Desperate Tactics of the FMA

Hughes still making it up as he goes along

Fran O'Sullivan has pushed the buttons of FMA Head Sean Hughes to get some answers on the Hanover Finance investigation in a classic pre-Christmas PR dump from the Authority similar to last years freeze order.

O'Sullivan's column today raises more questions than it answered. A brief fact summary follows from her material:

- The FMA has cancelled Xmas leave so Hanover charges can be laid in the first two months of 2012.
- Prior to even laying charges, the FMA has come out pre-Xmas and said it would against directors and promoters.
- O'Sullivan concludes (and we can only assume because she has been told by Hughes) that the FMA now wishes to cut a settlement deal with the Hanover directors and promoters.
- Hughes has stated the Hanover scenario is NOT "talking about wanton reckless misconduct".
- Greg Muir speaking for Hanover suggests the FMA has all the material it requires to show directors acted within the law. Hughes responds by saying the FMA is NOT "alleging intentional or reckless misconduct". Just that the "prospectus and advertising portrayed a rosier picture than the true scenario".
- The FMA are making these representations to keep the freeze order on over Xmas.
- The SFO is yet to conclude its investigation into Hanover involving related party transactions.

Here are my thoughts on the piece by O'Sullivan. And I number them for simplicity's sake. I also note that O'Sullivan's piece is the first by a journalist on this stage of developments. I am not suggesting she is doing anything other than what is her job, that is she is well within her rights to publish the piece, which was a good one.

But looking at Sean Hughes' conduct:

1. What the hell is the head of the FMA doing speaking to a journalist while a formal and serious, and very public investigation is still in progress?

2. Do the Hanover parties even know the possible charges they possible could be charged with? I assume not if the charges have not been laid yet. How consistent is this with natural justice?

3. What kind of outfit threatens to charge persons after more than a one year investigation without detailing precisely what they are being charged with? And does so through probably the most senior and respected business journalist in New Zealand?

4. If the conduct is not intentional, reckless or wanton then what was it? It is starting to all look a bit limp dick when it comes down to the effect of advertising and a prospectus that very few Ma and Pa investors even read cover to cover.

5. What relationship has the purposive placement of this information in the public domain by the FMA got to do with Winkelmann J's demands that the FMA show that they are nearing the end of their investigation?

6. If Richard Long is to be charged for apparently inducing person's into investing in Hanover, will the NZ Herald also be charged for running the $2 million of advertisements in their paper saying same? Just asking given the FMA picked the Herald to run this story through. If Long goes down then surely so does APN. Long probably convinced more people to sign up to Hanover than Hotchin, Watson or any Hanover official.

7. Again despite O'Sullivan publishing the standard 16,000 investors of $500 million of losses, the FMA investigation to begin with did not relate to anything like this figure, it is for a specific time period based on a prospectus in December 2007. That is what the freeze order on Hotchin was for. Apparently now Hughes is looking at a wider time frame but details are vague.

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 asset freeze remember was restricted solely to his assets as though he was carrying the baby for the entire loss allegedly due to technical prospectus violations. You know, prospectuses that every Ma and Pa investor read from cover to cover and base their decisions on. Yeah right.

If you were advising Hotchin and Hanover in a legal capacity right now you would be taking that eventual meeting with the FMA with a large grain of salt from the "get fucked" shaker and taking your chances in court. If there was any behaviour that was so very bad the head of the FMA would not be eliminating intentional or reckless conduct from the charges before they have even been laid. At present anything looks very technical and with it shakier than Christchurch.