So at April 10th we are heading into month five of Mark Hotchin's personal assets and that of corporate trustees allegedly related to him, remaining frozen under application of the Securities Act.
Freezing orders in law are meant to not be granted lightly and be temporary in nature while investigations are completed and with some certainty that charges will be anticipated. Hotchin's very blanket freeze order was the first under the relevant sections of the Securities Act, however there is reasonable precedent prior for fraud allegations and other New Zealand legislation allows freezing of assets.
The SFO investigation into Hanover was meant to be well completed at
Christmas. As was the Securities Commission's as to whether to
lay criminal charges. It has dragged on and on. Regardless of the reasons it is now becoming ridiculous.
Hotchin has even claimed that he hasn't been told what is being investigated. That is there is no specific reference to what he is being investigated for other than a general poke and feel around based on HUtu (Hanover Utu) and sensationalism running rampant in the media and in the public along with all other finance companies. A "fishing expedition" as we call it.
S60G of the Act broadly allows freezing in three situations:
- criminal prosecution have begun
- civil proceedings have begun
- where securities commission are carrying out an investigation into acts or omissions by the defendant.
While Hotchin isn't the favourite public figure in New Zealand, this case is making for ridiculous precedent. In the meantime Hotchin has had to pay bills, sort creditors and keep businesses moving and progressing. He also owes money to the IRD. I wonder what the IRD feels about the freeze order and whether they will apply to have it lifted themselves to be paid? The taxman waiteth for no one.
No other decision-making director of Hanover has been subject to such an order, no attempt either has been made to freeze Eric Watson's New Zealand based assets let alone his foreign ones. Hotchin has wore the entire Hanover matter on his own despite in each instance being just one of several directors.
While the general public seems to care none about any swanky car driving, long lunching businessman having anything frozen, which is fine, but everyone should care about antiquated orders such as this seeking to deny an accused (if he's even that as again there's been no charges) even the right to the basic presumption of innocence let alone speed in the investigation.
It was apparent from even Granny Herald's
investigations that Hotchin's assets and that of these trustees named in proceedings are predominantly NZ based and in the current market, highly illiquid NZ high-end real property. Some backed with large leveraging so don't actually all belong to Hotchin in the first place. He didn't seem to hold assets anywhere far away. If he did then he wouldn't have bothered killing his Christmas and spending screeds of accrued (unpaid IOU) time having lawyers lifting the orders one imagines.
Hotchin's property had to be in New Zealand given the personal and other guarantees developers have to provide and that New Zealand banks tend to only lend of New Zealand situs real property. Which was his core business prior to Hanover. I have spoken with half a dozen NZ developer advisors about to go down the gurgler around the time of Hanover. Nothing can be moved offshore as the guarantees these sorts provide as long as the leveraging requires a complete house of cards effect if in difficulty. That is they have no assets with clear title to move. Hotchin is sniffing to be similar. A developer is only as rich as he is at the time of liquidating his entire structure. Liquefaction doesn't just happen in earthquakes, cashing up property at the wrong time causes just as much damage.
An exparte order (one with no notice) was obtained. The Commission argued in their favour the risk of this property being sold and profits relocated to Australia where Hotchin now lives.
Let's take the worst case scenario for the whinging Hanover Utuists and Hotchin along with KA3 and 4 as corporate trustees (none of which Hotchin is a director or shareholder of) had liquidated millions of dollars in reasonably illiquid real property in New Zealand and taken it overseas. Money in sums such as that doesn't just vanish into thin air upon selling or re-financing an asset. The SFO if there was proven or even alleged fraud charges and with it the Securities Commission would have easily been able to trace where it ended up and with it obtain relevant orders at a later date. International orders are capable of being executed.
Contrary to what pinko reactive peasants and Utuists types say about the offshore industry, you cannot make money completely disappear, least of all when its coming or in something as traceable as large pieces of real estate and being watched by not one but perhaps up to three authorities in a country.
If you leave money in a bank account it is obvious as to its source and whereabouts, likewise millions of dollars can only be really used to pay large visible expenses or large visible assets all of which require large amounts of traceable documentation. A person or a trustee cannot hide spending of that amount.
Freeze orders come from a time before banking was fully computerized and tracing was nowhere near as sophisticated. They also came from a time before international co-operation treaties and information swapping. And when trusts were at law seen to be impenetrable.
Hotchin or the corporate trustees could not have sold the property and transferred it all into trusts overseas as most jurisdictions have laws preventing such transfers (fraudulent conveyances and transfers) and allow the rolling back of any transfers. Again the SFO as a criminal authority can easily go to most jurisdictions and gain orders rolling back such transfers. I maintain they have the powers to go after Eric Watson and Hotchin's overseas assets if they so wished. Hotchin seems to have very few offshore assets according to
reports here.
That is, given the investigation process at even that point Hotchin could not have circumvented laws and used trusts to place his assets. At that point it was too late to take him as a client for those purposes in the offshore industry and all New Zealand lawyers wanting to keep their practising certificates wouldn't have a bar of structuring out likewise.
So what has happened? My guess is that once again the Commission and the SFO (on standby) is being used as a political tool to gain populist support to "go after" people who can then be blamed for risktaking investors all whom are crying over losses from their risktaking. Basically it is becoming all the ex- finance company directors v Diplock and the old Securities Commission and one lot are going to wear it.
The SFO has enough powers to trace Hotchin's assets both now or in the future. Lifting the freeze order applied for by the Securities Commission makes no difference to their investigations. In fact it may actually assist them as they would have been able to follow the money and assets to see what he would have done with it all which would have created more intent to defraud. Moving money requires at least two bank accounts, a sender and a recipient, both traceable. Buying assets likewise. Moving large amounts of money requires banks to conduct AML (anti money laundering) and KYC (know your client) on the source of funds. That is, poor insomniacs like me receiving verification phone calls from banks in the middle of the night from all around the world asking for verification of both the transaction and a copy of the contract or paperwork by which the money has moved from one account to another. Banks are subject to orders that the SFO can generate through local jurisdictions and have to disclose signatories on the account and the beneficial owner of the account ie. Natural person.
Civil authorities however do not have such broad-ranging authority and use the SFO and criminal guises to squeeze their opponents.
How fair is this? Well again you may not care but imagine the outrage if your personal assets were frozen on the mere suspicion that you had done something civil or criminally wrong? Most New Zealanders couldn't last the month out if their cash and assets were frozen.
Also how fair is it to wrap up and taint assets earned pre-Hanover with ones obtained during and post-Hanover? That is where the Securities Commission will be at attempting to obtain orders from now on and get into the assets of those trusts. If the trusts have independent trustees non-associated with Hotchin and are documenting all their decisions and completing paperwork, this will be a very difficult task.
I will give an example of what has happened to Hotchin using a street level scenario. Right now Headhunters, Black Power, Highway 61 and Mongrel Mob gangs happily launder money through bank accounts in New Zealand under guises of associates and members. Most known to Police and the Organised Crime Unit they stick their all ill-gotten gains into banks, property and other investments or assets. I've even heard of a charitable trust structures being used by gangs to have "donations" paid into.
Do the authorities freeze their assets on suspicion of fraud or while being investigated? Of course not because gangs are constantly under investigation. They let gangs hold assets because they haven't got enough evidence to bust them. They are continually investigating them yet their assets stay in tact while this happens and they watch the accounts. The Organised Crime Unit doesn't just slap a freeze order on the account suspecting they've got the money from drugs, guns or crime. All money from gangs comes from some sort of crime, by definition. They aren't making anything through legitimate 9 to 5 jobs. Its all from drugs, guns, security, extortion, blackmail and protection.
Imagine the outcry from civil libertarians and Hone Harawira if government agencies went around and froze every bank account of a suspected underclass dirty tattooed mainly Maori gang member? Well there's no outcry when same happened to the nicely dressed middle-class white male.
Oh it is unfair that the totally peer-less Urewera 18 cannot have a jury trial by their peers or delay justice anymore for the terrorist group. Fran O'Sullivan drafted this rather
compelling argument that China's human rights record may be close to New Zealand's using the Urewera model.
But we can freeze Mark Hotchin's assets for four months without charge, without specific details given to him as to what he's been investigated for and with no signs of any progress in an elongated investigation spanning some months and prior investigations to this.
I bring the Urewera 18 up as Justice Helen Winkelmann is it is pertinent as she is the Judge both denying Urewera 18 a jury trial and Hotchin, any sense of fair play when it comes to the freeze order. The media and public say one is a travesty, yet the other is not.
Senior Barrister
Anthony Grant had this to say. He looked at corporate trustees KA Trustee No3 Limited and No4 Limited and commented that the Judge has effectively decided in advance with freezing the assets that even though Hotchin is not a shareholder or director of these companies or a trustee of the trust - he controls them and treated all assets as such so included in the freeze order.
If this is the case then no trust set-up in NZ offers protection for any settlor or deemed settlor from seizure or even attack. Which undermines the law even further. Winkelmann is not only opening up a can of worms she's force feeding them to the legal fraternity. The corporate trustee is a common occurrence in trust law, as is a structure where the "client" for want of a better term, has a power to appoint trustees. Little wonder Winkelmann has sealed the judgment as the legal fraternity will not be eating worms from her can, there will be an outcry.
More importantly Winkelmann, without further evidence is not just freezing Hotchin's assets but those she has had a wild guess are his assets. The net of which based on Herald investigations of his homes in New Zealand seem nowhere near the alleged amounts taken out in dividends that Hotchin says were invested back into the company.
If Hotchin had screeds of money he had taken out, again where is it? Why isn't he living now in Monaco on a superyacht rather than in a rented house around in the decidedly average Gold Coast? Why did the trustees run out of money to finish the Paritai Drive house? Why would he have bothered to come back to Auckland for even two days to do media? Why would he have asked for his ageing car fleet to be exported to Australia? Rich people just go buy new cars from bank accounts offshore.
These assets show no sign of excessive wealth by any means.
We know no further information as the court like in the Urewera 18 has slapped suppression orders on everything mainly in Hotchin's instance as it details affidavits of his assets and that of KA3 and KA4.
All leads to the conclusion that while John Key Prime Minister can stand up at a meeting and say about the man who cost hundreds of millions in bailout money - "
I like Allan Hubbard", left as the most vilified man in New Zealand is a bloke who hasn't cost the New Zealand taxpayer a cent in a corporate bailout welfare such as SCF, hasn't plotted terrorist activity like card-carrying vigilante racist Tame Iti or like the gangs sold "P" to your kiddies or gang raped your daughters.
Freezing Mark Hotchin's remaining assets and that of two trusts with established non-Hanover related assets with independent professional trustees and corporate trustees of which Hotchin is neither director or shareholder of, smells like a futile yet vindictive exercise preventing him only now from paying midget bills around New Zealand and the IRD.
If he's so worried about lifting the order it says to me that the purpose that the Securities Commission went to court for the order - preserving assets for those that "may" sue him in a civil action will yield Hanover investors in a class action even if they had a resounding victory against Hotchin in a personal capacity as director, around the amount that you sponsor a child a day in Africa.
Rather than being good for those who later may have a civil claim, the freezing order may just work the other way. You only have to look at SCF to see what happens to property valuations in a stressed market when left unattended. Decimation of value of what is left there to preserve.
