Run Away Alloway

If there was an award for Teflon Man in the recent finance company debacles the winner would have to be Rob "Runaway" Alloway. He's dumped and charmed the dirt on to everyone else with little accountability himself. Chucked his toys at directors and Andrew McDouall claiming he knew nothing about a $500k fee paid. He's driven the Allied sponsored Porsche, been seen on Norrie's A-list and given the car a paintjob that Foss' gay ute would be jealous of.



Yet, Runaway Alloway, hibernating for winter in the sleepy hollow of Hamilton has escaped any sort of sunshine on his own behaviour. The worm has it seems turned a little on a man who one can only now describe as a vulture. Sludge reporter Matt Nippert has taken his eye off the Poo-Piss long enough to have a little look. Others also at the NBR who obviously aren't buying the alleged robbery in progress.




Yes, contrary to sound advice that all good Waikato rural Grandfathers hand out that you only pay cash for toys, Alloway has a penchant for financing his non-revenue producing depreciating assets.

Alloway fronted the $396 million Hanover-Allied debt for equity swap including the now rather dubious self-indulgent "reset" clause that will kick in at the end of June 2011. He ran Allied into the ground selling ex-Hanover assets he said he wouldn't and now in an act of absolute egregious audaciousness looks like he's going to attempt to run away with what's left of cherry picked assets and staff. Remember his claim:

"This isn't some rumpety transaction to create some paper company. We have the vision to create a solid rural services and financial services company with plenty of equity and very little debt," he said. "We want to grow a business which is high-performing and delivers equity growth and earnings growth in the future."

Not that interested in that now.....

In finance we call that the behaviour of a vulture capitalist. There is no shame in that from a businessman's perspective, the public of course don't see it as favourably. If however you have orchestrated the entire situation to your own advantage from the beginning there may be another word for it. And the behaviour itself subject to closer inspection with authorities. It seems Allied-lite is being born before us.

The rot set in way back when a "reset clause" or adjustment mechanism, allowed adjustments to Allied shareholders if there was a write-down in ex-Hanover assets below the initial $396 million. This gave Allied shareholders every incentive to get limited value at all. One shareholder more incentive than the others. Runaway Alloway.

In April 2011 a company called "RS Racing Limited" changed its name to Prestige Livestock Limited. The same day Alloway's car racing company seems to have been retagged into livestock, Allied's core business before sucking in Hanover investors. As a girl-racer chick with a love of fast cars over slow men, I realise RS is abbreviated German Rennsport (racing sport), used by Audi and Porsche most famously. In otherwords - awesome.



According to a comments person the shareholders are Allied staffers. So we can only have a guess what's going on here until a reporter skips in and does their job.



Even worse for Runaway it seems the Poo-Piss was loaned money on another core business activity of his - flash cars. Oh well, never fear I'm sure a vulture can come in and make an offer on the Diablo and stick it in his Hamilton garage as well.



The only winner since the Hanover deal has been Runaway, and now he is leaving. The reset at the end of June will kick in and the real question I will now find out is how much of the company Alloway will end up owning? And what his net benefit will be out of this? I have the formula from the offering documents and will run the numbers. The examples I have seen only calculated a $20 million write down, they didn't expect one of several hundred million. I will need a proper calculator.

For all his fluffing and screaming to the FMA and SFO about Hanover's conduct, Runaway's attempt to hide his own dealings is starting to unravel.

It's now time for everyone to stop giving Runaway Alloway the chance to fling shit at others and man-up and collect some of it for his own conduct in the piece.

Update - not a second too soon, Runaway is having the Herald run his lines that he is "glad to be leaving". As would anyone who has set-up something more profitable to go to. The Gibson family must be having interesting dinner scraps. The NBR going harder than the Herald puff pieces.

Alloway said he lived in Hamilton and could not say whether he would remain there or what he would do next.

Hmm....didn't interview the keyboard very hard for that one....perhaps a callback in order with a simple question about the racing car turned livestock company above?

Duck v The Whale - A Grand On It.

Forget the election, the best entertainment will be The Whale v The Duck in a cycle race.

The problem with Mallard and the Whale is that neither knows when to back down. Right now old(er) ladies and Nanas are telling them both to back down I'm sure.

I reckon such barbaric activity should be encouraged.

Slater called Mallard a cripple. Which is to be fair, outright baiting.
Mallard reacted as one of the last true heterosexual males in the Labour Party should and took it as a challenge so he issued one.
Bike race. A very long bike race. Even longer when you have just had a massive bike accident yourself.

Whale accepted.

In short Mallard in doing so has accused Whale of being more out of shape than he is.

As I have been accused by Mallard of financing Whaleoil in this post, I will now throw a challenge to them both.

I will stick a grand up ($NZ1,000) as prizemoney.

Mallard wins, the Labour Party get the money.
Whaleoil wins, his new Party of choice, ACT gets the coin.

I now challenge the world's tightest pollster David Farrar to chuck another grand in as a possible prize to the only thing that is permanently crippled about the Labour Party - their finances.

Glory Days

RIP Macho Man Randy Savage aka Randall Mario Poffo age 58. Yes you wouldn't want to step into a ring with that name.

A sad day for wrestling fans worldwide. Macho died in a car accident although cause of the accident is unknown.

Blank Budget

Below are my thoughts on the budget.














ENDS.

Rooter Turns Straight Shooter

The VRWC gave Stuart Nash the alternative nicknames "Mangrove" and "Rooter". We did so with some affection of course as it is rather mean.

MP's are finally learning that you can earn your way to a nice nickname (such as Crusher) or alternatively no nickname at all by doing something noteworthy.

Today Stuart "Rooter" or "Mangrove" Nash is no more.



The politicianary will be updated as soon as Whaleoil gets his site online again with something more appropriate.

Nash is a first term MP and today he did something extraordinary. I cannot recall a first-term MP making such an impact in quite the way that Nash did today. He upset the opposition in such an astonishing manner and with it several of the nation's largest and most powerful lobby groups.

Nash is calling out farmers for the small amount of tax they pay. I liken this act of bravery today just like walking up to Richard Loe's face and calling him out for being a filthy eye goughing thug and maybe even spitting on him. Everyone knows it is true but Loe was an All Black so untouchable. Farmers have had such a golden run in New Zealand.

Nash remember is from Napier. The first reward for his bravery should be Phil Goff re-assigning him with the Labour candidacy for Epsom with a view in 2014 of assigning him into a safer Labour seat. Nash belongs in an Auckland electorate. He's got clean hair, good hair, dresses well, is good looking and cleans under his fingernails. Women like him and so do gay men and in Auckland they will vote for him.

Today in the House National tries to switch and run with spin from Nash's figures. They tried to blame him for the Dominion Post's piss poor sub-editing where they confused payout for income. Nash didn't do this, the Dom Post did. The Nats failed because in launching a full scale war on Labour regarding this attack by a first-term backbencher they are just showing how sensitive they are to the issue. Even Peter Dunne got upset and he was the chump who provided Nash with the actual statistics! Some of them are very telling. Amy Adams had a pretty awesome go, smashing up David Cunliffe. She started on Nash. Labour were very slow to provide Nash with some cover. Adams it was revealed today has the following interests. Perhaps a request that she table the trusts tax return sometime soon?

Farm property, Aylesbury (in trust)
Farm land, Darfield (in trust)
Farm land, Te Kauwhata (in trust)
Commercial property, Templeton (in trust)
Commercial property, Temuka (in trust)
Residential property, Fendalton, Christchurch (in trust)
Residential property, Riccarton, Christchurch (in trust)

Again good on her, nothing wrong with this. But it does make somewhat of a mockery when she isn't as vocal fighting for all business and taxpayers to pay much lower taxes and enjoy the sort of concessions she can.

Farmers do not pay their fair share of tax. It doesn't matter how you spin it. Looking at their gross income isn't the issue. Looking at their leveraging and how that swallows up deductions, is where the action is at.

Tomorrow I imagine there will be screeds of reactionary comment from the likes of Fongterror and Federated Fuckwits. All of it spin designed to show you how poor farmers are and how hard they have had it. The deflection will be grand to watch.

You know farmers are the backbone of the community bla bla. In reality they contribute 4.6% of GDP (agriculture), 7% employment (agriculture) and around 25% of exports. Yet you would think the way they carry on they carried 100% of all. They get special treatment. Fongterror's special made regulatory benefits see to that.

Today we have already had this spin. No farmers pay $28,000 in tax! Oh so that's better. Income of hundreds of thousand of dollars and stuff all profit all in the name of what sort of business model? Millions of dollars of leveraging all for capital gains.

Labour's argument goes a little something like this. Their core voters are married couples with two kids earning say $50,000. In the House today Labour bombarded the National Party with examples of such people in their electorate struggling to make ends meet. It is fertile ground because hand on heart no one can say that after John Key and co's "tinkering" with taxes that these people have been compensated for the increase in GST to 15%. Whenever there is sanctioned increase in prices, of course suppliers hike prices more that the GST increases. They do so because they can get away with it because everyone else is increasing prices.

Which is why tinkering with taxes was such a bad idea. The package of reforms didn't go far enough. The Nats chopped and chose what was saleable, in the meantime forgetting the anomalies they leave, the openings they gave the opposition.

The National Party research unit were quick to provide comment via Kiwiblog. (I have known David for 16 years and I know he doesn't write with the word "bullshit"...it would be as obvious as someone else writing my posts for me and being delightfully polite). Anyway the Unit found some MAF stats.


As I commented on KB, it is difficult, nigh on impossible to get accurate data regarding taxes paid and there are all manner of statistics floating around. I have OIA'd similar only to draw blanks. In fact the explanation was that it didn't include other tax codes such as trusts, companies and partnerships. In other words, proving the point again that farmers are shoving land in trusts to look poorer than they are and gain access to allowances and rest home subsidies, they are also using partnerships to income split between spouses, one whom may not even set foot on the farm.

The research unit in using MAF figures adds to the confusion.

Income $750,000
Expenses $529,000
Interest and depreciation $235,000
Loss $6,300

Right first question (apart from a link to more detailed statistics) is how did that farmer service the capital repayments on the loan that required $235,000 odd of interest (less depreciation)? Even if $150,000 relates to interest at say 7% interest rate the principal owed is $2.1 million.

What kind of bank would lend a non-farmer the sort of money required here with projections like this? That is $2.1 million if the business was making losses of $6,300 per annum? Can a PAYE earner on even $221,000 (750k-529k) per annum go to a bank and lend $2.1 million? Not according to the National Bank calculator the maximum they can borrow even for a house is $1.7 million. How much tax does a person on $221,000 make under a PAYE system? A whole load more than a farmer by the sounds of it.

The key is that farmers have been borrowing money at a much higher rate than they can handle for a few years now. Most of it borrowed from overseas banks. This overleveraging is entirely tax deductible. The vicious cycle remains, price of land increases, leveraging increases, taxes decrease. Farmers are becoming rich by selling land to each other. More deductions, tax free capital gains.

What makes farming different to any other business is that it revolves around land. A normal SME may have a building but they are more likely to lease premises than own them. If they do quite often the land and buildings is of greater value than the actual productive business on it. The lending that banks are making is on the assumption that land prices will keep increasing. The payout statistics are too volatile.

Head banker Allan Bollard has called time on this sort of lending calling banks "lucky" that the drought ridden season of riches was upon them.

John Key under questioning today in the House stood up and said that New Zealand did have a capital gains regime for land. He is of course correct. However he then said if land was bought to make a profit if would be taxed. Given that the act of farming itself on the land often does not return profits, the commercial rationale for buying a farm can only be put down to its capital gains. That's the problem with the lobbyists arguing farmers are in the poor house.

According to statistics there is currently $47 billion of wider agricultural debt, 2/3rds on dairy. That's $47 billion of lending that is being made to an industry that farmers wish us to believe often actually makes no taxable returns. How good is this as a business model?

I can see why the pinkos if consistent with their line that everyone should be paying their share of taxes, are getting upset.

I just wish that the National Party would get as upset as they did today defending farmers when they are asked about taxes on other industries, SMEs and PAYE earners in New Zealand.

Almost Not A Tory Banks

John Banks has announced he is going for ACT's nomination in Epsom. I have blogged by thoughts previously on Banks fitting in with ACT so it is a moot point revisiting my concerns. Lets move on from that because no one can convince me for example Tau Henare belongs in the National Party, Nick Smith doesn't belong in the Greens, Simon Power isn't a creation from a Labour Party fetus. Or Georgina Te Heuheu ever was blue.



Don Brash resigned from the National Party and made an advertisement out of doing so. He did this a wee bit late, but better late than never.

So first step would be Banksy resigning from National.

Today we get this piss weak wording

He said he would not be renewing his 38-year membership of the National party because neither party allows dual membership.

This is not good enough Banksy. Show some balls and issue your own Dear John letter, From John. Resign from the National Party and tell us why you are standing for ACT.

There are many ACT members and voters still hesitant on how John Banks fits in with ACT. We want to hear what you are all about in the year 2011. Who knows? You may convince a few people.

Banks could start instead of acting all slutty and hedging his bets for a return to National if ACT reject him, stand up and front foot it. Resign officially from your beloved Tories and commit to ACT.

A day late is better than not at all.

Awesome New Columnists - Shelley Bridgeman

Granny Herald have AMPED up their column drawer lately. The addition of the year has to be Shelley Bridgeman who is abso-frickin-lutely arousing the sad arse likes of someone I defriended on Facebook for accusing me of trolling when I compared his hatred for Shelley with Tapu Misa.

Then there is Bomber Bradbury, you know Bomber of the "David Farrar shouldn't have a column in the Herald", the same Bomber who with his own media profile still has less readers of his Manaless Party love-fest of a blog than Whaleoil, Farrar or myself. The same Bomber who has singlehandedly abused every mainstream well-paying commercial radio and television production company that is likely to ever employ him in New Zealand. So much so that he's now spending his time working for Wintec in Hamilton.

Yes Bomber, Farrar has a Herald column because he is better at it than you and despite an entire working life time in the media that you have, more people respect Farrar's political views than your own illogical rants.

Shelley Bridgeman on the other hand basically comes from the perspective that child welfare laws are to regulate stupid poor people and those of us smart enough and rich enough to behave appropriately should be left well and good alone.

The first classic I read that I will title "Poor people are too stupid so need laws" drew so much abuse that the Granny had to close off comments. It upset Dumb Post so much he created a shit-storm about it.

This one about fat activism, she took the sympathetic viewpoint that obese people are discriminated against, which naturally brought out the haters.

Then Shelley hated out on dog owners. Quite right as well. Here is something most of the readers won't be doing "I've been power walking along a Coromandel beach" Yeah that's right benny fatties - Shelley isn't poor and with it fat like you all are.

She goes to the movies alone. Because as I previously opined, unless you enjoy giving hand jobs or reaching across with your tongue pretending to be asleep on a man's lap, there is NO advantage going to the movies with someone else because, guess what, you can't speak!

Rather than employ some writer who has converted to mumsy and wants to tell everyone about how fabulous it is, or writing like Metro for the poor , Ponsonby liberal and needy, Shelley has been employed to upset the simple. She's going to do it because she obviously isn't struggling, doesn't need welfare and doesn't mind writing like a well dressed, thin, rich c***.

"A few years ago I was laid up for three days in a Wanaka hotel after spraining my ankle at Treble Cone ski-field".

Awesome.

Yes Shelley is upsetting the "column classes". You know those who think you have to have constant meaning and purpose excreted in writing a column? Usually the column classes are those who in the media rely on the few hundred a week you can pull for creating a cult of yourself. And hate on anyone they think is inferior to them because Dear God they may actually incite people into thinking and responding.

Go Shelley Bridgeman and one point (back) for the Granny Editor for daring to be different.

Update: Shelley now has her own Facebook fan page "Shelley Bridgeman Awareness Society"

Dear Don - John Responds

Sent to me on the "tipline". Allegedly stolen from John Key's computer. The letter is in response to this Dear John letter.

Note - Blogger seems to be having issues with scribd as well...hit on Dear Don to view the fullscreen.

Dear Don

Hotchin Spam Journalism - Duncan Bridgeman

The first victim of my spam reporting award goes to the NBR's Duncan Bridgeman for this piece. It is conveniently behind the paywall so you cannot read it but I will assist you. I understand the paywall is copyright but the article is such nonsense I will reproduce offending parts for re-educational purposes and will note once the NBR have corrected it for these and no doubt other errors from interviewing google at their desk to find links from the air.

I like the NBR, they are sponsoring our VRWC Veuve piss-up so I do not wish for them to receive legal papers like the tight-bastards at Granny did. They may wish to send the article back to their own legal team to review.

Here is my comment:

Huge Wins For Hotchin

A top ten at 10pm round-up of points of Winkelmann J's judgment (because I know people don't read all of an article):

1. She has already thawed possibly up to $5 million in assets to repay the Inland Revenue Department. This was at the Financial Market Authority's (FMA)'s agreement as they wish to avoid Hotchin becoming bankrupt. We do not know what those assets were that have been liquidated.

2. There are a questionable amount of net assets left in the freeze order if a $3-5 million IRD debt was a real risk of Hotchin becoming bankrupt. Evidence was accepted by Winkelmann that Hotchin prior to the December freeze had sold his family home to repay creditors. The Well may be dry. We are yet to see Hotchin's affidavit submitted to the Court of his assets and liabilities. And are unlikely to anytime soon. Any media reports of the estimates of this wealth are purely speculative based around the $30 million guesstimate of the cost of the Paritai Drive house. The extent of the leveraging is unknown.

3. In relation to the corporate trustee companies KA3 and KA4 the order as it stands is revoked against them, and Thomas the fourth defendant has been struck from proceedings entirely. This is a significant change to the freeze order, the trusts (ie. trustees) have had the order revoked against them. The trustees cannot make payments to Hotchin or people on his behalf but would be unlikely to at this juncture. If Hotchin is not a beneficiary of those trusts he cannot receive payments anyway so the point is moot.

4. The only specific trust related assets remaining under the order as of now are a yet to be fully described interest of questionable value in part of the Paritai Drive house and around $100k owed from one of the trusts to Hotchin.

5. The FMA do not have enough evidence as of yet to argue sham trusts. They tried. They will be stretching this out to keep trying.

6. The FMA lost on matters of further disclosure relating to a long list of other companies Hotchin allegedly has interest in.

7. Hotchin has complied with all relevant disclosures on a timely basis and Winkelmann chucked out an argument he had not, stating specifically he replied four days after a lengthy list for information.

8. She has given the FMA a large hurry up to report back progress to her on their investigation by 20 May.

9. The FMA can replead vis-a-vis the trustee and trust assets position and the order should there be new evidence. But they have been all along since December arguing sham and she knocked them back and there is significant discussion in the judgment that they will have to do better to change the current status that the order against those assets is revoked.

10. Winkelmann J. has stated the freeze matter is not a "mini-trial".

Now in details

As reported yesterday, such are the wide powers of the reliant sections of the Securities Act, anything other than the maintenance of the original freeze order placed by Winkelmann J. in its original form would be a slap for the Securities Commission and a huge win for Mark Hotchin and parties named in the original freeze. I will examine precisely what these wins for Hotchin were. The judgment itself is suppressed in parts so large probably very useful chunks have been removed.

The initial headlines in the mainstream media the NBR, Stuff and Herald have been appalling. All have reported the freeze order has remained with screeching simplistic headlines:

"Mark Hotchin's Assets To Remain Frozen",
"Hotchin's assets remain frozen", and
Mark Hotchin Asset Freeze Remains.

Bernard Hickey doesn't work afternoons. I couldn't see anything timely but assume he will come up with something better than the MSM effort today. I guess I am impatient but with a public holiday here today I've worked on actually reading the judgment and preparing this piece. The least the media could do is read the summary of the judgment or the release from the Courts to see what it actually says rather than misinforming the public in lazy headlines.

I contacted a politically aware friend of mine as a dummy test of general public reaction. She had only read the headlines and was happy the order remained because she hates Hotchin with some sort of purile vengeance, considering she never lost a cent herself. When I told her what the truth actually was, her reaction was unpublishable even on my blog, as it may be from the public when they realise what has actually happened.

In essence the headlines and even the initial reports tell a very small part of the judgment of Winkelmann J's. Remembering again the powers in the Act are so wide there is no way that at this stage Winkelmann J. was actually going to throw the whole thing out before the completion of the FMA investigation. She discusses these massive powers throughout the judgment. But is specific to note that the interim order is not intended to be a "mini-trial".



Excuse the length here but my own market research suggests people like cut and pastes of the document not a scribd with references back and the whole issue cries out for some analysis of the actual judgment rather a five second dip at the press releases.

1. Quantum of assets and previous thawing

The Financial Market Authority (FMA) consented to Hotchin having assets released from the original order to have an IRD debt paid of some reports say $5 million (we don't know the exact number as the details are suppressed). This is a new public development and I believe a potentially very significant one.

One clue I guess on the indebtedness of Hotchin is this, that Winkelmann has reported in her judgment as her own words and not that of Hotchin, in describing recent sales that led the FMA to slapping the freeze order on.



Selling a family home to pay existing creditors and expenses when the IRD debt remained outstanding isn't a good sign of a mass of riches beneath is it? Remember the way this is worded, Winkelmann J. has accepted this evidence and is stating it herself.



The FMA does not want Hotchin bankrupted else it makes a freeze order on his assets irrelevant. I do argue though that if not paying the IRD seriously exposed him to proceedings and bankruptcy, then it says to me there is stuff all worth in the remaining net assets for at least a $3 million - $5 million exposure to accumulate to bankruptcy. There is something not quite right there if his other assets can cover this debt.

There is a question remaining - how many of those personal assets have already been sold to pay the IRD debt? The glamour assets mentioned by the media that Hotchin tried to take to Australia - the cars, the boats and the smaller stuff is the most obviously easily liquidated. I have always wondered why a man supposedly with a $30 million house had only a $200k several year old Mercedes? And his wife drove a reasonably modest $90k Cayenne. More glam than Hubbard's VW sure but for Auckland those vehicle choices are quite middle of the road.

2. The FMA sham and conduct

In what looks like a continuation of the scatter-gun approach of adding as many parties as possible to the order and then taking them on a fishing expedition, the FMA argued in February that the Trusts were sham but you know? We don't have enough evidence to prove it and all:



They then apparently did file an amended statement of claim. Which Winkelmann J. has again knocked back



She has also here discussed the sham argument and in a nice judicial way with the words "I was not able to follow the Authority's argument. It appeared to shift and change through the course of exchanges with counsel". A very polite way of saying "you are making **** up as you go along". She then schooled them and sent them back to the corner.




Winkelmann then chucked out the existing freeze order applying to KA3 Trustee Limited and KA4 Trustee Limited and has told the FMA they have to replead. In other words - sharpen up their act.

She also removed Tony Thomas the individual on the order and fourth defendant.

This in effect means that the only (net) assets left in the order are Mark Hotchin's assets that are legally in his own name, a lazy hundred grand owed from the trust, and an undescribed perhaps even constructive leasehold interest in the Paratai Drive property. Which is precisely how it should have been to start with. We do not have a released affidavit or statement of the assets and their worth under the original order. We do not have same for the trusts that the trustees are responsible for. This is a win for Hotchin and a blow to the FMA who will now have to go back to the drawing board and construct a new pleading with respect to the trustees and the trust assets.

Another slap Winkelmann J. delivered to the FMA is here. She hits them for drawing false conclusions from evidence. For a Judge to even mention this against an investigative authority is material. Remembering she states this is not a mini-trial, yet she is knocking the FMA pins over like it is.




3. Timeline

In relation to the December freeze, the FMA stated a timeline of concluding investigations by the end of 2010 and filing of any proceedings in "early 2011". First quarter is early, May is not early.



Winkelmann J. has given the FMA a hurry up that on 20 May they have to report back to her. In doing so she has reminded the FMA that the orders are interim only. It is fair to say that Ma'am is getting a little impatient. She's awfully busy with the Urewera terrorists as well one assumes.



4. Potential exposure for Hotchin



This is discussed by the FMA in the judgment as well as the Allied sale agreement which there are concessions towards. Remember we are not talking all the $500 million of investors funds here, they are tagging Hotchin for the specific deposits in the period they are investigating which is around $30 million. The FMA are not taking this action against any other director either, just Hotchin. This point was argued, as in why just Hotchin is being targeted by this order and not the other directors. They are all potentially as liable in relation to any potential civil claim as he is. Remember this freeze order does not relate to anything to do with the criminal investigation or the dividend payments, just the prospectus and marketing in a very specific timeframe.

Hotchin has specific defences to these charges and these were discussed.





With the amount of money Hanover spent on legal fees, auditors, accountants and experts it would be safe to assume the defence here for not just Hotchin but all directors may be reasonably solid (pending the sort of stupid emails floating around in some finance companies as of late incriminating themselves for not following advice). Also proving causation and reliance of any untrue statements is again difficult.

5. Scope of assets - The Trusts

Winkelmann J. discusses this at reasonable lengths with some details suppressed and the reasons she has not excluded the alleged interest of Hotchin's personally in the Paritai house and an advance from the order.






Valuing this lease or otherwise interest is going to be a nightmare. For an unfinished house that in current market conditions would be difficult to sell it does make you wonder if keeping the house in the assets that remain frozen is actually relevant. Disposing of the interest currently would be nigh on impossible anyway. In any instance it was never put in writing as the house suffered financing issues and wasn't completed.

Winkelmann J. concedes that family trusts have transactions applicable outside commercial arms length basis' and this alone does not mean anything. Of course straight away Tim Hunter has jumped in and selectively quoted

A complex ownership structure "outside commercial norms'' obscured the relationship between failed financier Mark Hotchin and a huge luxury mansion he had constructed at Auckland's Paritai Drive.

In doing so he's missed all the surrounding discussion of Winkelmann's relating to it. In reality she's kept it in there as the financing (as you may expect of such a large property) is complex and it was not finished due to finance issues. The interest Hotchin has in the house right now from what we can tell is a new class of interest in my view, I describe it as verbal contingent leasehold.

Winklemann also has discussed control in the judgment and why the trusts are outside the current scope of the freeze order. Remember again in all other ways the section of the Act relating to the freeze are very widely drafted, yet KA3 & KA4 Trustee Limited fall outside it now.




So in summary this interest in the Paritai Drive property and a $100k advance owed from a trust to Hotchin are all that remain in the freeze order outside of assets in the personal name of Hotchin.



6. HUtuists

Hanover Utuists will be beside themselves with rage at this logical piece of compassion by Winkelmann describing the order in this instance as "harsh" and "unnecessarily intrusive" to allow Hotchin his furnishings and personal items back. I can hear the cries now that those on their own will be worth more than the average family home in New Zealand.



Even though a small percentage of the total in question under investigation, Hotchin has had a win here over those who wish to have the FMA take everything. In a bankruptcy you can only keep a smallish amount of personal effects, anything large or valuable may have to be given to creditors on application.

7. Further disclosure from Hotchin

The FMA also wanted as part of their fishing expedition further disclosure from Hotchin and the trustees. Winkelmann J. panned them on this as well.



The FMA wanted more information from Tony Thomas about companies outside the order that were not joined as parties. That too was given a wide hand and Winkelmann J. called the FMA's approach "procedurally flawed"




Conclusion

Any HUtuists who believe that the civil proceedings route will be a) easy, b) quick or c) lucrative, are dreaming. If the complexity of the freeze order proceedings are anything to go by and this is not a mini-trial as Winkelmann J. has claimed, then their Road to Damascus to realising there may not be a pot of gold left at the end of the rainbow is going to be a bumpy ride. Remember Hotchin can also throw his legal fees in and claim them first as part of his net position and he should be creating a large liability right now. Everyday therefore this drags on the costs are going to increase for him and every witness and expert he calls in is even if the claimants are successful, will be deducted from their proceeds.

In terms of the asset protection industry, Hotchin moved to what we call Red Alert status in or even slightly before 2008 if media reports are anything to go by. His affairs haven't been his own for years. The reason being is that as witnessed in my #1 - he is technically broke and the FMA know that, they threw him their own bone in allowing him to pay off his IRD debt, they've given him his household effects he may not have got back even in a bankruptcy. The trust assets are now safe from the freeze, the FMA have been slapped around in this judgment, they can't have details of a broader class of Hotchin "related" companies and the FMA are going to have to go away and think about how to replead again that they should be included. I think that in the circumstance of the stook he is still potentially in - is a very large win.

Prediction: The FMA are now going to report back to Winkelmann J. on her timeline of 20th May and ask for more time. It is reasonable clear this may stretch out a llllloooooong time. In return she is squeezing them to have made significant progress to justify maintaining the interim order on Hotchin's personal assets and given them a prod that they need to replead against the trust assets.

A Rare Endorsement

Adolf highlights some good reasons why

Winkelmann J. Has Unfrozen At Least Off Her Seat

On Thursday I posted this.

In what I am sure is a miraculous act of coincidence later the following day on Friday apparently Justice Winkelmann unfroze herself at least from her bench and released her ruling to the parties but completely suppressed it to the media and public.

Last Friday, the Financial Markets Authority (FMA), the former Securities Commission, confirmed the judgment of Helen Winkelmann had been released but would remain under an "embargoed" until further notice.

What does this mean?

It could mean absolutely anything.

However so integral is the freeze order to the positioning of the Securities Commission investigation I would suspect the suppression may remain. It is probably not in all interests (Hotchin's, the trustees or the Securities Commission's) to have the details in the public domain at this stage.

Whatever the contents of the actual judgment it is unlikely to reveal much either way because the powers to freeze assets are so very wide.

Basically due to the immense public pressure and trial-by-everyone that finance companies have become accustomed to, the release of any of the assets currently under the order would be deemed a large win for Hotchin and a slap in the face for the Securities Commission because of the broadness of the freeze power.

Remembering again the freeze order powers are very wide and pertain to not just actual but anticipated or potential legal action. The complexity of the whole structure of any finance company widens this net even further.

To keep the freeze precisely as it stood on Thursday would be a signal to Hotchin that he is in serious stoock.

At this preliminary stage Winkelmann cannot say anything in the judgment to prejudice any future litigation for either side. If released however it will give us a better idea of the size of any future civil action and specifically what it may relate to and what time period.

Jenni McManus, who has been writing longer than I've been born and is more cunning than a sack of rats, seems to allude to there being a connection between the legal action against the Herald and the decision, I guess meaning there is a lifting of the freeze order to pay the legal bills, but that seems purely speculation given the timing.

Winkelmann's decision comes just days after Hotchin hired top defamation lawyer Julian Miles QC to sue The New Zealand Herald and business columnist Brian Gaynor for a series of stories published during the past two-and-a-half years

Prediction - I won't do a Bernard Hickey on house prices.

I will just admit I haven't got a bloody clue as to the result of what has been suppressed. And that is the honest punters guess as well.

Can Winkelmann Warm Up For Winter?

It's been yet another month in the lifetime of Justice Helen Winkelmann. Still no action with respect to the lifting or otherwise of the freeze order on the alleged assets of Mark Hotchin. We are now entering the SIXTH month of this ridiculous freeze scenario.



As I have previously blogged the whole scenario has become farcical. One assumes (and only can as the entire case details have been suppressed) that Mark Hotchin has next to no assets in his own name and the SFO and Securities Commission are now madly running around trying to find something, anything to pin their hat on to justify the order. An investigation that was meant to be done by Christmas is just dragging on and on.

Here is what the Kiwis First website has to say on the mysterious Justice Winkelmann :

Called "the most virtuous girl in the b(r)othel" by one well-placed lawyer because of her willingness to take honourable stances in support of the rule of law in cases which threaten the absolute authority of the parochial NZ judge communty. This has, in the past, distinguished Justice Winkelmann from most of her judicial colleagues who have no reservation in contravening the rule of law to suit personal financial interests and objectives. However, in the last two years, Winkelmann J has demonstrated a worrisome tendency toward unduly protecting the Crown and powerful interests from legal accountability in secret.

Of most concern are the comments in bold.

As I have previously opined, freezing Mark Hotchin's alleged assets are entirely counter-productive. If the freeze was lifted (or never put on in the first place) it would assist the SFO and Securities Commission in tagging just where these assets would go. The Crown has actually shot itself in the foot with a golden opportunity to let Hotchin slip up and taint the separation of trustee and settlor.

Is there really "one law for all" when Mark Hotchin can have delay in a decision about his assets for now six whole months, when those allegedly poorer than him, involved in actual criminal activity (not just allegations), are free to have their assets while under investigation?

The asset freeze I contest is unnecessary because (and I hang my hat on this as a professional in the offshore industry) even someone of my level in the offshore industry (less than 10 years experience) could trace where the assets would end up. Assets such as real estate and money leave large imprints in the financial system. They don't just disappear. If you have access to the sort of information and tracing capabilites that the SFO does then it is certain that they can trace successfully where these assets would end up and therefore provide more proof for any case against Hotchin. When googled and the name Hotchin comes up you can see he is under potential criminal investigation in New Zealand by authorities. He would not be able to open bank accounts for a company where he was a beneficial owner, or trusts where he was a settlor. As an offshore professional you could not participate in transferring his assets into a traditional offshore "haven". There are laws preventing you when the client is under investigation sanctioned by the local regulators. All of whom are strict enough to take your license away immediately.

The problem is that there is only one answer that you can assume from the delay - and that is Hotchin's alleged assets that they wish to pin to Hanover are tied up in trust. Legally acceptable trusts. Long established family trusts set up with independent trustees that have acted for decades before Hanover to invest in assets and profit in their own name. Then they re-invest those profits in more assets. Rather like a farmer who set a trust up and gifted in other time the asset. When the farm is sold the trust holds all the funds from the sale of the asset and then buys a larger farm. All perfectly legal but instead of say a $500,000 asset that was gifted so not fully settled, over time it may be a $5 million asset locked away all in the name of the trustee of the trust.

Rob Stock has recently opined that there is a mood shifting against family trusts.

What ballocks! If there is a mood shift against them then I ask WHY do so many New Zealanders have them? An estimate by Stock stated that there may be 400,000 trusts in New Zealand, even if there are only say on average 3 beneficiaries in each trust that is 1.2 million New Zealanders are capable of benefiting from them (not including of course Maori trusts whereby there are literally tens of thousands of beneficiaries).

There are at least 237,500 trusts, as this is the number of tax returns filed by trusts with Inland Revenue in 2008. That number increased from 145,900 in 2001. The most cautious assessment is that there is one trust for every 18 people in New Zealand while some put the total number as high as 400,000.

And Politicians, as Rob himself found out why trusts will endure:

A few months back, however, I went through the parliamentary interest register, and found 72% of MPs had a beneficial interest in one or more trusts. With so many members of parliament having interests in trusts (yourself excluded), it is perhaps hard to imagine much will change.

And now Craig Stobo of the International Funds Services Development Group has came out today and said that the direction of the country needs to be one where New Zealand has friendlier rules towards finance hubs. And changing of tax laws in New Zealand to accommodate such. One feature of current laws are New Zealand's already existing Foreign Trust laws that allow foreign settlors to use the New Zealand jurisdiction for their trust structuring. The trend is still very much in favour of trusts and you cannot encourage them for foreigners while trying to over-turn their legal nature for New Zealand residents. New Zealand is considering more leniency towards structures to minimise taxation, not less leniency.

Justice Winkelmann in keeping this freeze order on and not questioning the Securities Commission as to why the hell their investigations are taking so long, is making an even further mockery of the situation.

I wonder if Hotchin's trustees should not just exclude him as a discretionary or fixed beneficiary, replace him as trustee (if he holds any position on such) and then apply back to Winkelmann that indeed he has no further legal or equitable interest in those trusts at all and therefore they should be released from the personal order?

Outrageous behaviour? If so then it is the same that I would estimate some 1.2 million New Zealanders are capable of doing themselves. Most with far less established family trusts, and plenty of those with sham based trustee arrangements and poorly drafted deeds from provincial lawyers or basic precedent sold deeds that are not tailored for their specific circumstances.

In offshore trust drafting it is quite common to exclude a person from benefiting the moment legal action is even contemplated against them and you can draft the trust deed accordingly.

It leaves me with one question that I am trying now to obtain the answer to - how many of the larger Hanover investors were in fact trustees of family trusts? That is, with exactly the same asset protection and legal rights that attach to assets that Winkelmann has frozen under the Hotchin freeze order? Which negates of course their whinging that Hotchin has done anything that they themselves haven't done. How many of the larger Hanover investors were also using company structures?

In any instance the judiciary needs to come out one way or another soon. Lifting the freeze order would implore the Securities Commission and SFO to indeed hurry up with their investigations.

The enduring nature of this freeze order is sending a very bad signal to the maxim that justice delayed is justice denied.

For all concerned.

Brash Passes First Test

Brash v Harawira. Sickly white liberals screamed all day as to why he was engaging Hone Harawira in debate. You know because evil prospers when good men do nothing.....

Here is why. Brash - logical, reasoned, educated and non-abusive. Harawira - titchy, on edge, ready to "kill-a-whitey", rampant, rude, mentioned Jewish people in pathetic comparison to what Maori have been handed, the Klan, said "bloody" in swearing twice, mentioned "rich pricks" once.

Brash retains composure and shows Hone up for the racist, uneducated, boarish, halfwit he is.

Win to Brash.

Kelvin Davis - please stand against him.

Labour Billboard Competition

I think a prize is in order.

Hone Denigrates Jews

Hone Harawira has fired the first shots, and Brash has smashed him in the gonads back. Good.

Hone Harawira likes to compare Brash to Hitler. And he did again this weekend.

Well if Hone was here where I am today and toured the site I did, he would shut the fuck up very quickly. I am in Berlin. Which is a lovely city, perhaps the nicest I've been to in terms of greenery, parks, landscaping and historic monuments. It is an interesting place because of its history and more importantly the nice Capitalist enclave it has become thanks to liberating it. I've spent too much time sightseeing and not enough shopping.

Today I visited Sachsenhausen. Said to be the model concentration camp.

Yesterday, on the anniversary of Hitler's suicide I was given a tour of the Nazi sites of Berlin. Including the Führerbunker site.

Comparing anyone to Hitler denigrates what Jewish people suffered under Hitler's regime. Not to mention homosexuals, gypsies and the disabled. Harawira comparing Brash to Hitler is a disgrace and racist. Maori haven't suffered under any regime even a 1,000,000th of what went on here.

Nothing as bad as what went on here has and will ever happen to Maori. If Hone Harawira was ever sent here (or skipped the day like he did in Paris to go sightseeing) and claimed Maori have it bad, he would be set upon by the Jewish community. Good job again.

............Some pictures to focus the mind of Hone that I took while there.....

Prisoner complaints about double-bunking? Try three to a 70cm bunk and triple bunking. Getting to that top bunk after 10 hours a day of manual labour would have been enough punishment on its own.



Washrooms where prisoners drowned if they fell into the water as they were too weak to stand




Murals produced by kitchen worker prisoners in jail to portray the "mana de-enhancement" they went through




The medical experiment room where prisoners were experimented on for curiosity and research in battle



If Hone wants to play race politics it will only mean one result - a victory for Brash. Because Brash is smarter.

Labour need to stand Kelvin Davis in the by-election, the Maori Party and National should agree not to stand a candidate and support Kelvin and give him at least a chance to take out Hone. Davis has to stand because if he doesn't he has conceded the seat in November already.

Here is a classic example of the quality of person that Hone represents:

Rotorua resident RangiMarie Bosma said she registered because Harawira was willing to challenge the government for change.

"We just want to be housed, clothed, fed, basically looked after. That's what we're fighting for.

In other words - bludgers who again want representation without paying any net taxation. All in the name of a broad church of left-wing hate speech against those who work harder and use their opportunities in life better than they have.