Hanover investors move to help Mark Hotchin

"Building a vast mansion even as the company you operate is collapsing all
around you... well, that could happen to anyone."

Investors in Hanover Finance have moved quickly to help the company's former head, Mark Hotchin, after a Herald on Sunday story revealed that he was struggling in poverty in Australia.

Pakeha Abuse Is The Problem

Mark Hotchin, Pakeha

It is a blight on our nation, a nation regularly regarded as one of the best places in the world to live if you are elderly. It remains our national disgrace, and continues to haunt us as the years pass by. The sudden financial loss to the elderly at the hands of Pakeha-run finance companies.

Like all sensible New Zealanders I regard elder abuse in this country to be an overwhelmingly Pakeha disease. The financial statistics prove as much, as do the photos of the company directors and promoters who have wronged them. Their names are etched into our collective consciousness: Mark Bryers, Rod Petricevic, Eric Watson, Allan Hubbard, and now Mark Hotchin.

And those are just the names we recall. For every name we remember there are half a dozen others, and they are overwhelmingly white. When you consider the legions of the retired or semi-retired who have lost their livelihoods to these monsters, it is little wonder that every Pakeha should now be regarded with suspicion.

But the official response is always more handwringing. Successive financial reforms have been weak-kneed and have achieved nothing beyond vast fees for the mostly Pakeha consultants, advisers and lawyers who have devised them. The epidemic of investment failures continues. When we hear of a finance company collapse we will guess the ethnicity of those responsible. Four times out of five we are right.

In the case of Mark Hotchin the story has affected me personally. Because I too might have put money into Hanover Finance, if it wasn’t for the fact that I never would have. So when I hear of the shocking tales of retirement incomes lost I sigh and think “there but for the grace of God...”

In response to the tragedy I have decided to post a picture of Mr Hotchin on my site. I “borrowed” it from the Stuff website, but frankly it doesn’t do justice to the callousness of this particular Pakeha. I already anticipate objections to the posting of this photo (i.e. I don’t own the copyright or have a licence from the copyright owner), but the real reason why people will feel so uncomfortable with the photo is that it reminds us of an inconvenient fact: Mark Hotchin is white.

But for that I make no apology. Why do we continue to pretend that race is irrelevant, when it must be? Look at the numbers and tell me there isn’t a problem with Pakeha financial abuse.

So enough of this conservative bullshit that says the markets must be deregulated so that capital can go where it likes. The handwringers and the financial regulators have all failed us, so don’t listen to what they have to say. Just remember to walk away if the face of the person who wants to take your money is white

Some Good News For Hanover Finance Victims

I'm pleased that the assets of Mark Hotchin have been frozen.

The actions of the Securities Commission to freeze Hotchin's assets do not mean he is guilty of any offence - he hasn't even been charged with anything. However, it does mean there may be some assets available should Hotchin be charged and found guilty of found liable in any civil action under the Securities Act offences. (edit made to correct my stuffup)

Even though I have to regard Hotchin as innocent of any crimes until proven otherwise, I can still be quietly pleased at the news. His behaviour in commencing construction of a vast mansion while the victims of Hanover Finance suffered is about as extreme an example of hubris as one can get.

I'm not hopeful that Hotchin will suffer impecuniousity as a result of his actions, because he probably has assets stashed away overseas, and I would not be surprised to learn that much of his wealth is secreted away in trusts that can't be touched. Still, this is a good day for the victims of his finance company.

Four Bastards

Four new inductees into the Imperator Fish Hall of Shame

The Herald on Sunday reports:

A blonde model was having a relationship with disgraced Bridgecorp boss Rod Petricevic when he allegedly signed off more than $1 million in "dishonest" payments to her, according to investigators.

Janita Wright received $1.12m for claimed data entry, marketing and consultancy work from her former companion's finance company.

However, a Government investigation failed to find evidence of work Wright had invoiced for, and said the call centre she operated for Bridgecorp had little traffic.

"Any call centre activity would have been in the weekend only and only minimal, with an average of 5 calls per weekend," the Ministry of Economic Development (MED) report said.

So what was she being paid for?

Wright told the Dominion Post this week the money from Bridgecorp was fairly earned: "I worked my butt off for that company, seven days a week."

And I think we can all guess what she was paid to do.

Just another reason why the person who punched Rod Petricevic outside a restaurant a few months back ought to be inducted into the Order of New Zealand.

The sooner we find a reason to put the man in jail the better.

 ******

Meanwhile, it turns out that Mark Bryer's pledge to set up a scheme to compensate Blue Chip investors has about as much chance of paying out as a bet on the All Whites to win the World Cup.


Despite being bankrupt, he's got access to money and assets - the Herald reports the bastard drives a  late-model Peugeot, earns $144,000 a year and lives in a $2.5 million apartment. Which makes a mockery of his claim to be sorry for the losses his actions caused. Actions speak louder than words.

But he apparently owes $235 million to creditors, so there's no chance of a payout to investors.

If you lost money in Blue Chip, don't expect Mr Bryers to come knocking on your door with a cheque. In fact, if he does comes knocking, set the dogs on him.

******

Eric Watson is another who seems to enjoy living the high life on other peoples' money. His henchman Mark Hotchin has borne most of the flak from the Hanover fallout, but Watson is just as culpable. The only difference is that Hotchin's hubris has outshone Watson's.

But Watson's no stranger to business failure either. And yet another company he co-owns is now in trouble.

I can't stand Russell Crowe, because he's an overrated buffoon (Australia, he's all yours), but the finest thing he ever did was give Watson a smack.

******

All this means I have new four people to add to my Hall of Shame. I know, why so many? But I've not been taking care of business, so thought I ought to dump a whole pile of complete bastards in to catch up. These guys should all have been in months ago.

Send The Lot Of Them To Oz

So Mark Bryers only got a slap on the hand. I can understand the outrage, but the offences he was charged with were relatively minor ones. That doesn't mean Bryers is a saint. In fact the SFO are still looking into the collapse of Blue Chip, and there may be more pain to come for Bryers.  But the fact he received what seems like a light sentence probably isn't the fault of the court. Only one of the charges before the court was punishable by jail.

Still, Bryer's lawyer's argument against any form of community service was a brave one:

Bryers had wanted his offending dealt with by way of fine only. His lawyer, Aaron Lloyd, referred to a letter from Bryers' employer noting that the hassle of their employee having to return from his Sydney home to do community service in New Zealand might make it not worth employing him.

His employer is Northern Crest Ltd, previously named Blue Chip Financial Solutions, the sole remaining remnant of the Blue Chip group. It is now run by Australians with the assistance of Bryers, acting as a consultant.

It's most likely that Bryers is still in charge, or at least highly influential, behind the scenes of Northern Crest, so he's essentially employing himself. I think he can probably sort leave out with his boss.

His claim to own only the clothes on his back and a set of golf clubs is also looking shaky:

Bryers is paid up to $144,000 a year ($10,000 to $12,000 a month). That information is contained in a probation report examining Bryers' ability to pay a fine.

The only positive in this story is that he's living in Australia, not here. In fact, that's a compelling reason to be done with the community service and just ban him from returning here. Because I may have found a path to achieving one of our nation's economic goals.

If we deport all the finance and property company shysters, clowns and rogues to Australian (Bryers, Hotchin, Petricevic et al), and don't allow them to return, we'll have closed the income gap with Australia in no time.

Hotchin's Hurt Feelings Trump Hanover Investor Losses

Finally some common sense:

A broadcaster is defending Hanover co-founder Mark Hotchin, describing the businessman as a victim of tall-poppy syndrome.

On Newstalk ZB's breakfast show yesterday, host Mike Hosking said Mr Hotchin was being unfairly hounded by media.

He was not a criminal and had apologised for his company's failure.

"What's his crime? There isn't one ... he's not charged, he's not in court, he's not in jail," he said.
 
"What he did was make some bad decisions, borrow too much, gear too highly, and the company fell over."

Hanover, co-founded by Mr Hotchin and Eric Watson, left more than 16,000 investors out of pocket when it froze $554 million worth of assets.

Hosking is absolutely right. When you consider the losses Hanover's investors have suffered, they pale in comparison to Hotchin's troubles. How would you like it if your $4000 a night luxury getaway kept being interrupted by journalists?

People forget how sorry Hotchin feels about what happened. Some people say his $30 million palace on Paratai Drive is an obscenity, is in bad taste, and shows awful timing. They say that if he truly gave a damn about the people who lost their money due to mismanagement by Hanover's directors, he would have built something slightly less extravagant. Or canned the building project and given the money to the people who lost their retirement savings.

But then those people don't appreciate that Hotchin deserves this grandiose home. A man who has contributed so much to the incomes of lawyers, receivers, and forensic accountants around the country deserves some reward. And as John Key tells us, rich people are better than us, and their needs are greater.

Mike Hosking points out that Hotchin's actions were not illegal, therefore they cannot be morally wrong, because any harm done to investors has been rectified with a heartfelt apology. And you know Hotchin's sincere, because he's toned down his house plans. He had planned to install a huge fountain gushing Chateau Lafite Rothschild onto the lawn (apparently the plants love the stuff). Now he's had to scale back and use Penfold's Grange instead.

And what reason do you have to question your betters anyway? I mean, look at you. Frankly, you're a fairly shabby specimen of humanity, and I certainly wouldn't have you as a member of my golf club. If you think that's unkind, take a look at yourself. You're sitting alone at your computer, either hiding from your partner (assumng you've ever been in a relationship with another person - and online doesn't count), or trying to avoid work. You're nothing. People like Mark Hotchin provide inspiration for us. We can all dream of spending months on a Hawaiian beach, pondering the challenges of building a mansion in the finest part of Auckland, and wondering which leisure activity to indulge in next. But for most of us it will only ever be a dream. You in particular will never achieve any of these things (look at you!), so why not pretend to be someone else for a while?

That's why Hosking is right. We need the Mark Hotchins, the Eric Watsons, the Mark Bryers and Rod Petricevics of the world to give us something to dream about.

Local Community Muck In To Help Finance Company Director In Trouble

News that Hanover Finance's Mark Hotchin is struggling to find the money to pay contractors to finish his $50 million palace has galvanised the Orakei community into action.

Last week a team of volunteers went onto the property to help with the landscaping and building work. And on Saturday morning Jim Mora and the crew from Mucking In arrived to help finish the building project.

Local man David Polescratcher said that Mr Hotchin was a fine man who deserved the help he was getting.

"I remember the helping hand he and his friends at Hanover gave my dear late Mum. Thanks to the rock-solid first ranking secured debentures Hanover offered her, she was able to invest her life savings with peace of mind.

"Of course she lost almost everything when it turned out that the foundations of Hanover were built from straw, and the stress of it all probably killed her. But for just a few months she was happy and secure.

"Now it's time I gave something back in return."

In addition to supplying labour, local residents went door to door asking for donations.

Mother of two and local Lions member Ena Slythe said she was happy to give her time to such a worthy cause.

"The papers have a lot of negative stuff about Mark," she said. "Some of it's plain disgusting. But people don't always see the good he's done.

"I know of a couple of European luxury car dealers he's saved from bankruptcy, thanks to his taste in fast cars.

"And the Hanover collapse has pumped a lot of money into the economy and helped a lot of people, especially in the Orakei and Remuera areas. Mostly the lawyers. But lawyers are people too. Most of them live around here."

Late on Sunday the Mucking In crew were working frantically to finish the house. However, they were handed a repriebe when Hotchin failed to return from his trip away.

"Apparently he's on Hawaii", said the show's host Jim Mora. "Between you and me, it's a good thing too. We had some serious trouble finding diamond-encrusted taps to match the toilets in the seventeen bathrooms. And the downstairs is a mess still. When we tried to fill the underground pool with champagne on Saturday, it overflowed and we had a real mess to sort out.

"Still, we had a pretty merry night afterwards."

Mr Mora admitted the job had been bigger than they anticipated.

"We hadn't dealt with a moat before on the show. The kitchen tiling also caused us problems, because the building specs said the grouting had to be mixed using gold dust and the ground-down bones of the poor. Thankfully we whipped down to Placemakers and the boys down there sorted it out for us."

There was no word tonight on when Mr Hotchin was due to return to New Zealand.

"It must be tough for him," said Mr Polescratcher. "And I can see the attraction of Hawaii, because nobody will know him there. But when he returns here he can be sure of a warm welcome from a local community that just wants to say 'thanks Mark for all you've done.'"

The Game's Up

Following the good work done by business news columnist Brian Gaynor on Saturday, Eric Watson and Mark Hotchin seem to be backing away from their latest finance company venture, FAI Money.

They claim the move is in response to the Government's announcement to end the deposit guarantee scheme, but the timing looks suspicious.

If the removal of the scheme was the sole reason for the move, then that suggests FAI Money was potentially not in a position to continue in operations without someone else backing it. And when I say "someone else", I mean someone who has both the money and commitment to stand by the company. Remember how Watson and Hotchin were going to stand by Hanover and make sure it didn't fail? How did that work out?

The more likely scenario is that the public scrutiny of FAI Money made Watson and Hotchin realise the game was up.

I hope they stay out of the retail investment game permanently. In fact, I wouldn't trust them to run an ice cream van.

Watson and Hotchin Want To Spend More Of Your Money

You would have to be a fool to put money into anything that has the signature of Eric Watson and Mark Hotchin on it.

The disgrace that was Hanover Finance continues to haunt investors. Allied Farmers is now saddled with its loan book, and things are not looking good.

Hanover Finance forgave personal guarantees and loans in the run-up to the transfer of its loan book to Allied Farmers, says Rob Alloway, the man now trying to turn the mess of loans into hard cash.

Alloway, Allied Farmers' chief executive, is on the warpath after last week having to write down a loan book supposedly worth $396.2 million in October, to just $175.5m.

"There were two borrowers involved and several days before the transaction settled they were released from their personal guarantees in the project which is just mental. Why would you do that?"

One personal guarantee was for more than $20m and the other for "several hundred thousand", Alloway said.

And yet the same pair that ran Hanover into the ground are behind FAI Money, another finance company that is advertising for funds.

Brian Gaynor writes:

But the most extraordinary development is that Hotchin and Watson are still raising money from the public through FAI Money, formerly FAI Finance, and its accounting policies and disclosures are just as poor as Hanover's.

FAI traditionally offered secured and unsecured personal loans but its latest prospectus reveals that the board and shareholders have decided that the company may now engage in the provision of property development and property investment finance to the property development/investment sector.

The prospectus also reveals that FAI's accounting policies on interest are exactly the same as Hanover's. In other words, interest capitalised on property developments is accrued over the course of the loan instead of being recognised when it is received.

In addition, KPMG was the auditor of Hanover Finance and is the auditor of FAI Money.

But, more importantly, there is no disclosure of the Hanover debacle and the role Hotchin and Watson played in this.

A great deal of emphasis is placed on FAI's Credit Committee, which comprises the CEO, credit manager and an independent member of the board.

But neither the CEO nor credit manager are listed in the Company Directory section and David Henry, who is FAI Money's only independent director, was the chairman of Hanover and doesn't appear to have much property development expertise.

FAI's investment statement, which is the most widely used document by investors, is also woefully inadequate as it doesn't include a list or description of directors and executives.

It also contains only vague comments about the company's approach towards property lending.

Take a look at the FAI Money site. It's full of promises about how secure your money will be. Heck, you'll even receive a first ranking secured deposit - first ranking, except for all of the things that rank ahead of it, that is:

In the event of insolvency, there is no other charge over all of the assets of the Company that would rank above a secured first ranking deposit other than claims of the Trustee and any receiver, claims of the holders of any prior ranking charges and any claims given preference by law. [emphasis added by me]

So how lucky are you feeling?

The Capital Markets Taskforce denounced the poor state of our investment disclosure regime. The prospectuses and investment statements routinely pedalled out to gullible investors are usually not worth the paper they are printed on. The rules allow people like Watson and Hotchin to take money from unsophisticated, often elderly, investors, on the back of promises of unrealistic returns and assurances that their money is safe. First-ranking merely means that your position is only slightly better than the position of a completely unsecured investor.

Watson and Hotchin may well have broken no laws, but in many respects they are little better than pirates.

Hanover Boss: “I Feel Your Pain”

Hanover Finance director Mark Hotchin attended a meeting of the company’s investors yesterday, and spoke about how the company’s plight had affected him personally.

Emotional and struggling to hold back tears, Hotchin told the gathered investors about the pain he felt.

“The recession has left me financially devastated,” he explained. “I feel your pain. I really do.

“My plans for a dream home have been all but destroyed”, he said, referring to the opulent mansion being built on Paratai Drive. "I’ve had to make so many compromises that my heart’s not in it anymore.

“The grand staircase was meant to be lined with 24 carat gold and encrusted with diamonds. I’ve kept the gold, but I’ve had to downgrade to sapphires and rubies. It’s just not the same. And I have had to scrap plans for the enormous golden dome that was supposed to rival St Peter’s Basilica for size.

“Worst of all I’ve had to abandon plans for the special toilet-paper to go into each of the 34 bathrooms. You’ve no idea how hard that has been to deal with. Once you’ve felt the softness of Italian silk nothing else will do.”

Asked if he thought his plight could be compared with the suffering of those who had lost everything, he replied: “I feel for them. But I’m a victim too. Every time I see Graeme Hart’s super-yacht I burst into tears. Some days the pain’s so bad I can barely get out of my enormous golden bed.”

Hotchin’s tale of misery has clearly moved Hanover investors. Jim Smith, 74, a retired Nelson pharmacist, says he has over $200,000 tied up in Hanover. “The guy’s genuine” Smith said. “It broke my heart to listen to his story. I just wanted to give him a big hug.

“I had dreams too. My wife and I were going to use some of the money to fly to the UK to see our children, but that’s on hold now. She’s sick anyway, and the money would have been useful to help pay the medical bills. At our age, I’m not sure if we’ll see the family again.

“Still, imagine having to abandon plans to build a bejewelled palace the size of the Taj Mahal. He must be devastated.”