Eric Watson also in Sec Com sights

Hanover Finance co-owner Eric Watson is still in the frame of a Securities Commission investigation that this week invoked unprecedented powers to freeze the assets of his business partner Mark Hotchin.

And the commission has said it will use international agreements to pursue people overseas if necessary.

Sue Brown, the Security Commission’s director of investigations and litigation told the National Business Review: “We’re continuing to look at the roles of all the people involved in the preparation of prospectuses. Mr Watson was a promoter of the offers and therefore as a promoter he is one of the people who could be liable if there were untrue statements made.”

Ms Brown was keen to stress that the investigation was continuing, a decision was yet to be made and her statements were in no way indicative of civil or criminal liability.

However she added that a commission statement concerning Mr Watson would be made “very shortly.”

She refused to answer questions about whether the commission was in contact with Mr Watson’s lawyers: “I don’t think I should comment on that. We don’t normally comment on the conduct of our negotiations.”

Hanover entered a moratorium owing $554 million in 2008. Mr Hotchin and co-founder Eric Watson took $91 million in dividends in the years before the company defaulted on payments to investors.

Hanover investors subsequently voted to merge with Allied Farmers, a deal that has since soured with allegations of inflated loan values and referrals to the Serious Fraud Office.

Mr Hotchin said in a statement through his lawyers that: “As the matter is before the court, and the investigation is said to be incomplete, Hanover and Mr Hotchin do not propose to make any further comment at this time.”

Mr Watson could not be reached for comment.

Asset freezes
Ms Brown said Wednesday’s unprecedented use of Securities Act powers introduced in 2006 to freeze assets in the High Court named Mr Hotchin’s New Zealand assets, as well as several trusts owned on paper by Tony Thomas.

These trusts, a series of numbered companies beginning with Ka No. 1 Trustee, own property connected with Mr Hotchin including his half-built $30m Paratai Drive mansion.

Ms Brown confirmed the order was sought over concerns assets might be appropriated abroad were civil or criminal action to be brought against Mr Hotchin.

Asked if a similar argument could be made in the case of Mr Watson, who also has extensive overseas interests and lives abroad, Ms Brown said: “Yes.”

Mr Hotchin and Mr Watson are also co-owners of OHL, formerly Hanover Overseas, owns several tracts of forestry in Northland.

Mr Watson was valued at $250 million in the most recent NBR Rich List. His domestic assets include Westbury Stud, a palatial six-bedroom estate and golf course presently on the market for $30 million, sole ownership of underwear maker Bendon, a half-share in Viaduct nightspot Soul and 75% of the New Zealand Warriors NRL franchise.

Action could go global
The Hanover pair have in recent years lived mostly abroad – Mr Watson in the UK, and Mr Hotchin in Hawaii, Italy and Australia.

Ms Brown said the commission could still take action if those charged were overseas. “Mr Hotchin is not in the country all the time. So if that were relevant, we’ll obviously be looking at the reciprocal relations we have with other jurisdictions,” she said.

Ms Brown confirmed a close working relationship with the Australian Securities and Investment Commission but preferred not to comment about how far the commission could reach.

The Securities Commission has signed memorandums of understanding facilitating the exchange of information and mutual assistance with comparable authorities in the US, Hong Kong, Taiwan, Papua New Guinea, Sri Lanka, Malaysia, Indonesia, China and Israel.

NBR understands both Mr Watson and Mr Hotchin are on the Serious Fraud Office border alert list.