SFO decision on Hanover: no criminal charges

UPDATE:

The Serious Fraud Office has confirmed no criminal charges will be brought after a 32-month investigation into Hanover Finance and related companies.

SFO acting chief executive Simon McArley says it was an "extremely difficult decision to make" and it remains open to reconsider its decision if fresh evidence as to the actual knowledge and intent of those in control of Hanover becomes available.

NBR ONLINE yesterday broke the story that ex-Hanover boss Mark Hotchin would not face charges.

On the basis of the evidence currently available, Mr McArley says the SFO is not satisfied that an impartial jury could be satisfied that identified individuals in control of Hanover companies had committed a criminal offence.

Mr McArley says that while many people may view the conduct which occurred at Hanover Finance as egregious, "that alone is not sufficient for me to commence a prosecution".

The SFO says it has coordinated its activties fully with civil claims being pursued by the Financial Marketrs Authority (FMA) and will provide all the information and evidence possible to assist FMA in those claims for compensation of investors.

Mr McArley says that from evidence and advice gathered – while not enough to support charges – serious questions arise as to:

• The consistency between the overall view of the nature andf financial condition of the Hanover companies disclosed to investors in the period from December 2007, and the actual position of the companies.
• The solvency of the companies at the times that dividends were paid during the six months immediately before the suspension of payments to depositors in July 2008.
• The propriety of a number of transactions entered into in the three months immediately prior to the suspension of payments to depositors that appear to have provided little or no benefit to the companies, while conferring some significant benefits on the related parties.
• The accuracy of the valuation of the companies' assets in the financial statements supporting the debt repayment proposal put to investors in November 2008.

Mr McArley says recent decisions relating to other failed finance companies highlighted how difficult it is to satisfy the standard required to support criminal charges.

He says the Hanover investigation was the most extensive and challenging of the finance company investigations undertaken by the SFO.

Investigations of 15 other finance companies resulted in criminal prosecutions in relation to nine companies and charges against 23 individuals.

No individuals are named in the SFO media statement.

A High Court hearing relating to the size of Mark Hotchin's personal stake in his ill-fated Paratai Drive mansion – which was adjourned yesterday because a serttlement was likely – is due to begin this morning.

Read more about Mr Hotchin's Paratai Drive trust fight here.

janderson@nbr.co.nz