Hotchin, Watson didn’t commit fraud at Hanover, SFO concludes
By Paul McBeth
April 30 (BusinessDesk) - The Serious Fraud Office won't lay charges against any of Hanover Finance's directors or owners including Mark Hotchin and Eric Watson, saying it's exhausted all avenues of investigation and found nothing to meet its threshold to pursue a prosecution.
Acting chief executive Simon McArley said there were serious questions over Hanover's behaviour, including how it disclosed its financial position to investors from late 2007, its solvency at times when dividends were paid up to the 2008 moratorium, the propriety of transactions in the lead-up to the freezing of payments to investors and the accuracy of how the company's assets were valued.
Still, those questions didn't meet the bar for the white collar crime investigator to proceed with a case that could prove beyond reasonable doubt that an offence had been committed, he said.
"While many may view the conduct at Hanover Finance as egregious, that alone is not sufficient for me to commence a prosecution," McArley said. "We have now exhausted every available avenue of enquiry and the time has come to move on and focus our resources elsewhere."
The decision is the second time the SFO has had to give up pursuing a high-profile case, having decided the failed property investor Blue Chip group could be seen as operating in a "moral vacuum" but didn’t cross the threshold for a criminal prosecution.
Hanover Finance froze $554 million of funds for its 17,000 investors after running into financial difficulties before convincing them to accept a disastrous deal where their debt was swapped for equity in Allied Farmers.
The SFO spent 32 months investigating Hanover in what it says as the "Most extensive and challenging of the finance company investigations."
McArley said he consulted with crown solicitors, leading criminal Queen's Counsel and the deputy Solicitor-General in making his decision not to go ahead with the prosecution.
"The vast majority of the information we have accumulated has already been shared with the FMA (Financial Markets Authority), but if there is any additional material we can provide to assist we will do so," he said.
The FMA is pursuing the former Hanover directors and promoters in a civil suit over the period between December 2007 and July 2008 when $35 million was deposited with the failed lender, and the SFO will provide information and evidence to assist that claim.