Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search


Sludge Report #82 - Catch 22 For Hartner Creditors

In This Edition: Catch 22 For Hartner Creditors - Good Enough For The Goose But Not The Gander

NOTE: Authors of this report will be anonymous and wide ranging, and occasionally finely balanced. Indeed you are invited to contribute: The format is as a reporters notebook. It will be published as and when material is available. C.D. Sludge can be contacted at The Sludge Report is available as a free email service..Click HERE - to subscribe...

Sludge Report #82

Catch 22 For Hartner Creditors

Hartner creditors spokesman Geoff Bayley says subcontractors whose livelihoods have been destroyed by the Hartner Construction Company failure on the Auckland waterfront will be “disgusted” by the decision of the Securities Commission not to appoint a Statutory Manager to investigate the collapse. These creditors are not the only ones disgusted, so is C.D. Sludge.

Defending his decision this morning on the radio, Securities Commission spokesman John Farrell outlined the classic catch 22 situation facing the “disgusted” creditors.

Legally the Securities Commission could only appoint a statutory manager to investigate the collapse if there was evidence of fraud. Unfortunately, of course, unless there is an investigation then there is no evidence. That is why you have investigations!

As an additional arm to his argument, Farrell said the Companies Registra and the Serious Fraud Office could adequately cope with any necessary investigations.

However through all the humming and hahhing on the radio this morning, neither Farrell nor the Minister responsible, Paul Swain, committed themselves to the allocation of any additional resources to enable the investigations job to be conducted properly by the Companies Office.

That said, the Minister appeared to be willing to put some faith in the Companies Office liquidator, to whom he had spoken personally, doing his job properly.

And perhaps Sludge would be well advised to at least give him the benefit of the doubt. But if history is any guide then the line recording the experience of a snowball in hell immediately comes to mind.

Not only has the Companies Office never successfully conducted an investigation of this nature, but it is highly debateable whether it has the expertise to undertake the same.

Meanwhile SFO boss David Bradshaw is being quoted by Radio New Zealand in the wake of the decision saying that the SFO file on the case is not closed. He added that the SFO would only be investigating activity within its frame of reference, that is, criminal fraud.

For the uninitiated what Bradshaw is saying here is that it is not the responsibility of the SFO to investigate “reckless trading” by Hartner Construction, nor is it their role to investigate or prosecute bank complicity in the same. Why? Because these things are not “criminal” fraud. Rather they are matters more properly within the purview of the Companies Registra and/or the Securities Commission.

Sludge cannot help but be extremely cynical about what Bradshaw’s remarks really mean.

The SFO has hundreds of open files. Most of these are going nowhere fast, and will go nowhere.

Furthermore, whenever Sludge has had the opportunity to pursue cases involving securities matters, such as the Winebox for example, it has been abundantly clear that the SFO’s investigators do not regard such matters as their responsibility. By and large the SFO prefers to confine its activities to prosecuting self-confessed embezzlers.

Good Enough For The Goose But Not The Gander

In defending the decision not to appoint a statutory manager both Farrell and the Minister responsible raised the contrast of the case of IMI Pacific, for whom a statutory manager was appointed early last year.

This raises some interesting issues.

IMI Pacific was a “funny money” company. It was involved in a similar business to that described in a series of Sludge reports last year about free money for the greedy. This business is sometimes known as, “prime bank instrument fraud”.

(For background on this see…
- Sludge Report #14 – Rodney’s Speech In Fiji (1)
- Sludge Report #15 (Part 2)
- The Sludge Report #12 – Rodney’s Trip To Fiji
- Winston Peters on Investors International
- Sludge Report #11 – More Evidence In Money Mystery
- Sludge Report #10 - Free Money For Greedy Mystery )

In the context of the Hartner Construction collapse the interesting thing about “Prime Bank Instrument Fraud” is that, at least in part, the activities of companies such as IMI Pacific might be seen to reflect badly on banks.

And unlike the case of Hartner Construction, not all of IMI Pacific’s victims wanted the company shut down.

More importantly, in sharp contrast to the IMI Pacific case, in the case of Hartner Construction the reason that the creditors want a statutory manager appointed is primarily in order to sue the bank involved.

That is a statutory manager was appointed in the IMI Pacific case, and the banks approved, a statutory manager was not appointed in the Hartner Construction case, and again the banks approved. Is there perhaps a pattern emerging here?

Paul Swain and John Farrell have stressed in their public comments on this matter that, “money cannot be created from nowhere”. However the truth is that if the bank that put Hartner into receivership were successfully sued by creditors, then perhaps the creditors of Hartner Construction might be able to get some of their money back. This, incidentally, is precisely the remedy that the creditors want a statutory manager appointed to pursue.

Which brings Sludge to an interesting story he heard about the Hartnercollapse earlier this year, but which, so far, has not emerged into the light of public scrutiny.

While it has taken more than four months for the Securities Commission to announce that they plan to do nothing about the Hartner Construction collapse, this has not been because the creditors did not act swiftly at the beginning of this affair.

In fact the creditors wrote to Paul Swain at the outset calling on him to appoint a Statutory Manager and giving detailed reasons.

Paul Swain in turn passed the matter on to the companies registra and the Securities Commission.

An official was duly despatched to Auckland to investigate. He spoke to the receiver John Waller, but strangely enough, did not speak to the petitioners. When Sludge says strangely, it is because the complaints related in part to the activities of Waller and his client the bank.

As receiver Waller was appointed by the debenture holder, the bank, and his prime responsibility is to the bank.

And then before you could say jack sprat, Waller was down in Wellington, knocking on the door of Minister Paul Swain.

According to Sludge’s sources Waller’s conversation with Swain went something like this.

Waller: “We, the bank and I are concerned about the idea of appointing a statutory manager in this case.

Minister: “Oh yes?”

Waller: “Yes Minister. The bank feels, in fact, that if the government were to get into a habit of appointing statutory managers in cases such as this, then that would affect the ability of banks to advance credit for development projects. Afterall they would not be able to rely on their security.”

Minister: “Oh.”

You may well think that this conversation amounted to a not so veiled threat from the bank to obstruct commerce in NZ if the Government chose to appoint a statutory manager, Sludge, however, could not possibly comment.

Anti©opyright Sludge 2001

© Scoop Media

Top Scoops Headlines


There Is A Field: Reimagining Biodiversity In Aotearoa

We are in a moment of existential peril, with interconnected climate and biodiversity crises converging on a global scale to drive most life on Earth to the brink of extinction… These massive challenges can, however, be reframed as a once in a lifetime opportunity to fundamentally change how humanity relates to nature and to each other. Read on The Dig>>


Gordon Campbell: On The Barriers Facing Female Politicians

On the current evidence though, voters are less likely to regard a female politician as ‘likeable’ than a male one, and – even worse – this perception tends to become a barrier that only female candidates in the main, have to face. More>>

The Detail: Britain's Trump Is Now Its Prime Minister

Guardian journalist James Murray says Boris Johnson wears the hat that works, depending on what he’s trying to achieve. More>>


Gordon Campbell: On Trump’s Open White Nationalism

By telling those four elected, American born and/or raised women of colour to “go home”, US President Donald Trump’s racist agenda has come out of the shadows. More>>


Mediaversaries: 20 Years Of The Scoop Information Ecosystem

Scoop celebrates its 20th anniversary this month. To celebrate, we are offering 20% off all ScoopPro subscriptions, including the newly launched ScoopPro Citizen service for Citizen readers. More>>