Transcript Of Close Up Interview With Mark Hotchin

7PM THURSDAY 17th FEBRUARY

On Close Up tonight Hotchin fronts up...

Mark Sainsbury: And front up he does, Mark Hotchin joins me. Look tell me do you ever feel sorry for those people who lost money because of the Hanover collapse?

Mark Hotchin: Of course I've felt sorry right the way through, this was never the plan that we set about doing, this business was designed to succeed, we thought it would, it was built to last.

Sainsbury: Have you ever said sorry to them?

Hotchin: I have yes.

Sainsbury: Because you seem to provoke a lot of anger and part of it as we saw in that, is the lifestyle that you lead when other people are basically on the bones of their arse.

Hotchin: I think there's - yes is the short answer, although it's incredibly exaggerated. A little over two years ago I had a 50th birthday in Fiji, I didn't pay for it, everybody paid for themselves. They flew themselves there, they paid their own accommodation, they paid their own food, and yes I attended, and I've apologised for it, it was ill-timed and I accept that.

Sainsbury: But you know you look at - you know there's the house in Paratai Drive, this was the most expensive house in the country.

Hotchin: Yes I know, of course you've gotta look back, well there's a couple of things about the house of course, it's subject to a court order and it's owned by a family trust, and I'm not to speak of it, but you know that was six years ago, it was a very different time.

Sainsbury: But you see, like people watch and go ooh it's owned by a family trust, it's another of these rich guys hiding their assets or doing something dodgy around trusts.

Hotchin: Like as I said I can't really talk about the trust, but one of the things that's interesting about this is, I'm not a beneficiary of that trust. Our plan had been to live in the home by contributing to it, but anyway as I said I can't talk about it.

Sainsbury: But the idea, when you first decided to build it, was it a vanity project?

Hotchin: I think looking back now you kind of question it of course, it wasn't a vanity project it just - it grew over time and ended up somewhat larger than we anticipated.

Sainsbury: And I spose it's like you know the holidays in Hawaii , living in Queensland. The investors think you're rubbing their noses in it.
Hotchin: Yes I know. Clearly there's a lot of misinformation. Living in Queensland is not living in the lap of luxury, we rent an apartment, it's a ground floor apartment, mainly because our home was sold some time ago, in the middle of last year.

Sainsbury: But you're not broke are you?

Hotchin: Well I am at the moment, my assets are frozen, and they're reasonably limited anyway. We put back a lot of money into Hanover. You know there was talk in the programme there about dividends. Way more money went back in than came out. This is a total misnomer the dividend amount was exceeded well and truly.

Sainsbury: Well let's just deal with that now. One of the big issues with the investors and why they have it in for you, the last three months before the company collapsed fifteen and a half million was paid out in dividends to the shareholders, and that's you and Eric Watson.

Hotchin: No not in the last three months, the numbers as I understand it, there was about 15 million paid out in the last six months, and about double that went back in.

Sainsbury: Went back in for what?

Hotchin: It went back in to reduce related party debts, to take over some liabilities that were in Australia that were Hanover Finance's.

Sainsbury: But related party debts are loans the company had made to the owners is it?

Hotchin: Yes...

Sainsbury: So you're paying off the money you owe to the company?

Hotchin: Yes although in part it's about liquidity as well, so if we hadn't paid that money, those debts would have stayed higher.

Sainsbury: I spose I'm getting to is that you're not doing it hard, and some for those investors are.

Hotchin: Oh look I absolutely know that investors are doing it hard and certainly this wasn't what we intended. The plan had been to move from a platform that wasn't working to a better one with Allied. We got sold a dream, thought it made sense, and you know sadly helped them deliver that opportunity.

Sainsbury: Part of the situation now you've been back to the court trying to get them to free up those assets, and I come back to - I mean can you not live on a thousand dollars a week?

Hotchin: I can live on a thousand dollars a week reasonably comfortably which is what I said to the court, if I was in my own home, and if I had my things around me, but being in temporary accommodation, no furniture, no clothes, no vehicles, kids into new schools etcetera, it was tough, but if you actually look what did happen despite what it says in the papers, I ended up saying okay it'll be a thousand a week.

Sainsbury: Why not come back and live here. I mean you must have friends who could put you up? Do you have any friends?

Hotchin: Yeah of course, I have many friends, friends have stayed with me.

Sainsbury: Why not live here then?

Hotchin: The main reason is the children, the constant media attention, it just didn't seem appropriate to put them in that.

Sainsbury: Thinking back, I mean if you weren't building the biggest house in the country, you know if you didn't have - whether people paid for or not a bash in Fiji - you are of that lifestyle, it's always going to attract attention.

Hotchin: Well you say that, you know the 50th bash in Fiji was two years ago, more than two years ago, it was planned nearly three years ago, life was a bit different then. Yes I took the family on holiday in Hawaii. With the benefit of hindsight clearly that was a mistake, I got a good deal, I did feel I wanted to get away, we'd had an enormously stressful period, and we'd done a deal, we'd sold the assets to Allied and thought they were going off to a better life.

Sainsbury: Just while we're on that, on the holiday, let's just clear something up, because your wife was quoted in a paper here as saying, 'we don't have to justify where we get our money or what it's spent on'. Did that happen?

Hotchin: No. She didn't say it.

Sainsbury: Can you prove it didn't happen?

Hotchin: Well she got four affidavits saying it didn't happen. I was nearby, but more importantly I know here, and anybody who's ever met here will know she didn't say it.

Sainsbury: Will you sue the newspaper?

Hotchin: Well we were in the process of doing that and my assets were frozen, so it's made it a little more difficult.

Sainsbury: Okay, let's just go on to Allied, the deal you did with Allied, which you're not criticising them effectively for mismanagement, for not looking after the assets. Now some find that a bit rich.

Hotchin: Well they do because they've been painted a picture. The reality is we got approached about doing a deal with them in August. They did four months due diligence on that book - four months independent, visited every property, looked at every loan. They then came to their conclusions and they happened to coincide with what we'd come up with through our auditors. So the numbers were very similar, so they presented an offer that said we've got a better platform, you guys are in a moratorium it's thinking, you can't go forward you can't do anything with it, you can't lend, you can't add value. We have a structure that's better. We've got a government guarantee on our finance company, we're gonna put these assets in as capital so they don't need to be sold, and that's a critical component - they don't need to be sold they'll sit as capital. They've never done that. From the minute they took over they have sold these assets wholesale.

Sainsbury: You know what they're saying, they're saying you sold them a pup.

Hotchin: Of course, it's just an easy out isn't it? Look at the track record, they took it over, they didn't do what they said they were going to do. They haven't done one thing. Nationwide went into receivership, Matarangi went into receivership, and every message that's come out of that company has been negative, every single one.

Sainsbury: If they didn't do what they said they were gonna do after they bought it, how do you know they actually did the proper due diligence beforehand? They might have been so keen to get hold of a deal they thought was gonna work for them....

Hotchin: Well we can't ensure that they do their due diligence appropriately, we can supply them with all the information, we can lead them to the properties, and in some cases we had our people meet them there, I'm pretty sure they did a reasonably thorough job, and they got exactly what they thought they were getting, which was a number of assets that are best served being sold over time, and they need help, they need capital assistance, and instead they've been wholesale sold.

Sainsbury: But things went bad when you guys were running Hanover, couldn't they have just gone bad while these guys were running Allied Farmers?

Hotchin: Oh look I'm not suggesting that there's no degree of market movement, the market's been tough I know that. The problem is, they had a plan that meant they didn't have to sell them, that's what attracted us, they didn't have to sell them. Could have been over time, you didn't need to realise that cash if they'd put them in the finance company.

Sainsbury: But you were out there at those meetings telling the Hanover investors take this deal - look if you want to give me a kick that's fine - but don't do that, this is gonna be good for you. It hasn't been good for them.

Hotchin: No, clearly, and that's why I'm here. The whole point is we were sold a concept and an idea and they haven't delivered, and they haven't even come close, it's so far away.
Sainsbury: So are you saying you were hoodwinked?
Hotchin: Totally.

Sainsbury: But you were sposed to be a smart businessman.
Hotchin: Well the concept of somebody taking what appears to be a fantastic opportunity, one that I was envious of, and taking that and not doing it, and doing the opposite, selling these things wholesale is illogical.

Sainsbury: Alright so is it bad business, or are you saying these guys are dishonest?

Hotchin: I'm saying they had a plan and didn't stick to it for reasons that I'm not sure. I suspect it's because they had more money pressure than they let on.

Sainsbury: The not do something you said you're gonna do, is that dishonest?

Hotchin: I think that to not do something that you said you were going to do is at the least misleading.

Sainsbury: Do you consider yourself an honest man?

Hotchin: I do.

Sainsbury: How do you think other people view you?

Hotchin: I think there's a lot of mixed feeling out there, there's been a lot of media attention, there's been a lot of misinformation, there's been you know this lavish lifestyle, 90% of it's exaggerated.

Sainsbury: But look when you're building the biggest house in the country it's hard to deny you had a lavish lifestyle?

Hotchin: Well the house obviously makes it very difficult and notwithstanding it's technically - well it isn't mine. Yeah no no, I see that, the point is that all of to these other references to you know things that I've read about where I've been or done or seen, is just not true.

Sainsbury: Okay. You're saying Allied didn't keep their promises. The question is as to whether you did. Let's go back to Hanover, and when you got into trouble, when it collapsed there was a moratorium. You and Eric Watson promised to put in 30 million.

Hotchin: We actually promised to put in 76 million.

Sainsbury: But the deal with Allied got you off the hook on that didn't it?

Hotchin: No no. We said we'd put in 76 million and we put in 76 million, so that happened, despite rumours or people suggesting to the contrary, that happened. Where you're talking about is under certain circumstances in the future there was potential further call.

Sainsbury: What I want to know is how could you get caught out on this. As I said you've been in the business. Everyone else says it was plain as the nose on your face things were going bad.

Hotchin: At Allied?

Sainsbury: No no, around the country, this is in 2008 before Hanover collapsed. Didn't you sniff the breeze?

Hotchin: Look of course, you know 24 companies went before us and I think 60 in total, definitely things had tightened there's no question, and we were managing it you know, this was a strong company, it had good governance, it had very good practices, we believed we would get through.

Sainsbury: But if you could sniff the breeze how could you take dividends out?

Hotchin: Because they went back in, it was liquidity, every dollar that went out two dollars was going back in, so it was actually creating liquidity.
Sainsbury: The investors watching this tonight Mark Hotchin, I mean are they gonna buy this do you think?

Hotchin: I don't know, I think there's been so much misinformation. I guess the point is that you don't have to buy it. What you have to do is say what's happened since I did my deal with Allied? Have they performed? Have they lived up to any of their promises? And the answer is no. We did a deal of 78 cents, it's now two cents times you know three shares, that's ridiculous.

Sainsbury: I mean sure enough, people may have to look at the behaviour of Allied, but there is still the sense, people think you got off the hook on Hanover.

Hotchin: Well I'm not sure how they think that because apart from anything else we put in a huge support package. When the deal happened with Allied that support package was forfeited, so the 76 million that went in, we left that behind, plus the capital that went in got left behind.

Sainsbury: But the difference is I spose, you and Eric Watson can put in 76 million, and you're not gonna be in the poor house at the end of it. A lot of the mums and dads watching tonight who put their retirement savings, their nest eggs into Hanover, feel betrayed, cos they don't have any cushion.

Hotchin: And I understand that, that's why we worked so hard to try and deliver a better alternative, rather than a sinking lid which is what we had in the moratorium, we tried to give them an opportunity to add value, to have an exit to have liquidity, to have shares that they could trade and sell and value add, and at the time it seemed like a very good opportunity.
Sainsbury: Is the whole environment just too loose, too cowboy in this country?

Hotchin: I think there was a period when clearly it was very easy to be in that space and as a consequence there were a lot of people in there that shouldn't have been, and some of those failures perhaps caused a roll on effect, but you know Nationwide, Allied's subsidiary Nationwide is in receivership, you never hear of it, you hear of Hanover every day.

Sainsbury: Allied on the other hand as I say, they blame you, they went to the Serious Fraud Office, the Securities Commission, there are investigations underway, investigations at this stage. Are you worried about those?

Hotchin: No. Well I shouldn't say not worried about them, you know you go through a process. The Securities Commission as I understand it's investigating every failed finance company in the country, so that was going to happen regardless. Mr Alloway's made allegations about a number of loans that got transferred which he's reported to the SFO which they're investigating, but what I can say with confidence, no executive or director of any of the Hanover companies every knowingly did anything wrong.

Sainsbury: But the buck does stop with you doesn't it?

Hotchin: It would certainly appear so.

ainsbury: Look don't go away, Next - What is next for Mark Hotchin and all those Hanover investors still waiting.

Sainsbury: Welcome back. Well Mark Hotchin is still here. Why didn't you do an Eric Watson and just stay overseas?

Hotchin: I don't think that was the appropriate thing to do, but in fairness to Eric you know he gets a bit of flak, probably not so much because he hasn't been here, but ...

Sainsbury: He gets nothing near the flak that you've got.

Hotchin: No, but equally he's lived overseas for a long time, and you know the likes of the shareholders' support package I talked about a little earlier 76 million notwithstanding he wasn't here, he put up his half.

Sainsbury: But do you feel a bit bitter that you're the one who's had to take it, and you're the one, you're the public face, you're the bogey man for the finance collapses, and Eric Watson's effectively got away scot free?

Hotchin: Well I mean you could hardly blame him to not come back in the middle of it, except the overriding factor I guess is that he doesn't live here, he lives in England and he has for eight years, and to expect him to come back and go through this - well I don't see what value he could add anyway to be honest.

Sainsbury: You don't think he should have just manned up and ....
Hotchin: Well he wasn't actually that close to the running of the business.

Sainsbury: Look we see it in the papers, we know he's doing alright, he's still got plenty of money. I come back to there's people watching tonight and thinking oh well you know they're not gonna necessarily think poor old Mark Hotchin. They're gonna think you've got assets stashed away, I mean they're frozen at the moment, if you win the court case do you have any idea what you're worth?

Hotchin: My personal worth is incredibly low. I've got bills to pay, I've got assets frozen, I've got bills to pay, I've tax to pay. I'm not sure how relevant it is but certainly what I can tell you is my financial position now compared to say three years ago is dramatically different.

Sainsbury: Well come back to three years ago you're building the most expensive house in the country. Five years ago. So look I mean you're still a millionaire?

Hotchin: No well at the moment I'm far from a millionaire.

Sainsbury: Cos people want to know, he's got money stashed away somewhere, somewhere you've got it stashed away or it's in trusts or in Swiss bank accounts?

Hotchin: No, I don't have money stashed away. I've had to fill all this out for the SFO and for Securities Commission and the Courts etcetera, there's no money stashed away.

Sainsbury: So what do you want to say to the investors tonight?

Hotchin: Well I guess the biggest thing is I'm sorry. This wasn't the intention. We set about trying to build a business that we thought would withstand the test of time. When we had a glitch or more than a glitch, when we had to stop trading, decided it was the prudent thing to do to stop at that time, to give some comfort to those same investors, we put in a lot of money, a big support package, and went forward. Now we then decided that the best thing for them, not for me, the best thing for the investors was to do the Allied deal. You know it would have been quite easy to have just carried on.

Sainsbury: Can I ask you, look putting the rules aside, putting whether this box should have been ticked or that box should have been ticked, do you think you've been a decent citizen in how you've carried on business?

Hotchin: Yes I do.

Sainsbury: I can give you one example at one of those meetings there was a woman there who said they wrote to the directors and said my husband needs a stem cell transplant, can I get my money out, and you said no. That doesn't imply decency.

Hotchin: Well I can't comment on that because I didn't see that letter. We had a policy - that surprises me - we had a policy at board level that anybody who had urgent need for early repayment would get it, however during the moratorium, during that period from July 08, we were barred from any money going out. Now that wasn't our decision, that was a decision by the Trustee and their advisors, we couldn't take pay for anything.

Sainsbury: But you believe you're a decent human being?

Hotchin: I do.

Sainsbury: Why are you doing this? Why are you coming out, because you know I mean it's gonna rake up everything else?

Hotchin: Sure, and of course I don't want to be sitting here, I'm not particularly enjoying it. The reason I'm doing it is a lot of people have lost a lot of money, a lot of people believed Allied, and they believed me when I said I thought the Allied deal was good, and it's all very well and good for Allied to say blame Hanover we didn't get the right assets. That's nonsense. If they'd stuck to their plan and had treated these assets as they needed to be treated, and had backed them into the vehicle that they had ready and waiting, we wouldn't be here today. If these shares were back at 20 cents or whatever the number was that they'd got them at, this conversation wouldn't be happening.

Sainsbury: And if Hanover hadn't collapsed of course you would be here.

Hotchin: Of course.

Sainsbury: Obviously we're gonna get feedback people will be emailing in now I can tell you that, or on our Face Book, saying what they think. What do you think people are going to make of you tonight?

Hotchin: Look I don't think there's any easy solutions, I think a lot of people have lost a lot of money in Hanover and in many other finance companies. They're hurt, they're upset, they're bitter, I understand all of that. What we've always tried to do and are continuing to try to do is get the best result. Now we thought we delivered that with the Allied deal or helped support that deal, and with the benefit of hindsight that was wrong, and leaving it as it is, it's gonna get worse.

Sainsbury: Are you frightened to walk down the street?

Hotchin: No.

Sainsbury: Mark Hotchin, thank you for coming in tonight.

ends

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