Labour promises South Canterbury Finance inquiry

Labour is promising a major inquiry into all aspects of the South Canterbury Finance failure which is estimated to have cost the taxpayer more than $1 billion already.

Labour's Finance spokesperson David Cunliffe and Commerce spokesperson Lianne Dalziel said today the collapse of South Canterbury Finance (SCF) represented New Zealand's "biggest corporate disaster and most expensive taxpayer bailout."

David Cunliffe said: "Bill English and the National Government have totally mismanaged the fiasco, costing the taxpayer at least $700 million more than was necessary.

"In 2010 National declined a recapitalisation deal that would have limited further liability to around $500 million. Instead total confirmed losses may already have reached as much as $1.2 billion and are still climbing."

Lianne Dalziel said the inquiry needs to cover:

· the causes of the failure;

· the role of the Retail Deposit Guarantee Scheme and whether there were depositors who made deposits to fall within the scheme knowing that SCF was due to collapse;

· why the roll-over of the RDGS was approved by the Government;

· whether the timing of the receivership was appropriate;

· whether there was a recapitalisation alternative to receivership that would have limited taxpayer exposure to around $500M;

· all aspects of the receivership; and

· whether there has been a proper process of realising SCF's assets to ensure that taxpayer exposure has been minimised.

"In addition the inquiry would need to consider the decision to place Allan and Jean Hubbard and their related companies and trusts into statutory management," Lianne Dalziel said.

"At the time the Government stepped in with $1.7B, John Key and Bill English made it clear that the expected eventual loss would be reduced to about $600 million once the company's assets were realised over three or four years for around $1.17B. Latest figures indicate the cost is more than $1 billion and still rising.

"Maybe Mr Key would like to answer his favourite question. Where's the money?"

Lianne Dalziel said she had one example where property worth $2.91 million was sold for $1.84 million. This was less than a month before the receivership (settlement four days before receivership). The balance of the subdivision valued at $4.04 million was sold to the same company for $1.3 million on the first day of the receivership.

"How could the receiver sign a transaction on the first day behind the desk? Where is the due diligence? What about the prior transaction with the same company? That is $4 million lost to the New Zealand taxpayer.

"While the Government has had Treasury analysts and independent consultants trawling through the books in the months leading up to the receivership, and the Serious Fraud Office had Alan Hubbard in its sights before his untimely death, nobody has been ensuring that the losses are being reduced to minimise the impact on the New Zealand taxpayer," Lianne Dalziel said.

"The more I have looked at what has happened since South Canterbury Finance went into receivership, the more convinced I have become that a high level inquiry is required.

"Everyone has been looking at what happened before the receivership, but no-one is looking at what has happened afterwards," Lianne Dalziel said.

"It seems to me that this is the equivalent of a rescue team turning up at a train wreck and after seeing that no-one can be saved, failing to secure the train against looting by people, who think they can get away with some of the valuables on the basis that no-one would know what was in there at the time.

"The example I have highlighted could be the tip of the iceberg. How many more are there?"

David Cunliffe said that there were too many unanswered questions. "John Key and Bill English have been caught asleep at the wheel.

"Only a fully independent inquiry with the power to compel witnesses will get to the bottom of this."
Contact: David Cunliffe 021 377 337; Lianne Dalziel 027 548 0644
Authorised by David Cunliffe, MP, and Lianne Dalziel, MP, Parliament Buildings, Wellington

NB to media: Lianne Dalziel has copies of documents that she can send on request.
The documents show:

· 1 Nov 2007: Valuation for total property after Braebrook Subdivision consented $7.313M - Stage 1 sections valued at $164,677

· 28 Jan 2009: Valuation for Stage One completed $3.118M and for stages 2-4 uncompleted $3.7M - sections valued $148,000

· 19 Mar 2010: Valuation for remainder of Stage 1 after first lots already sold $2.9M Average Lot value $165,000; Stages 2-4 $4.04M average lot value $160,000.

· 28 April 2010: Asset Management - Position Statement - Subdivision recorded in list of assets at $6.950M - Stage 1 $2.91M and Stage 2 $4.04M referencing Colliers Valuation

· 6 August 2010 Agreement for Sale and Purchase for Stage 1 for $1.84M (Valued $2.91M in April) to Antrim Developments possession 27/8/2010 four days before receivership

· 1st September 2010 Agreement for Sale & Purchase Stages 2-4 for $1.3M (Valued $4.04M in April) to Antrim Developments - this is day one of the receivership and is signed by the receiver.

· The sections were effectively sold for $80K each including GST - and have since been on-sold to the public at $135K each.

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