UPDATED: Hotchin cuts deal with IRD over forestry investment

UPDATED: Hotchin cuts deal with IRD over forestry investments, winds up companies

(Fixes reference to convinction in seventh paragraph.)

By Paul McBeth

Jan. 4 (BusinessDesk) – Former Hanover Finance boss Mark Hotchin cut a deal with the tax department after an audit of one of his forestry investments forced him to wind up the companies involved.

Hotchin’s MSH Forests and subsidiary DF Forestry Holdings shut up shop in December after the investment companies failed following the Inland Revenue investigation, according to the first liquidators’ report.

Hotchin, the sole director of the two entities, told liquidators Tony Maginness and Boris van Delden of McDonald Vague that the failure of the companies was due to the tax department’s audit. That led to the IRD succeeding in claims against the companies plus shortfall penalties, late penalties and interest.

“The liquidators understand that a settlement was made between the company and the Inland Revenue Department,” the report said. “At this time the terms of the settlement are unknown.”

Hotchin has had to deal with intense scrutiny of his assets since the Securities Commission froze them at the end of 2010 to stop him from transferring ownership as it launched a probe into the affairs of Hanover Finance. The then-regulator opened its probe after the lender sold its loan book in a debt-for-equity swap to Allied Farmers at the tail-end of 2009 in an effort to avoid receivership.

That deal ultimately led to the decline of Allied, which joined several parties in laying a complaint with the regulator.

MSH Forests holds 95 percent of the stock in DF Forestry, with the remainder owned by Silver Oak Holdings, a holding company jointly owned by Nathans Finance directors Mervyn Doolan and John Hotchin, the brother of Mark Hotchin.

The company had no assets at the time of liquidation, and estimated a shortfall of $4,274 to preferential and unsecured creditors excluding an unknown amount owed to the tax department.

DF Forestry had a book value of $307,090 as at Dec. 20, with the bulk of that coming from its investment in Roxburgh Forestry Joint Venture. Still, the liquidators estimate it will only realise $1,775 from an ASB bank deposit and unpaid share capital.

That will leave a shortfall of some $912,291 for preferential and unsecured creditors, with an unknown amount owed to the IRD, the report said.

Hotchin and fellow Hanover directors and promoters are expected to face civil proceedings this year from the Financial Markets Authority after a lengthy investigation.

Last month, Hotchin gained permission from the High Court to increase his court-ordered $1,000 per week living allowance, which he has been forced to live under during the FMA investigations. He complained at the time at the length of time the FMA investigation was taking.

Hanover is still under investigation by the Serious Fraud Office after a probe was opened in September 2010.

(BusinessDesk)

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