When I was approached by Chris Lee to write the foreword to this book on the South Canterbury Finance Ltd scandal, I was both humbled and flattered. The Billion Dollar Bonfire gives an insight into the facts surrounding the collapse of South Canterbury Finance Ltd and its associated private equity funds and also the thinking and activities of its principal, Allan Hubbard. It encompasses the New Zealand financial markets from the 1970s until now, Chris’s own story and, importantly, the various business activities of South Canterbury Finance Ltd and its associates and the actions of its directors and key management, all of which ultimately led to the demise of this once-grand company.
I have been involved in the financial markets for fifty years, was a former shareholder and director of one of New Zealand’s largest stockbroking firms and was instrumental in establishing the Market Surveillance Panel of the New Zealand Stock Exchange. Indeed, I served as a member of that panel for a period of some nine years, including a stint as deputy chairman.
More significantly, I was a shareholder and chairman of the Timaru-based finance company Mascot Finance Limited. This company was the first to call on the Crown guarantee in 2009, which, at that time, was the subject of some controversy. In defence of Mascot’s receivership, it should be noted that the receivers recouped 92 cents in the dollar, a satisfactory outcome when compared to amounts subsequently recovered from other finance companies that called on the Crown guarantee. Being based in Timaru and operating under the shadow of South Canterbury Finance Ltd, we were, in effect, ‘mice under the giant’s table’ and survived well on the crumbs that fell from that table.
When Chris intimated to me that it was his intention to stand back from his very successful business for a period of up to a year to write this book, and to provide the funding to complete the necessary in-depth research, I had nothing but admiration for him but was doubtful as to whether or not he would succeed. Needless to say, I underestimated his drive and tenacity.
Given the complexity of the South Canterbury Finance Ltd saga, I think he has succeeded in recording and bringing to the forefront highly questionable practices that cost the New Zealand taxpayer in excess of a billion dollars. The imposition of this cost on the taxpayer has not been subjected to independent scrutiny by, for example, a commission of inquiry.
Having had the benefit of reading the draft manuscript, the only matter that still puzzles me is the purported bailout offer to purchase, allegedly made by Duncan Saville and his interests, and the role played by the then government in the rejection of it. While certain details are covered in the book, Treasury’s steadfast refusal to accede to any request for information on this matter under the Official Information Act remains mystifying.
Over the years I had a number of dealings with Allan Hubbard, all of which were completed to the satisfaction of those involved, and while the way in which Allan sometimes operated may not have been orthodox, I was of the opinion that he was not a fraudster. The details set out in this book reaffirm that view. That is not to say that he was not party to wrongdoing or questionable financial practices.
The publication of The Billion Dollar Bonfire will doubtless cause some controversy and embarrassment amongst participants in the financial markets, certain former leading politicians who were involved, the supporters of Allan Hubbard and the investors in South Canterbury Finance Ltd and its associates. The public have a right to know what happened and what caused this sorry chain of events. This book is not only an honest attempt to outline what happened but also puts forward Chris Lee’s views of what needs to be done to avert similar situations in the future.
I would like to congratulate Chris on bringing together a complex story based on meticulous research.
Brian Kreft
Retired Investment Banker
Wanaka