Allan Hubbard's sudden death has jeopardised a proposal by Auckland businessman Tur Borren to negotiate a commercial settlement to the Hubbard statutory management.
The Borren plan would have resulted in a new company being formed to hold the assets and liabilities of Aorangi Securities and Hubbard Management Funds, boosted by a $30 million "capital" injection which was expected to come through tipping some of the Hubbards' private assets into the mix.
The commercial solution has already been presented to statutory managers Grant Thornton. Mr Borren believes it would have won support from all creditors, investors and co-venturers involved in the Hubbards' private affairs.
But the Timaru financier's death means negotiations are not likely to be able to proceed unless Mr Hubbard's estate also approves the plan.
Mr Borren had been advising Allan and Jean Hubbard since they were put into statutory management, along with Aorangi Securities and Hubbard Management Funds, in June 2010. But he is not prepared to comment publicly until after Mr Hubbard's funeral.
The widely respected businessman is managing director of private investment company Demi Holdings and has been actively involved in financial reconstructions in the NZ business sector, particularly the resolution of financial difficulties experienced by Renouf Corporation which was later relisted as Hellaby Holdings. Mr Borren subsequently served as its managing director.
In an August 1 report, Mr Borren said Mr Hubbard had given an undertaking he would support a commercially negotiated solution by giving him personal power of attorney to oversee its implementation until all public debts had been discharged.
In interviews Mr Hubbard expressed considerable confidence in Mr Borren.
The plan has also been supported by South Canterbury identities such as John Acland, Neil Anderson and Diana Pye. Mr Acland had been proposed as chairman of the new company.
Mr Borren's report argues that the appointment of statutory managers in the private affairs of Allan and Jean Hubbard and associated entities was never requested by the investors whom the statutory management was designed to protect. He says that those investors have been disadvantaged by the outcome and suggests the Government may be accountable for this loss of value.
At the weekend, several of those investors told the New Zealand Herald they had had a "gutsful" of waiting for the two Hubbard companies to come out of statutory management. They were particularly incensed at the very low distributions that Grant Thornton had made and the erosion of "their capital" through "inept management" and hefty fees paid to the statutory managers and lawyers.
The Hubbard Support group is now looking to take a class action against the Government, alleging that it put Aorangi Securities and Hubbard Management Funds into statutory management on the basis of a flawed Companies Office investigation.
Group spokesperson Jan McPherson said the investors "have been the forgotten party".
The support group is expected to base its action on an investigation by Kerry Grass, which it commissioned last December. Mr Grass' investigation summary was sent to key Cabinet Ministers - including Prime Minister John Key - last week. Mr Key passed the issue to Justice Minister Simon Power, who recommended Cabinet put the Hubbards and their associated entities into statutory management.
Mr Grass' summary report alleges that the relevant authorities failed to carry out their duties objectively or reasonably after receiving a complaint from an investor who was granted anonymity. The report says the Securities Commission effectively hindered and prevented Aorangi Securities from issuing a prospectus. It also says that Companies Office investigation was materially flawed, in that among other things, the inspectors did not review all available evidence.
It also alleges that Grant Thornton had a conflict of interest and that the Serious Fraud Office had intimidated some elderly investors.
