The Serious Fraud Office (SFO) today confirmed that it had been conducting an investigation into the affairs of Hanover Finance Limited for the past 3 months.
SFO confirms Hanover Finance investigation
The Serious Fraud Office (SFO) today confirmed that it had been conducting an investigation into the affairs of Hanover Finance Limited for the past 3 months.
SFO Chief Executive, Adam Feeley, said that the investigation had now reached a point where reasonable grounds existed to believe that fraud may have been committed and accordingly the investigation had been elevated to a “Part II” investigation under the Serious Fraud Office Act.
“Given the intense public interest and media speculation, it has not been appropriate to make any public comment on this matter until we had a detailed understanding of the issues involved, and the entities and individuals behind the Hanover operation.”
“We have undertaken extensive preparatory work and are now in a position to move into a more active phase of the investigation.”
Mr Feeley said that the SFO had commenced issuing notices last week under section 9 of the SFO Act to over 30 individuals which would require their compulsory attendance at interviews and the production of documents relevant to the investigation.
“Given the volume of notices which are now being issued, it was inevitable that our investigation would now become a matter of public knowledge.”
Mr Feeley said that the scale of the Hanover collapse was such that it was not feasible for the SFO to investigate all aspects of its failure.
“We are focusing on some very particular transactions, and specific individuals within Hanover management and their board.”
Mr Feeley said that having considered the Securities Commission report and the complaints of a number of persons, including Allied Farmers, the efforts of the SFO investigation was best focused on several key areas relating to the payment of dividends and other transactions occurring immediately prior to announcement of the moratorium proposal, and debt restructuring involving the transfer of assets to Allied Farmers.
“We will be interviewing a small group of key Hanover staff and professional advisers to seek explanations of these transactions.”
Mr Feeley said that the even with a tightly focused investigation, the scale of the task was such that the SFO would be engaging significant external resources.
“The interest in Hanover is such that it is in the interests of all parties to ensure it is carried out with the utmost professionalism and urgency.”
“In addition to a large internal team, and collaboration with the Securities Commission and Registrar of Companies, we have engaged a number of New Zealand’s senior legal counsel and leading forensic accountants to assist us.”
Mr Feeley cautioned that, notwithstanding the focus of the inquiry and the resources which would be devoted to the investigation, the public should not expect quick results.
“It would be both unrealistic and unwise to think that an investigation of this complexity could be completed in a matter of weeks. This will be a lengthy inquiry and the only certainty from it is that any decisions reached will be the end result of a comprehensive and well-managed investigation.”
For further information
Adam Feeley
Chief Executive
Serious Fraud Office
Phone 021 333 539
Background Information
1). The role of the Serious Fraud Office
The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Act in response to the collapse of financial markets in New Zealand at that time.
The SFO operates three investigative teams:
- Fraud Detection & Intelligence;
- Financial Markets & Corporate Fraud; and
- Fraud & Corruption.
The SFO operates under two sets of investigative powers.
Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”
Part 2 of the SFO Act provides the SFO with more extensive powers where: “..the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”
The SFO’s Statement of Intent 2010-2012 sets out the SFO’s three year strategic goals and performance standards. It is available online at: www.sfo.govt.nz(external link)
2). SFO Powers
Section 9 - Power to require attendance before Director, production of documents.
(1) The Director may, by notice in writing, require—
(a) Any person whose affairs are being investigated; or
(b) Any other person who the Director has reason to believe may have information or documents relevant to an investigation,—
at the time and place specified in the notice, to do any one or more of the following things:
(c) To attend before the Director:
(d) To answer questions with respect to any matter that the Director has reason to believe may be relevant to the investigation:
(e) To supply any information specified in the notice with respect to any matter that the Director has reason to believe may be relevant to the investigation:
(f) To produce for inspection any documents which are specified in the notice and which the Director has reason to believe may be relevant to the investigation.
(2) Where any document is produced pursuant to this section, the Director may do any one or more of the following things:
(a) Retain the original document produced, provided that a copy of the document is taken and returned as soon as practicable thereafter:
(b) Take copies of the document, or of extracts from the document:
(c) Require the person producing the document to provide an explanation of the history, subject-matter, and contents of the document and to answer any other questions which arise from that explanation and which the Director has reason to believe may be relevant to the investigation:
(d) Where necessary, require the person producing the document to reproduce, or to assist any person nominated by the Director to reproduce, in usable form, any information recorded or stored in the document.
(3) Where any person is required to produce any document pursuant to this section and fails to do so, the Director may require that person to state, to the best of his or her knowledge and belief, where the document is.
(4) Where any person is required to supply any information under this section, and does so by producing a document containing that information, the powers conferred by subsection (2) of this section shall apply in all respects to that document.
(5) Any person who is required to attend before the Director under this section, shall, before being required to comply with any requirements imposed under this section, be given a reasonable opportunity to arrange for a barrister or solicitor to accompany him or her.
(6) Section 18 of this Act shall apply to any notice given under this section.
Section 27 - Privilege against self-incrimination no excuse
No person shall be excused from answering any question, supplying any information, producing any document, or providing any explanation pursuant to section 5 or section 9 of this Act on the ground that to do so would or might incriminate or tend to incriminate that person.