South Canterbury Finance Scandal and Investor Impact

The South Canterbury Finance scandal had a devastating impact on investors, with many losing their life savings. The company's collapse in 2010 left a trail of debt in its wake.

Investors were promised high returns on their investments, but in reality, the company was struggling financially. The company's financial statements were also found to be inaccurate.

Many investors were unaware of the company's true financial situation, and some were even misled by the company's management. The company's collapse led to a significant loss of trust in the finance industry.

The impact of the scandal was felt far and wide, with many investors left to pick up the pieces.

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South Canterbury Finance started as a small-time lender to local businesses and households in Timaru in 1926. It was initially named South Canterbury Loan and Finance and specialized in small personal loans.

Allan Hubbard bought the company in either the 1950s or 1960. He later became the sole owner after buying out Hugo Fanning in 1964.

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By 1963, Hubbard and Fanning had acquired South Canterbury Finance from a group of businessmen, including a member of the Todd family. This marked the beginning of Hubbard's significant involvement in the company's growth.

In 1986, Hubbard bought Canterbury Finance from Humphrey Rolleston in return for a 23% holding in Southbury Group. This acquisition helped the company achieve real size.

South Canterbury Finance became New Zealand's tenth largest finance company by 1992. Hubbard was considered the driving force behind the company's growth.

By the late 2000s, South Canterbury Finance had 35,000 investors and its assets were worth almost $NZ2 billion. The company owned 13 companies, including fruit packaging and warehousing company Scales Corporation and helicopter and tourism business Helicopters NZ.

In November 2008, SCF was accepted into the New Zealand Deposit Guarantee Scheme.

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South Canterbury Finance's lending practices were quite extensive, with loans made to property development throughout New Zealand, Australia, and Fiji. At 30 June 2009, property loans were a staggering $414.2 million.

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Real estate lending represented 207 loans, with an average net loan value of $1.15 million. This is a significant amount, and it's worth noting that 37% of lending was secured by a second or lower ranking mortgages.

Some of these loans were quite large, with ten property loans exceeding $10 million. This highlights the scale of SCF's lending operations.

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Rod Oram has discussed South Canterbury Finance, highlighting the issue of New Zealand's lack of deposit insurance.

This makes us a great anomaly among developed countries, as Rod Oram pointed out in his discussion about South Canterbury Finance.

South Canterbury Finance was a major lender that faced significant issues, as Rod Oram has discussed in his business analysis.

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The Serious Fraud Office laid 21 charges against five individuals in respect of South Canterbury Finance on 7 December 2011.

These charges relate to a variety of allegedly fraudulent transactions with a total estimated value of approximately $1.7 billion.

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This includes an estimated $1.58 billion from the Crown Retail Deposits Guarantee Scheme.

The charges include entering the Crown Guarantee Scheme by deception, omitting to disclose a related party loan of $64.185m from SCF to Southbury Group and Woolpak Holdings, failing to disclose related party loans of $19.1m from SCF to Shark Whalesalers, and breaching the crown guarantee scheme by lending $39m to Quadrant Holding Limited.

The five accused are former South Canterbury Finance chief executive Lachie McLeod, former South Canterbury Finance directors Edward Oral Sullivan and Robert Alexander White, former chief financial officer of South Canterbury Finance, Graeme Brown, and Timaru chartered accountant Terry Hutton, formerly of Hubbard and Churcher.

All five defendants deny the charges, and leading up to trial, charges against Brown and Hutton were withdrawn.

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South Canterbury Finance (SCF) had a significant lending portfolio, with property loans making up a substantial portion of their business. At 30 June 2009, property loans totaled $414.2 million.

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Real estate lending was a major component of SCF's business, with 207 loans averaging $1.15 million each. These loans were often secured by second or lower ranking mortgages, which can be a riskier proposition for lenders.

37% of SCF's lending was secured by second or lower ranking mortgages. This is a notable fact, as it highlights the potential risks involved in lending to property developers.

Ten property loans exceeded $10 million, demonstrating the significant scale of SCF's lending activities.

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The SCF trial was a complex and lengthy process, spanning 14 months and involving a $1.7 billion fraud case. The Serious Fraud Office (SFO) laid charges against three former South Canterbury Finance directors in December 2011.

Two of the defendants, Lachie McLeod and Robert Alexander White, were acquitted on all charges. Edward Oral Sullivan, however, was found guilty of five charges and acquitted on the remaining four.

The trial centered around allegations of undisclosed, related party lending and the misuse of the Crown Retail Deposit Guarantee Scheme. The SFO estimated the total value of the allegedly fraudulent transactions at $1.7 billion.

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The SCF trial concluded in August, and the verdicts were handed down by the High Court at Timaru. Justice Heath delivered the verdicts, which included the acquittals and guilty verdict.

Here's a summary of the verdicts:

Sullivan was remanded on bail and will be sentenced on December 12, 2014. The SFO is considering the judge's reasons for the decisions.

Former SCF investors have pledged over $117,000 to fund a possible civil claim against those responsible for the company's collapse.

This shows that even years after the fact, investors are still seeking justice and compensation for their losses.

The amount of $117,000 is a significant pledge, indicating that investors are willing to put their money where their mouths are to pursue a claim.

It's a testament to the determination of those who lost millions of dollars in the collapse of South Canterbury Finance.

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