Boscawen John: Financial Review Debate — In Committee 
Boscawen John: Financial Review Debate — In Committee 
[Volume:661;Page:9470] 
JOHN BOSCAWEN (ACT) 
: 
 I will refer to the collapse of financial markets and the importance of restoring confidence in financial markets and particularly to page 107 of the Commerce Committee’s report on financial markets. The committee outlined the progress that the Government has been making to restore confidence in financial markets. But this afternoon I want to talk about one specific finance company Strategic Finance. Sadly it was placed in receivership last Friday with no doubt the loss of many hundreds of millions of dollars. I believe that if the Government wants to restore confidence to the financial markets it needs to put Strategic Finance into statutory management. I wrote to the Minister of Justice Simon Power on 14 December outlining the reasons why I believe he should do just that. I believe that some of the investors who voted in the moratorium in late 2008 did so without knowing the full situation surrounding Strategic Finance’s financial affairs. 
In setting out those reasons I will come back to a speech I gave on the last sitting day of last year. In particular I referred to the fact that in the June 2008 accounts Strategic Finance showed $300 million worth of second mortgages. Twelve months later in the June 2009 accounts rather than showing $300 million worth of second mortgages it showed $232 million of second mortgages— 
The CHAIRPERSON (Eric Roy) 
: If I can pause the member for a minute this is a financial review of the Ministry of Economic Development. Although the member has some interesting material it should have some connection to that matter. 
JOHN BOSCAWEN 
: I am making those points because the theme that comes through from the Commerce Committee is a need to restore confidence. We have had a situation arise where accounts have been presented that in substance are showing mortgages that although classified as second mortgages are in effect third mortgages. The people who have invested in those second mortgages bondholders in Strategic Finance are told more than 12 months after the end of the financial year that the second mortgages they think they hold—some $68 million worth—are second mortgages with subordinated position. A second mortgage with subordinated position is a mortgage where Strategic Finance has participated with other lenders and investors where the company’s position is subordinated to those people. 
In my letter to the Minister of Justice on 14 December I gave an example of the Hilton Fiji project where some $80 million $90 million or $100 million was advanced on second mortgage but of that mortgage approximately $30 million was a preferred position. So when it comes to paying back that second mortgage those preferred investors those at the top half of that second mortgage get paid in advance. I believe that the people who voted in the Strategic moratorium did not have the full facts at their disposal; I believe that they may not have voted for that moratorium and in terms of restoring confidence— 
The CHAIRPERSON (Eric Roy) 
: There are two issues here that trouble me a little bit. The first which I have raised earlier is that this is the financial review of the Ministry of Economic Development. The second is that I believe that this matter is before the courts so under the Standing Orders some elements of what the member is talking about are matters that are sub judice and cannot be referred to in the Chamber. I tell the member he should move on from the material and refer to matters on the Ministry of Economic Development financial reviews. 
JOHN BOSCAWEN 
: I have only a couple of minutes left. I guess the Commerce Committee was concerned about restoring confidence to financial markets and we have had a receiver appointed to a company that can hardly be called an independent receiver; PricewaterhouseCoopers wrote an expert opinion that appeared in the moratorium. And no this matter is not before the courts I believe but it should be before the courts. If the Government is serious about restoring confidence to financial markets it can pass all the laws that it wants but it may as well start by enforcing the laws it already has. To restore confidence in the financial markets I believe we need an independent statutory manager appointed to this company. I do not believe it is appropriate to have PricewaterhouseCoopers appointed as a receiver when it was that party’s expert opinion that may well have led the company going into the moratorium in the first place and when the losses the bondholders will incur—and they will be substantial—will be even greater than they may have been had the company been put into receivership in December 2008. Thank you. 
Report noted.