10 November 2010

The $150m Fudge that might not be Swept Under the Carpet

The Helicopters NZ transaction undertaken by South Canterbury Finance on 28th Feb 2010, whereby SCF purported to book $152.5m in new equity, but actually booked more like $11.8m (less commission paid to Forsyth Barr and other transaction costs) perhaps will not be swept under the carpet, not least as a result of my efforts. Chalkie has written a more stinging piece on it today after an earlier one in July. The National Business Review has also picked up on my analysis several times. David Cunliffe has also extracted an extraordinary admission from Treasury in Parliament:

'Treasury’s view of the transaction was that at worst it made no difference to the Crown. ... That view has proven to be correct, and I do not believe the cost to taxpayers was impacted by this transaction.
I take this to mean that they knew that the net effect of the transaction (i.e. closer to $12m than $150m) was recognised by Treasury when they were being asked to approve it.

Subsequent to the transaction, materials released by Treasury indicate that Craig Murphy, Senior Analyst, The Treasury, expected that the provisioning for the Crown's loss on SCF should decrease by $150m as a result of this transaction, however, whoever had the seniority and authority to sign off the actual provisioning levels must have been in the know, as no material change in the provisioning levels happened as a result of this transaction.

I have a hope that this sleight of hand accounting for this transaction will see more scrutiny. Sandy Maier and the Board have a lot to answer for on this transaction, as do the trustee and the Treasury (I'm still planning on writing something on the Crown's role in this saga).

I'll bet this won't be the last we'll hear about this transaction.

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