Mark Hotchin & the Uncivil Society – When Will We Wake Up?

I wrote the below on New Zealand businessman Mark Hotchin, director of failed finance company, Hanover, on 1 June, 2012:

 

This being the first day of June, 2012, I am simply publishing a piece I first penned December, 2011, to mark the then first twelve months of ex-Finance Company director Mark Hotchin's asset freeze, not only without trial, but without a charge having been laid. Nothing has changed from when I wrote this; Hotchin now enters his nineteenth month without any criminal charge by the state, and it's sadly looking like, when his assets and his - and his families - lives were frozen, the state had no criminal case in prospect of prosecution. What a shameful indictment of the (lack of) the rule of law in New Zealand, as I define this in my article following.

I don't know Mark Hotchin, I'm neither defending nor attacking him: we simply owe it to ourselves to dispassionately understand the nature of the society we live in, and most of us would know what sort of a state practices detention without trial; well, an asset freeze with neither trial nor charge, for nineteen months, is a police state. When we smugly watch the nascent protests against Putin in Russia, and draw the obvious conclusions about that state, we are all missing the jackboots standing inside every room in New Zealand.

More and more I ask myself how can this happen? Every NBR and interest.co.nz thread about Hotchin is full of personal vitriol against the man, with no one seemingly able to grasp the desperate principles underneath his frozen life. I suspect it just shows how slavish as a society we have become behind the IRon Drape, in which the unprincipled hate of people laughing at the state-built gallows of their own lives, is part of the course in a country where a vigilante TV show consistently tops the weekly ratings.

 

This week we find from NBR:

 

The directors and promoters of the failed Hanover Finance group of companies will have their day in court in the middle of next year, more than three years after civil proceedings were filed against them by the Financial Markets Authority.

 

[Snip.]

 

The hearing date comes more than a year after the Serious Fraud Office completed its $1.1 million, 32-month probe into Hanover, which raised some concerns around the lender's behaviour but found nothing that crossed the threshold to warrant a criminal prosecution.

 

[Snip.]

Principal Mark Hotchin's assets have been frozen since December 2010 by the FMA's predecessor, the Securities Commission, including the proceeds from his multi-million dollar mansion on Auckland's exclusive Paritai Drive.

 

So after the Serious Fraud Office can find no case to make Mark Hotchin answer, yet another government department, the draconian Financial Markets Authority (FMA) can in a yet to be held civil case, keep this individual’s assets frozen for five years without trial. Justice this slow is not justice at all.

 

In one of my very first posts on Hotchin, four years ago now, I raised the nature of my disquiet over a state so powerful it can negate an individual’s rights like this:

 

Nothing attracted vitriol to my old blog Life Behind the IRon Drape more than the pieces I wrote on Mark Hotchin and Allan Hubbard (no relation). I may soon put them up again here, over December. For the coming one year anniversary I'm writing of is the freeze that was put on Mark Hotchin's assets over December, 2010. I have no idea whether Hotchin will be found wanting in respect of the laws of New Zealand, but he has now had his life frozen by the State for a year and not only has never been given the chance to defend himself in court, he's still not had a single charge laid against him.

To me, this denotes a State with far more power than I'm comfortable with, and no justice for the individual of Mark Hotchin, no matter what you think of him. The champagne thieving bureaucrats at the SFO need to charge Hotchin, or not, and give him his day in court (and unlike Mr Hubbard, don't make him have to sue to use his own money to defend himself). This isn't Putin's Russia, is it? It's New Zealand. Perhaps the difference is far less than we would all like to think.

 

Well the SFO didn’t charge him, they couldn’t make their case, so I guess that puts New Zealand firmly into Putin’s sphere rather than the Founding Fathers. Indeed those bullying statists of the Left take cynical glee in telling libertarians like myself we are utopian dreamers: and I agree, New Zealand is far closer to those big old state gulags, than to my fantasy of the free, civilised, prosperous Western society. We truly are in times when everything is tax avoidance, and everything is illegal, if that’s what the state decides, and where the God-like powers of departments like IRD above our privacy legislation are used to spy on citizens in programs that have nothing to do with the New Zealand tax take.

 

Finally, regarding Hotchin’s civil case in a year’s time, I repeat why that is not appropriate:

 

1) I contend the rule of law does not encompass the State taking a civil case, using taxpayer money, against Hanover. Surely this is outside the role of the State in a free country, as the losses borne are between Hanover and its investors: it's a private matter to those two parties, to be worked out through civil claims. The FMA should take no civil case for the same reason not one government should have bailed out one bank, and New Zealand should never have had legislated the Deposit Guarantee Scheme, with the disastrous unintended consequences it entailed. That is, just as the State and the Church were separated historically, to further the cause of freedom, so now must the state be separated from the economy and functioning of a free market, by which I mean, given the market is simply where individual needs and desires find their expression and resolution, separated from the lives of individuals, period.

2) My real concern, Mr Hotchin has had his assets frozen for over one [correction, four ]year[s] now, and still no criminal fraud charge has been laid, and prosecution of same would be the only appropriate role of state (which civil cases may well flow from). Nobody seems to have difficulty understanding that detention without trial is a practice that denotes the totalitarian State, not a state of freedom, well, how is Mr Hotchin having his life effectively frozen for over one year without a trial, or even a charge, any different (no matter what you might think of the man)? Does he get access to his funds to fight the State now in this civil case? Surely, even if it were legitimate the State take the civil case - it's not, but bear with me - then any criminal wrongdoing must be proven first?

 

Regarding that last, I repeat, no case for criminal wrongdoing could be made, so decide for yourself what sort of society that denotes, although I'll leave you the following words to ponder (hattip Sue@English_Woman:

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Fortress of Legislation Has Regulated Another Industry to Death: Financial Advisers.

AFA’s, or AFG’s, or  GHE’s, or ABC’s, perhaps GOD's?  Oh, whatever, so many confusing acronyms over time: financial advisers. On the regulatory death of free speech under our draconian securities legislation, there is now a dearth of financial advisers. That and the Fortress has legislated so many hoops to jump through in this industry, nobody can be bothered doing so anymore (paid link).

“It’s more of a gut feel of just looking at the maths and anecdotal feedback from discussions with the industry and how the limited number of AFAs are now needing to prioritise the personalised advice they provide,” he says.

“It’s important not just to knee-jerk at the numbers. We need to understand why there aren’t more AFAs.”

Mr Ireland notes some of the AFAs do not even deal with  KiwiSaver, particularly not for those with small balances. 

Other advisers are qualified and capable of becoming AFAs but do not do so because they don’t consider the benefits worth the  extra cost and compliance burden.

And the Financial Market Authority, FMA, as I've said over and over in this blog, is a monster that belongs in the USSR, not a free country: their continued police state actions over Mark Hotchin has been proof of that since the get-go. Regarding this story, my comment to the NBR thread sums up my lack of surprise well enough:

(Maniacal laughter).

Our securities law regulates everything right down to free speech - that is, there is none - and then we wonder why there are no advisers.

Given the risk faced in advising under NZ securities law, I wouldn't trust any adviser doing so, as they would by definition not be prudent.

Indeed, more and more, I don't know why prudent people would take the risk to build the companies to invest in, to be advised on.

A little over four million total population and so many laws: what a farcical kindy of a country we are.

For the record: I didn't vote for it.

Mind you, this will teach the industry hierarchy for toadying up to crony capitalism. You got what you asked for: big government - didn’t work out so well, did it, for any of us. Hell meet hand-cart ...

NZ: The Party of Small Government Making More Big Government Laws: Craig Foss and Low-Ball Offers.

No government should ever legislate their nose into a voluntary transaction between two consenting adults where there is no element of force or fraud involved. This National government’s coming Low-Ball Offer regulation is an inappropriate intrusion of the state, yet again, into the private, voluntary transactions of individuals. Worse, it’s treating New Zealand adults, as if they were children, in this kindergarten of a country. Understand that I know  what’s good for me better than any bureaucrat, and certainly any politician, so (Anti)Commerce Minister, the authoritarian Craig Foss, can take his regulation back to the Fortress of Legislation, and rescind it please, while giving the taxpayer their money back for the time that has been squandered over this.

Just in case Foss is confused by this attack on him, here’s what he doesn’t seem to understand: if a company wants to make me a ridiculously low offer on a share or bond I own, I don’t need to take it. I can simply say no. Armed with the Internet or a phone to a broker, I can find out the market value of any stock or bond I own within five minutes: I don’t need protection from a low ball offer.  And worse: sometimes a low-ball offer may be to an investor’s advantage. During the period of the finance company disasters, a low-baller willing to take a risk by offering a lower price for a bond than an investor might have got out of liquidation, could well be doing that investor a favour simply by offering them liquidity. If I was ninety years old and a low-baller offered me $10,000 for a bond I might receive $20,000 for from a liquidator in five years, well, time considered, $10,000 in my hand now may well be the prudent decision, because I might not be here in five years, or perhaps that money is needed now for medical bills that will make my life better. That type of opportunity, which may well improve my life, is the beauty of the functioning voluntary free market that Foss is trying to destroy.

Though, bottom line, it’s always about philosophy: freedom of the individual versus the mollycoddling of an out-of-control state.  And philosophically, here’s the final insult: for the act of a low-baller making me an offer that I can voluntarily accept or not, without duress - it’s just a letter through the post for Rand’s sake - and an offer that may well be doing me a favour, that low-baller, conducting their right of the voluntary offer, can be fined $30,000.

This legislation is every bit an insult as the recent IRD and MSD privacy breaches, therefore, I ask Foss to voluntarily step down from his portfolio please: if nothing else, he has proven he does not understand his party’s stated ethic of small government, by just placing the fist of state, in the form of the increasingly draconian Financial Management Authority (FMA), into my stomach again. And let me reiterate, the continuing power grab by the FMA, represents a bigger threat, and menace, to business, investment, and prosperity in New Zealand, than every low-baller does.

Doing the Rounds of the Police State.

I barely need comment on either of the below items: draw your own conclusions about where our social democracies have ended up, as I have stated clearly in my blog by-line above:

Firstly, from (behind the pay-wall) at NBR:

Auckland businessmen Andrew Tauber and Paul Webb have lost their appeal against the lawfulness of a tax department raid on their homes. … Messrs Tauber and Webb complained property was damaged in an intrusive search of their homes , which extended to a teenage girl’s underwear drawer. …

A tax partner at Ernst & Young says the court’s decision demonstrates the IRD has more powers than the police …

Secondly, from Sharechat:

Pyne Gould Corp and its trustee unit Perpetual Group are weighing up their options after the High Court ruled the Financial Markets Authority's raid for information was unlawful, though the market watchdog didn't have to return the information.

The High Court decided the FMA's notices to obtain information from Perpetual Trust were unlawful, Pyne Gould said in a statement to the exchange. The company is considering "the possible implications of the judgment," it said.

The fact you won’t find a single sitting politician who would be bothered about either of these (mis)uses of government force - the first immoral, the second illegal even under immoral law, but still with no consequence for any government officer involved - shows that not a single sitting politician deserves the vote of free men. I don't care what the excuse for each raid was: free men know that governments were never supposed to jackboot across this line into the voluntary society again. If the Fortress of Legislation has had to inveigle such draconian police state powers to sustain itself, then it  has long ago left a mandate to provide the rule of law in a free and civilised society.

Western Economies – Gone by Glide Time

I can demonstrate, by quoting one simple letter, why Western economies - particularly Europe - are failing. It’s more obvious than just the debt built up by politicians whom Keynes let off the leash of responsibility. It's more obvious than the central banked fiat money system, or democracy under a tyranny of the majority following the bribes of unprincipled politicians looking for a free lunch and no risk. It is, indeed, a tangible thing that covers and smothers you: the massive, moribund, choking, blanket of regulation reaching around the world, that has been patched and patched and patched to stitch us up over the last seventy years.

About fourteen or fifteen years ago ‘we’ – my wife and I being one of those joint account type of families - invested –Jesus, sorry, fell off my chair – we threw $10,000 into a UK investment trust. The plan – note this Mr Taxman – was long term savings into what in those days I thought to be capitalist economies, so providing us alcohol for old age. Trouble is, after at least, two, three, who knows how many inflationary bubbles called economic booms over that period, our $10,000 was at the end of March 2012, worth only $7,102.39. Over that time the damn thing has driven me nuts: the investment trust has changed its name at least four times; I once spent the better part of a day just trying to track it to its new name, as I updated its once a year belly laugh we called a ‘balance’  for our financial statements. Every time we’ve changed house I’ve had to hunt through reams of paper to find the address of the latest registrar – changed at least three times – to send new contact details. So, we’ve decided it’s better to cash up early: we’re planning to put the whole lot - minus loss, admin fees and commissions - into short term deposits while we not so slowly drain it off and drink it, to help get us to old age. And the process has set me to pondering over a glass of wine or three in the interim.

Here’s a big question: is modern portfolio theory such a good idea under crony capitalism? That was the central point I missed at the start of all this, and I’ve been learning to my detriment: the West is no longer capitalist, hasn’t been for a very long time, it is, as George Orwell called it, state capitalism, or crony capitalism, or socialism by any other name: more accurately, it’s statism. Indeed, the misnomer of Keynesian aggregates has effectively given the statist politicians an excuse to build national Ponzi schemes which, in a plot that makes a James Bond movie look daft in comparison, are now set to destroy the world’s savings, and with them, much of the middle class. And we are the generation for whom the chickens of truth have come home to roost and expose the battery cages that taxpayers have been imprisoned in, showing how they are standing on a rank, steaming hubris of shit. More, against this stench, diversification is no safeguard, there’s no clear air anywhere which allows the untaxed, unregulated voluntary transaction, while the maxim of hold long has become the one guaranteed way to lose the nest egg. As bad as my job is, I still thank Job I’m not a financial planner as Western stat(ist) capitalism gets printed on the presses into the end game. I sometimes wonder if this’s why Papa Morgan spends so much of his time chasing penguins in icy southern waters these days: he’s acclimatising to what’s coming for his industry.

Anyway, I detour. We decided to knock the bugger of this investment off, finally, and donate it to the vineyards of Marlborough, despite it aggrieves me the excise tax windfall this will be for an increasingly wowser government. Though it's this process that has given me the final proof of my premise. In cashing up, after finding the latest name of our fund, the latest value (oh dear, $6,987.98), the latest registrar, writing to it (don’t be silly, can’t email them), waiting three weeks, we get in the mail, just this morning:

“Unfortunately, we have been unable to complete your request. Due to legal requirements and regulatory permissions, we are currently unable to offer a Postal Share Dealing service … outside of the UK/European Economic Area (EEA). Please contact your local share dealing provider, such as a local bank branch who may be able to handle the transaction on your behalf …’

Oh, just great. Another barrier to get through, another commission to pay. I know why the West is collapsing: it’s collapsing because I can’t do something so simple, anymore, as get my own money back out of an investment due to ‘legal requirements and regulatory permissions’.

Though pity these poor sods at the registrar concerned, because, defeated on my first tilt at it, I’m going to have to send this issue nuclear: I’m handing the whole sordid affair over to the lovely wife. She’s the only person I’ve come across that can move a bureaucrat with any speed: for note that's what these businesses are now, bureaucracies - that’s what they had to become after the onslaught of regulation, after regulation, after regulation, which was all about, supposedly, protecting me, the investor. Well I certainly am protected, no doubt about it; I’m so protected I can’t even get what’s left of my money back. And don’t think we’re immune in New Zealand where we’ve just had the new Financial Markets Authority legislated to shoot, or kneecap, any investment still showing signs of life – because life is risk, right, and that must be eliminated - while the SFO was last seen scouring Christchurch for more work to slow up the rebuild, now they’ve ensured no sane person here would want to be a director of a company issuing prospectuses anymore.

Have a good weekend.

Postscript: by the by, tax inspectors in Indonesia are now being given three weeks military training. You see the way this is all going? And look whose using the exact same tactics as the Nazis and Big Brother in Orwell's 1984: hey kids, why not dob in mum and dad to the IRS whistle blower program. What ugly things our social democracies have become.

So many things I’d love to blog about, but alas, no time. Hopefully I'll get a chance to torture some more metaphors over next couple of days. Um, I wonder if some of my 'learned' readership have figured out yet that most of my pieces are written in iambic pentameter, and are written to be read aloud? Don't ask me why ...