SCF:David Cunliffe continues to seek enlightenment

As I suspected David Cunliffe has embarked upon the ritual of using Question Time to raise a series of questions re SCF, no doubt hoping that the constant drip, drip approach will over time wear down his opponent and/or gain him a breakthrough – if of course there is one to be had. Plus of course trying to cause the Government pain and distress.

Today’s skirmish in the struggle between Cunliffe and Bill English can be seen here:-

Today was about when the view was reached that SCF would fail and whether statutory management as an option was explored.

Russel Norman of the Greens joined in as a player today.

My initial thoughts, based on a first viewing and reading of the material follow.

This extract was an interesting exchange:

Hon David Cunliffe: Approximately how much extra taxpayer liability would the Government have avoided if it had intervened in June 2009, and what was the rationale for incurring the additional taxpayer liability after that date?

Hon BILL ENGLISH: The first point I make is that even as late as early 2010 no one really had a good grip on the assets or liabilities of South Canterbury Finance. In fact it became clear, with KordaMentha’s involvement, that the Government had a better idea of that than the company itself did, until Mr Maier came on the job. The kind of calculation that the member is postulating never really occurred. The Government’s approach was, knowing that there was potentially a very large liability, to make sure the company had every opportunity to succeed so that there was no taxpayer liability. We made decisions along the way that did not, in our view, increase the taxpayer’s liability, yet gave the company the best opportunity to succeed. In the end the company did not succeed.

I find the comment about the Government having a better idea than the company of the position, quite fascinating. It suggests at the very least that governance was severely lacking. It calls into question the quality of fundamental business processes and basic internal control, when one hears/reads:-

Hon BILL ENGLISH: The first point I make is that even as late as early 2010 no one really had a good grip on the assets or liabilities of South Canterbury Finance.

Indeed, one might wonder just what the board of directors was doing to fulfil its stewardship role, if Bill English’s statement is correct. How long had that been the case is a question that also comes to my mind.

The statements made today, certainly seem to lend support to the comments I expressed the other day, some of which are below:-

To me, and in my opinion based on reading the article and other prior ones, plus other media comment, it reveals a pattern of:-

1. Lax or lacking governance

2. Poor internal control in certain areas

3 Dominance of process by one person, which is normally seen as a control weakness and business risk

4 Business processes inadequate for the scale of operation undertaken

5 Management weakness, as it could be inferred that to an extent lending operations were the province of individual fiefdoms, especially given Mr Maier’s comment on Lending Officer control.

The points above leading to a personal view that business risk was being incurred which was capable of being reduced and or avoided.

These thoughts are to my mind borne out by the comprehensive revision of past financial statements by Ernst & Young after their appointment – plus the fact that they queried whether SCF was a ‘going concern‘. It would be fascinating to know what was contained in any post audit letter on suggestions for improvement.

I tend to wonder about the role of the board of directors in all this. Just what reports and information were they receiving?

Russel Norman’s exchange with Bill English did bring out a couple of interesting points:-

Dr Russel Norman: Given the level of what we could only describe as fundamental uncertainty concerning some of the basic facts—that is, about whether the level of risky borrowing increased after the guarantee—why will the Minister not support having some kind of select committee inquiry or public inquiry into the events surrounding South Canterbury Finance’s failure, given the amount of public money involved?

Hon BILL ENGLISH: In the end that is a matter for the select committee. The Government will, when we have the time and the resource, issue all the documents related to the scheme that we can. That will give the member, along with anyone else, the opportunity to scrutinise all the relevant information and decide which further questions need to be answered

This seems to suggest that whilst at this time Government is not proposing to hold an inquiry, a mistake in my view, as I think a wide-ranging inquiry performed by appropriately qualified persons outside the political process into the whole finance company mess not just SCF would be best, there is nothing to stop an appropriate Select Committee undertaking an inquiry. However, as we saw with US Congressional Hearings into the Gulf of Mexico oil spill such inquiries tend to be more of a political grandstanding opportunity than a reasoned and objective look at the facts. Hopefully, any inquiry by a select committee in NZ would not degenerate into a partisan mud-slinging contest.

It was heartening as well that Bill English is on record regarding the making available of all information, albeit with a caveat which might cause restrictions on availability in due course.

I look forward with interest to the next instalment . Watch this space as they say!

2 responses to “SCF:David Cunliffe continues to seek enlightenment

  1. Cunliffe will be asking some very good questions in the near future.

  2. It will be interesting to see where he goes with this

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