Dunedin City Holdings Limited

Dunedin City Council
Media Release

New Start For DCHL

This item was published on 01 Nov 2011.

In keeping with the recommendations of the [Larsen] Report on the membership and operation of DCHL, the following measures have been endorsed by the Council at its meeting yesterday.

    • Membership of DCHL board precludes membership of the boards of subsidiary companies
    • Elected members and senior DCC staff not eligible for board membership
    • There will be no multiple directorships
    • The DCHL board will be reconstituted with three directors only.

The Council expects these measures to be implemented immediately.

To this end:

    • DCHL board have all resigned or been removed.
    • Two new DCHL board members announced today are Denham Shale and Bill Bayliss.
    • They will be assisted by Warren [Larsen] who will act as a consultant to the DCHL board.
    • There will be a further appointment to the board determined by Messrs Shale, Bayliss and [Larsen].
    • The new/interim board will guide the implementation of the restructuring of the subsidiary companies’ boards.

Contact Dave Cull, Mayor of Dunedin on 477 4000.

DCC webpage

*Name correction in square brackets by What if? editors.

Larsen Report via this DCC weblink – published 11 August 2011.

Related Posts:
28.10.11 DVML, DVL and DCHL annual reports
16.9.11 DCHL and subsidiaries: shuffling, no real clean out?
2.9.11 Dunedin City Council is buggered
13.8.11 Ridding DCHL of conflicts of interest, Otago business monopoly ‘by director’, and other ghouls
9.8.11 CRITICAL Dunedin City Council meeting
3.8.11 D Scene broke the news
29.7.11 WE ALL SAID IT #DunedinCityCouncil #SHAME
9.2.11 DCC and DCHL, was there ever any doubt?

Posted by Elizabeth Kerr


Filed under DCC, DCHL, Economics, People, Politics, Project management

73 responses to “Dunedin City Holdings Limited

  1. Why does the board need a consultant? Is it justified? How much are his fees?

    We all know what consultants charge like….

  2. Russell Garbutt

    Well, well.

    I am relaxed about Larsen looking longer at the whole DCHL setup as he seems to have got to the nitty gritty of the setup so long supported by the likes of Chin, Harland, Brown, and the late Walls. Not to forget the major beneficiary Hudson who has, for years, creamed the City as he sat with his behind firmly in the middle of the fence. If Hudson had any moral character whatsoever, he would have resigned from all his public positions a long time ago knowing that he has had a conflict ever since he sat round the Council table and had anything to do with DCHL.

    Not missed for a minute either will be all those other Directors who, not to put too fine a point on it, have been in positions where conflicts between DCHL business and their own businesses have been more than close.

    I look forward to the yelping by these members of the OB network, but it is interesting that while I heard the result of the press release on National Radio a couple of hours ago and now have read it on What If?, there isn’t a squeak from the Oddity on-line. I bet there are a couple of people there wondering how to best downplay things so the normal people are protected as best as can be managed.

  3. Mike

    What about the non-DHCL directorships? I assume Syd Brown is on the Golden Block board representing the DCC’s 49.9% investment right?

    • Elizabeth

      Good question, Mike.

      Meanwhile, ODT is breaking news…

      ### ODT Online Tue, 1 Nov 2011
      Cull sacks board of DCHL
      By David Loughrey
      Dunedin Mayor Dave Cull has sacked the entire board of the city’s holdings company, and brought in Auckland-based Denham Shale to institiute a major restructure of the council’s group of companies. Two of the five directors, Mike Coburn and Stuart McLauchlan, resigned rather than being “removed” from Dunedin City Holdings Ltd (DCHL), Mr Cull said.
      Read more

  4. Russell Garbutt

    Another interesting question to ask is why was it that Coburn and McLauchlan “resigned” before being sacked?

    The only options that I can see is that the entire group were given the chance to resign before the sackings commenced and that these two saw that they may save some of their reputation by resigning, or that they were given the chance to resign ahead of anyone else knowing what was going on.

    But the difference between voluntarily walking the plank or being forced to wander down the wood at the point of Dave Cull’s sword is a small one.

    Both may attempt to save some of their reputation but neither of these two coots can divorce their lack of action while serving on the Boards and continuing to take the fees.

    I think it ironic to say the least that just a few days ago in the ODT McLauchlan was yet again putting the case for big increases in Director’s fees. Yeah right. Not a bad little number to be being able to be appointed to a position without a contest, show up for an annoying meeting or two, keep quiet about the blindingly obvious conflicts, ignore little things like accountability, do a few deals, and wander off with the loot.

    More power to Dave Cull in sorting out the other obvious things that need sorting.

  5. Peter

    All credit to Dave Cull and the rest of the council in seeing this through. It is easily the best thing they have done. This, plus a new CEO who seems to be genuine, is heartening for Dunedin.

    • Elizabeth

      ### ch9.co.nz November 1, 2011 – 6:25pm
      Council Controlled Organisations to be restructured
      The city’s Council Controlled Organisations are to be restructured following an announcement by the Mayor today. The changes have been prompted by the Larsen Report, which highlighted Councillor Paul Hudson’s position as chairman of Dunedin City Holdings Limited as a conflict of interest.

  6. Mike

    McLauchlan of course was on the board of SCF along with the 2 new guys they just hired … (it’s a small plaid mafia)

  7. Ro

    Were Coburn & McLauchlan the two least-recently reappointed directors whose appointment was up for renewal anyway? This would reduce their honour somewhat and underline the obstinancy of the others,

  8. Ro

    And apart from Paul Hudson, who were the directors who were sacked?

  9. JimmyJones

    Peter, I think you are being too generous to our Mayor. Sacking the DCHL board is a good thing, but we shouldn’t think that this will fix the big problems like:
    – excessive debt caused by continuing irresponsible spending
    – insufficient spending on essential infrastructure (eg water pipe renewals)
    – unacceptable levels of predicted rates increases
    – rapidly diminishing profitability of DCHL (SOI profit forecasts)
    – dishonest financial forecasts for the stadium companies
    – “Cone Of Silence” around stadium information – both councillors and citizens are being misled about costs
    – dangerously poor decisionmaking from our councillors and staff. Staff have their own agendas and councillors mostly believe everything staff tell them.

  10. Phil

    Given that the stadium has reached Practical Completion stage, which it would have done prior to the RWC matches in order for it to obtain the necessary Code Compliance certificates from DCC to permit public occupancy, final payment claims and payment certificates will have been issued. Payments are required to be resolved within 20 working days following the submission of a monthly payment claim, and we’re well past 20 working days since the stadium was handed over. Therefore, it will hold that the DCC and Council are now in receipt of the agreed total costs payable to Hawkins Construction, consultants, and parallel contractors for the period through to the stadium being handed over to the venue operator. Any chance that the rest of us might be let in on the secret as well ?

  11. Peter

    Jimmy. I take your point. I was just referring to the reforms for DCHL.

    • Elizabeth

      [Paul Hudson] The city councillor said he did not attend Monday’s council meeting because of the potential conflict of interest, and was “disappointed” he had not heard about yesterday’s announcement until approached by the media.

      ### ODT Online Wed, 2 Nov 2011
      Council dumps directors
      By David Loughrey
      The Dunedin City Council has sacked the board of the city’s holdings company as Dunedin Mayor Dave Cull acted swiftly yesterday to implement moves ratified by the council the previous day. Chairman Paul Hudson and four directors have been removed from their positions on Dunedin City Holdings Ltd (DCHL), though they will, for now, keep directorships on subsidiary companies.
      Read more

      (via ODT)
      • Mr Shale is a practising lawyer, an accredited fellow of the Institute of Directors, and a member of the directors’ institute national council. He is chairman of Farmers Trading Company and director of OceanaGold, among other positions.
      • Mr Baylis is also an accredited fellow of the Institute of Directors, a fellow of the NZ Institute of Chartered Accountants, chairman and former chairman of several companies, and was appointed to the Carisbrook Stadium Trust in 2009.
      • Mr Shale and Mr Baylis have previously worked together on restructuring; in 2009 they, and Mr McLauchlan, were appointed as independent directors of South Canterbury Finance.

      ### ODT Online Wed, 2 Nov 2011
      Directors calm over changes
      By Chris Morris
      Directors of Dunedin City Holdings Ltd say they have delivered for the Dunedin City Council, despite being removed from their posts or forced to resign. DCHL directors Stuart McLauchlan and Michael Coburn opted to jump rather than be pushed, faced with Larsen report recommendations calling for restructuring over an $8 million annual dividend shortfall. Fellow directors Norman Evans, Ross Liddell and chairman Paul Hudson – also a city councillor – chose not to resign, and were instead removed in changes confirmed by Mayor Dave Cull yesterday.
      Read more

      • Elizabeth

        From the comment by russandbev (ODT Online Tue, 01/11/2011 at 10:03pm) – And now for the next stage:

        “Now Mr Larsen, or someone like him, needs to be appointed to examine and report on the financial nonsense surrounding the city’s finances. Is it OK that our current debt level per ratepayer is running at about 5 or 6 times the NZ average? We all deserve answers on how this got to happen, who was responsible, and how they are going to be held to account. “

  12. Hype O'Thermia

    I wonder what the total amount paid to the new directors will be, compared with the total raked in by the previous bunch.

  13. Russell Garbutt

    I’m not the first person to hold up a flag of caution in terms of whether the medicine has the potential to do as much harm as the original disease.

    The history of South Canterbury Finance is a sad one and those responsible for the appointment of Directors in the DCC would do well to examine very carefully what happened to SCF and the subsequent taxpayer bailout. Much was made of Mum and Dad investors in this company, but I’d be also interested in how many “habitual” or large corporate or individual investors had their investment settled very favourably within a very short time. SCF governership doesn’t seem to me to be a very good indicator of wise, prudent directorship and to suddenly read that:

    “Mr Shale and Mr Baylis have previously worked together on restructuring; in 2009 they, and Mr McLauchlan, were appointed as independent directors of South Canterbury Finance.”

    I’m hoping that the lack of communication from DCHL is not going to deteriorate, and that Mr McLauchlan’s views on DCHL shedding in a radio interview yesterday – read sell off – of assets is not an indicator of things to come. Smacks of the vultures circling the corpse a bit to me.

    After all, it was the like of Mr McLauchlan, that ensured that this City entered into a splurge of ratepayer funded spending on the new rugby stadium. They have every opportunity to provide all sorts of “fixes” that potentially bring benefits only to those that are in a position to purchase such assets and subsequently sell them on to those that the City would never do.

    Until there is an independent and trustworthy financial analysis of ALL the DCC activities including the CST, DVL, DVML, DCHL and all its companies and all of the DCC activities, I am loathe to accept that we are being told the entire truth.

    All that said, there is no doubt that Mayor Cull has done the right thing in terminating the deep gravy train so thoroughly enjoyed for so long by those happy to ignore basic conflicts – we just need to make sure that the place at the trough is not taken up by others who may be eager to try the taste.

  14. Hype O'Thermia

    Russell, I haven’t seen any detail yet so am wondering if the only change is change of personnel, or if there will be changes in what they can do. There need to be limits to their actions, they cannot be permitted to act autonomously with our city’s assets.
    Uh – unfortunately they CAN. What I mean is they should be constrained by a high razor-wire topped fence from doing so.
    Has anyone read or heard anything along the lines of limiting their power? Any changes taking place before these new brooms start sweeping away the good with the bad?

    • Elizabeth

      One of the fastest changes I want to see – but which seems unlikely – is Dave Cull ousting Stuart McLauchlan from all DCC company involvement as the restructure takes effect. A vote of no confidence in the fellow hangs in the air.

      Next to get rid of is Bill Baylis, once his ‘job’ is done. Both men are too deeply immersed in the old boyfriend network. I realise the pool of directors nationwide is fairly small but why give DCC and ratepayer funds another chance to be manipulated and placed at further risk by private interests, especially if those interests are conniving to secure the Dunedin water asset for their own gain.

      The true extent of the companies’ rot is yet to be identified, openly and transparently by the Council – for public scrutiny. All those on the subsidiary boards have to go, they’ve made their hay while the sun shone, unaccountably for much of it – a few things to surface publicly before our headache clears.

      And yes, the true extent of Dunedin City Council’s playing of the books is yet to be identified through a forensic audit, the ultimate accountability for public scrutiny. Lots of rocks to look under.

  15. Robert Hamlin

    I regret to say that I must echo Russell’s comments. Just a brief history here. I appended a comment relating to the history of these directors to the original ODT article that appeared on the website yesterday. The article promptly disappeared and then reappeared with a ‘sugared’ version of my comments reincorporated. The original article and my comments, quite possibly along with those of others, conveniently disappeared.

    I noted as part of this comment that Messrs Baylis, McLauchlan and Shale were appointed to the board of SCF as independent directors in late 2009, around a year after National extended the deposit guarantee scheme to SCF.

    I agree with Russell that the SCF situation that was presided over by these three individuals needs to be thoroughly investigated. However, this will now never happen as Bill English paid out all SCF depositors (including those not covered by the scheme) literally within hours of the trustees of SCF putting the company into receivership. This made inconvenient court cases that might have turned up equally inconvenient information impossible to pursue as the Government (ie us as taxpayers) was at that point the only ‘injured party’ who could initiate such proceeedings. Just to make extra sure that nothing more was said and/or done to establish just what had happened, Mr English then refused to hold any kind of inquiry due to ‘lack of resources’. This ‘lack of resources’ may well be linked to the $1.1 billion that the collapse of SCF has cost the taxpayer. As a top rate taxpayer my individual personal bill for this is likely to exceed $2,000.

    Just who were the beneficiaries of my involuntary largesse? (I never invested in any of these finance companies because I studied their structure and decided that the risk to the debenture holders was far in excess of that suggested by the premium over bank deposit rates that was offered.)

    Martin Kay on stuff.co.nz (2/9/2010) states that when SCF collapsed, it owed $1.6 billion to 32,000 investors. This works out at an average of $50,000 apiece, but in the same article he suggests that the rich caused SCF’s collapse by pulling their deposits back to the maximum of $250,000 per account specificed in the new tightened version of the guarantee scheme. Therefore, there must have been a lot of them above this threshhold.

    To these larger depositors must be added the bondholders. The bonds issues by SCF are a bit of a mystery. Bonds do not really fall under the description of a retail deposit, and in the months leading up to the final receivership of SCF they were trading at steep discounts (up to 40%). This suggests that the bondholders of SCF themselves knew that they were not covered by the actual letter of the guarantee, otherwise the bonds would have represented no risk and therefore would have attracted no discount.

    The payout of $350 million to these bondholders by the Government therefore seems peculiar for two reasons. It also led to enormous profits for those who held them. This group held both large scale corporate and personal speculators. This drops the average deposit to some $30,000, which does suggest that the deposit book of SCF was very heavily populated by very large $250,000+ depositors before the rules got slightly tightened. However, unlike the bondholders, they were not speculators, they were onto a ‘dead cert’ – as long as they kept below the maximum that allowed full and free access to my (and your) back pockets. The reduction of this maximum led them to pull their money out of SCF and into other wheezes and thus triggered the final hit. So, who benefitted – well, the Great and Goods (G&G’s) of course – innit always the way?

    The prevailing ‘fog’ surrounding SCF at the time is perhaps summed up by a reported comment from an analyst at the time, taken from stuff.co.nz, “Complaints have been made by Kapiti broker Chris Lee, who wants an explanation for the apparent discrepancy between the picture of South Canterbury painted by chief executive Sandy Maier, in a statement on May 19, and the situation on August 31 when the company was placed in receivership. “Between May 19 and August 31 – 14 weeks and four days – [South Canterbury] lost $840 million, or $60m every week, $8.6m per day – unless [the prime minister] or Maier spoke wrongly,” he says.”

    Messrs McLauchlan, Baylis, and Shale presided over this murky mess as directors and Mr Maier’s bosses for nearly a year. While a couple of SFO inquiries on the fringes of this situation are ongoing I have no particular confidence in being further informed by either them or by any outcomes of the statutory management of Allan Hubbard – ditto the final wind-up of SCF.

    We will therefore never know or be able to infer what they knew or didn’t know as the largest single loss of public money related to a corporate collapse in recent NZ history occurred on their watch. I can find no public statements of concern, contrition, analysis, explanation or justification attributable to any of these three independent directors either before or after the event.

    While they have to be given the benefit of the doubt with regards to any prosecutions, liability, etc, there is no reason or justification to extend this position to critical, and presumably lucrative, board appointments within DCHL. Before Monday the DCHL/SCF directorial commonality index stood at around 20% on nearly all DCHL boards (McLauchlan). It now stands at around 20% on nearly all subsidiary boards (McLauchlan) and 100% on the main DCHL board (Baylis/Shale).

    Surely in this nation of four million people it is possible to locate and appoint directors who do not have unpromising track records in successfully restructuring companies facing complex challenges of governance and transparency, and with balance sheets that are overburdened with debt? It is also not an encouraging development that the two new incumbents have also been given the right to appoint the third and final member of the interim board. I have no idea what speciifc powers (if any) Mr Larsen may have been given as a ‘consultant’ to moderate both this process and any others that may occur.

    The Mayor says that the two new incumbents were ‘suggested’ by Council staff and ‘consultants’. I bet they were! May I say now that both this Mayor and his predecessor have been far too willing to be guided by ‘suggestions’ of this type from such sources. May I suggest that they finally do their civic duty and actually go out and actively look for and select individuals who truly represent a fresh start for this city. An open and competitive appointments process for all board positions, candidiates lists published and with interviews taking place in public, would be a good start.

    The two new appointees say that they will implement the Larsen Report in full. I presume that one of the priorities will be the eliminaition of all Council members from boards. Despite the fact that Hudson will be disposed of, this is not good news. Unlike Mr Larsen I believe that the presence of representatives of the public in the form of at least two elected councillors on all DCHL boards is essential to keep the Council/shareholder informed. Two representatives are required for such oversight systems in order to ensure that the inevitable absences of a single member cannot be exploited to slip things through.

    By all means don’t allow then them to vote, or even to speak at meetings. But they do need to witness (and report on) board activites to the full Council in a timely manner; if only to avoid re-runs of the Jacks Point affair. Without this mechanism the Council will be reliant upon annual reports and Chinese whispers, which will only allow a reactive stance to be taken to events within the DCHL structure.

    I believe that this week’s developments are in fact a retrograde step. That they will deepen rather than remove the veil of secrecy that cloak activities going on within DCHL. I anticipate that Council will increasingly be told (or find out via unpleasant fiscal surprises) what has been going on within DCHL only after events have occurred. I fear for the ownership of assets, forests, water, and the like.

    But above all I fear for what may happen within Dunedin City Treasuries Ltd (DCTL) once all direct and timely Council oversight of it has been eliminated. By the current secrecy relating to its financial and money market activities (eg ‘habitual’ investors and bond pricing by reference to the ‘swap’ market – or possibly even participating in the swap market – God help us all), and by its established practice of issuing debt guaranteed by direct charges on the rates to private householders, DCTL, in my opinion, represents a clear and present threat not only to the City, but also to our own privately held assets.

  16. Russell Garbutt

    I really hope that all Councillors read Rob’s post.

    He makes points that in my view, would be very difficult to take issue with.

  17. Ben

    There is a basic governance issue in the above though, we either have companies that are going to be run on a commercial basis or we are some disjointed halfway house that creates more issues. The council is the shareholder, the shareholders make appointments of Directors to the companies and the Directors report back to shareholders on performance and matters requiring shareholder approval.

    As a Director of a company there is no way I would stand for having shareholders at Directors meetings, Directors have substantial obligations under the Companies Act, shareholders do not generally speak, and observers would be even worse. Imagine Lee Vandervis sitting in on board meetings and how that would end up, you simply wouldn’t get skilled Directors who are prepared to sit on such boards and isn’t that the whole point here.

  18. Robert Hamlin

    I hear you Ben. In a private company situation, especially in one that has public issue stock, there would be very serious issues with having shareholders at board meetings. This would be especially so if there were multiple largish shareholders. You are right in that Directors have specific legal responsibilities under the Companies Act. But these duties are all owed to the shareholders, either directly and individually, or indirectly and collectively via duties to the company. Nearly all of these legal requirements relate to equitable treatment of actual, and in some cases potential, shareholders. In such circumstnaces ‘sit ins’ by certain shareholders at board meetings would rightly be unnacceptable on the basis of equity of treatment for all.

    However, here we are talking about a single shareholder. And as you say it is a special case. A single shareholder/owner often sits on the board of the company that they own without any issues re the Companies Act. Indeed, they may be the board of the company concerned. I do not think that any board would last long in private industry if they denied a 100% equity owner full and immediate access to the Board’s deliberations!

    This relationship changes fundamentally if you sell so much as a single share. At that point the requirements of the Companies Act for equitable treatment of shareholders, and the avoidance of companies being directed for the benefit of the majority/major shareholders kick in. This is why 10%+ ‘spoiling stakes’ are such a nuisance to would be 100% acquirers of companies. This is of course something that ‘Johnny Boy’ is keeping very quiet about with regard to his 49% selldown of assets. 51% does not equate to absolute control.

    This theoretical legal protection doesn’t stop small shareholders being screwed on a regular basis however; even if overall they constitute a majority (eg ENZA & the apple growers), but that’s business/life I guess. I wouldn’t have an issue with Lee Vandervis sitting in on a board I was a member of – just as long as he represented a 100% stake in the company – which he would under such circumstances.

    • Elizabeth

      I should note yesterday’s DCC media release about DCHL gave Warren Larsen (correct here) an ‘o’ in his surname – not for the first time, Rodders.

      D Scene gave Bill Baylis (correct here) a double ‘s’.

      • Elizabeth

        ### radionz.co.nz Tuesday 1 November 2011 at 17:40
        Checkpoint with Mary Wilson
        DCC sacks subsidiary group board
        The Dunedin City Council has sacked the board which runs its subsidiary companies, Dunedin City Holdings. (3′01″)
        Audio | Download: Ogg Vorbis MP3 | Embed

  19. Robert Hamlin, go have a talk with Keiran down at the occupy. He’s very clued up on the whole SCF thing.

  20. Robert Hamlin

    I have had a couple of inquiries about interest rate swaps with regard to the post above. This activity was highlighted for two reasons. Firstly, ‘interest rate swap rates’ were used by the Athol Stephens, SFO of the DCC, to justify the interest rates paid by the DCTL on bonds issued to the mysterious pool of ‘habitual investors’ who are allowed to acquire these bonds as part of a closed and secret process. The second is that interest rate swaps have a particularly ‘queasy’ history with regard to local government ‘dabbling’ in such markets. The passage below is lifted in its entirety from the ‘local government’ section of the Wikepedia entry on interest rate swaps:

    “In June 1988 the Audit Commission was tipped off by someone working on the swaps desk of Goldman Sachs that the London Borough of Hammersmith and Fulham had a massive exposure to interest rate swaps. When the commission contacted the council, the chief executive told them not to worry as “everybody knows that interest rates are going to fall”; the treasurer thought the interest rate swaps were a ‘nice little earner’. The controller of the commission, Howard Davies realised that the council had put all of its positions on interest rates going down; he sent a team in to investigate.

    By January 1989 the commission obtained legal opinions from two Queen’s Counsel. Although they did not agree, the commission preferred the opinion which made it ultra vires for councils to engage in interest rate swaps. Moreover interest rates had gone up from 8% to 15%. The auditor and the commission then went to court and had the contracts declared illegal (appeals all the way up to the House of Lords failed); the five banks involved lost millions of pounds. Many other local authorities had been engaging in interest rate swaps in the 1980s, although Hammersmith was unusual in betting all one way.[3]”

    Sound familiar – Feeling nervous yet? The ratepayers of Hammersmith were extremely lucky that the deal was able to be cancelled (by the efforts of an extra council authority acting on a tip off) as an unlawful transaction and it was the banks that lost the money not them. Given the (lack of) support and protection that this community has received to date from our own national regulatory and audit agencies, I suspect that we would not be so lucky. This is what creates butterflies when I hear the term ‘interest rate swap’ mentioned in any context that is associated with the Dunedin City Council and especially its secretive financial CCO.

  21. Peter

    Rob. I clearly remember you asking Dave Cull at the Opoho election meeting whether, if elected Mayor, he would reveal the names of these habitual investors who are getting a good screw off the ratepayers from these high interest bonds. He replied in the affirmative. Likewise, Bev asked Athol Stephens, in a private meeting before the last election, about this same issue and he was quite sanguine about the idea. In fact he rang the manager of Computershare Investment Services while she was in the office – with the speaker on. The fellow he needed to speak to, Dave Mitchell, was out to lunch. Follow up emails to Athol to pursue this have been met with silence.
    Clearly pressure has been put on these people and the local media (ODT and D Scene) to not report on this issue. What is the role of Forsyth Barr in all of this? Does Eion Edgar have a major say in this?
    The local media seem very very reluctant to question Forsyth Barr in terms of naming rights as well. Bev has just sent both papers some interesting information to report. As yet no acknowledgement.

  22. Calvin Oaten

    Yes Rob, the whole debt financed explosion of DCC projects over the last ten years (Harland’s rule), have been facilitated by ever more ingenious (shonky) financial smoke and mirrors tactics – designed and implemented to confuse and befuddle an enthused council. I particularly love the move of the ‘capitalising over four years, of $28 million of due interest knowing all the while that it won’t register in their little craniums. I like you, live in fear and trepidation of the day when interest rates start to move up off their historically low base. Indeed, that was the guts of Athol Stephens’ sworn affidavit, that there would be no adverse effect from the increase in land costs for the stadium due to him having negotiated a reduced interest rate. The Judge bought the argument and ruled accordingly. The main bet all round is that the proponents all reach retirement and hive off to Wanaka before the ‘proverbial hits the fan’.

  23. Phil Cole


    Well…believe it or not, I was born and lived in Fulham (part of the ‘London Borough of Hammersmith and Fulham) from 1964 until 1996. I remember that ‘local government’ scandal very well!
    If the council had not got the verdict that they got, all of us ratepayers would have been liable for the losses, which from memory were VERY substantial (tens of millions of pounds!).
    If there was a funny(?) side to the above…I am sure that the council administration at the time was Labour – ironic that they should be caught speculating with other peoples money! No charges were ever brought against any of the councillors and indeed, one Labour councillor, Andrew Slaughter, is now the Labour MP for Hammersmith and Shadow Justice Minister. No surprises there, I guess!

    • Elizabeth

      As to the merits of the individuals now sitting on the interim DCHL board, and the ever-hovering Mr McLauchlan…

      ### ODT Online Thu, 3 Nov 2011
      Editorial: Shaking up council companies
      As the Dunedin City Council shake-up of the governance of its companies begins, it should be asked if the council is, in fact, going far enough.

      Why could not the council companies have, say, one CEO and one board including even City Forests? Many major businesses have different wings, with talented professional directors capable of dealing with governance and strategy issues required across different areas

      Read more

  24. Peter

    The blacked out parts of the Larsen Report also recommended that DCHL CEO Bevan Dodds’ position be disestablished. Is it a case of if, or when, this still happens?

  25. Robert Hamlin

    I have had a couple of interesting inquiries over the last couple of days with regard to how you can swindle the taxpayer if their government is misguided/corrupt enough to issue a deposit guarantee to a finance company. There are obviously a large number of ways that it can be done, but the process described below is one of the more obvious and amusing routes.

    1) Two G&G’s get together (we’ll call them Feargal and Seamus). Each has a block of land worth $2 million on the open market.

    2) Each then gets this land valued at 4 multiples of this figure (I have heard comments that this type of thing has been done recently before not too far from here).

    3) Each then forms a company (we’ll call them Feargal #1 and Seamus #1), and transfers this land to these companies at the $8 million valuation.

    4) Each then forms a second company (we’ll call these ones Feargal #2 and Seamus #2).

    5) Feargal #2 then borrows $8 million off a finance company (we’ll call this company ‘South Fantasy Finance’ SFF). SFF has been given a government deposit guarantee. Feargal #2 uses this money to buy the block of land off Seamus #1, and secures the 100% loan on this land using the valuation as a basis, and pays a punitive rate of interest.

    6) Seamus #2 then does the same thing with Feargal #1

    7) The finance company really doesn’t care about the actual land collateral value as it has no capital risk regardless of collateral, and it actually likes the high interest rates. In fact the requirement for any kind of security is simply ‘window dressing’ if it has the deposit guarantee. The depositors also like the high interest rates, and the shareholders of SFF really like the generous spread that they can insert between the two rates (this spread is siphoned off as shareholder profits, CEO bonuses, directors’ fees and the like)

    8) This situation attracts more depositors and more Seamuses and Feargals.

    9) Seamus #1 and Feargal #1 deposit the $16 million they have received from Seamus #2 and Feargal #2 with SFF or another company.

    10) Seamus #2 and Feargal #2 pay the punitive rate of interest on their $16 million debt for a short while – and then go belly up.

    11) SFF seizes the land as security for the loans.

    12) As SFF has acquired $16 million in relatively short term liabilities from this transaction, and only $4 million in liquid assets to meet these liabilities from the same transaction, it takes a hit. As it is actually playing host to dozens or hundreds of Seamuses and Feargals, it takes too many such hits, cannot pay its depositors (which may, amusingly, include Seamus #1 and Feargal #1, and it also goes belly up.

    13) The Government then instantly pays out 100 cents on the dollar to the depositors who funded this transaction.

    14) The government sells the two blocks of land for $4 million.

    15) The wash up:
    Seamus and Feargal ……………….c. +$12 million
    Depositors …………………………..c. Even
    Taxpayers ……………………………c. -$12 million
    SFF staff and shareholders .……..+? (but lots over 100s of S&F’s)

    16) There is much ‘tut-tutting’ as the corpse of SFF is examined. It seems to have an extraordinarily high number of grossly overvalued real estate items in its asset portfolio. How can that possibly have happened?

    17) The tut-tutting does not result in legal action as no-one who might be inclined to do so has actually lost money. The only loser is the taxpayer, and their representatives are usually strangely reluctant to ask further questions.

    18) After paying all the people they had to pay to look the other way, Seamus and Feargal retire to a trendy lakeside location with about $10 million between them, and both build themselves ‘McMansions’ of astonishing size and unsurpassed vulgarity.

  26. Calvin Oaten

    Rob; excellent explanation, but surely, “Jack” would have seen the “Point”. Michael most certainly did.

  27. Calvin Oaten

    And another point. How on earth can the position of Vice-chancellor of a moderate size university at the bottom of the Pacific be worth over $500,000 per annum to administer? That is just as big a crime as the above.

  28. Russell Garbutt

    Once again, Rob’s pithy succinct and amusing explanation of how individuals of the type we have in numbers around our fair City is top-rate.

    But we are not alone in our troubles in Dunedin. Whle it has not been widely reported in the national media – like our current financial problems – Hamilton is another City beset by past idiotic Local Body decisions. It all surrounds the V8 racing and it is noted in the Waikato Times of today that:

    (Waikato Times Link) “Former Hamilton mayor Margaret Evans has asked Local Government Minister Rodney Hide to immediately sack the Hamilton City Council, appoint Mayor Julie Hardaker as commissioner, and call elections for early next year.

    In a letter to Mr Hide copied to Prime Minister John Key, to whom she has spoken about her request, Ms Evans said in “the interests of democracy” Mr Hide should retain councillors Martin Gallagher and Margaret Forsyth as sub-commissioners or advisers.

    “Along with Mayor Hardaker they are the only members of the current 13-member council not involved in or responsible for the previous council’s gross mismanagement and failure to properly perform their functions, duties and responsibilities (Local Government Act 2002 section 253).”

    A spokeswoman for Mr Hide last night said his office was aware of the letter from Ms Evans, but had not yet received it.

    It was expected to arrive today. But Mr Hide would not be commenting on its contents until after he had met with Mayor Julie Hardaker on Monday.

    “He’s just gathering all the facts at the moment and once he’s got those he will respond accordingly,” the spokeswoman said.

    The letter asks Mr Hide to immediately start proceedings using powers under legislation including the Local Government Act.”

    What will be learned toots sweet will be Ms Evans will have as much joy in getting Rodney Hide to deal with anything as she might do in getting any Government organisation to actually do what they are supposed to do. The Auditor General seems happy if he can show that wrongful spending has been correctly written down, and it seems that Local Government can continue to act completely contrary to ratepayers’ interests without any fear whatsoever of being held accountable.

  29. Hype O'Thermia

    “Accountable? We looked at the accounts and they were very neatly presented in a set of matching folders. WHAT ARE YOU MOANING ABOUT???”
    Wishing her luck with Rodney cluster-ferk Hide…….

  30. Peter

    Old ‘perk buster’ Rodders, at this late stage, wouldn’t give a rat’s arse about any council. He’s had a jolly good time the last three years – including taking his bit on a free trip to Europe, courtesy of the taxpayers.
    Now they have that old fogey Don Brash leading the charge, taking us back to the 1980s. What an outfit. National are so far ahead in the polls, they don’t need them. And neither do we.

  31. So the asset sales will start next year then. Even though every Nat supporter I speak with is against it….

  32. Calvin Oaten

    Which immediately raises the question; why are they Nat supporters?

  33. Peter

    Because John Key has a nice smile.

  34. Hype O'Thermia

    Because the Clark government’s increasing nannying got up a lot of noses and National was so similarly centrist last election it was not a big step to vote for them instead. And they haven’t done anything – YET – to piss people off in a big way. Governments get voted out not in. Unless people get the message loud and clear about asset sales – which will piss them off – National will be back. Unless Labour does the smart thing and announces that sales of OUR assets will definitely be nationalized at no $more than was paid, as soon as they come back into power which they will at some time, we will be stuck with it. If Labour made that announcement now the demand for shares in our assets would not be great.

  35. As silly as it sounds Peter you have hit the nail on the head. Scary stuff.

  36. Hype O'Thermia

    Milli Vanilli, the Spice Girls, Justin Bieber………. just can’t get enough of them.

    • Elizabeth

      Thanks Alistair. Another independent outsider raising questions about DCC and DCHL, and particularly the subsidiary Delta. Chris Lee won’t be the last.

      “SCF’s recovery was bungled, to the cost of taxpayers of at very least several hundred millions. Forsyth Barr, Edgar and McLauchlan are accountable for many of the decisions made in its last nine months of SCF. The board it introduced did not function successfully, and has left behind worrying issues that are now having to be investigated at great cost.”

      This is not boding well for Dave Cull’s resurrection of DCHL via the boys who failed at SCF. No wonder he’s getting distracted by small irritations at Octagon. As we know the Mayor has bigger fish to fry, right under his nose – there will be no easy time of it.

      • Elizabeth

        ### ODT Online Fri, 18 Nov 2011
        No DCHL answers yet
        By David Loughrey
        The Auckland company director brought in to take control of the Dunedin City Council’s group of companies following the sacking of the board of directors says it will be next year before concrete decisions are made on the companies’ restructure. And it appears that ratepayers, who are the ultimate owners of the companies, will have to wait before they get much information on the issue.
        Read more

  37. Elizabeth

    Report – FSD – 09/02/2012 (PDF, 697.8 KB)
    Statement of Intent – Dunedin City Holdings Ltd

    • Elizabeth

      ### ODT Online Thu, 16 Feb 2012
      Changes made: councillors have concerns
      By David Loughrey
      Changes to the Dunedin City Council holding company’s statement of intent have been pushed through, despite concern from some councillors alterations to the document were dumped on them at the last minute. The statement outlines the strategic direction for Dunedin City Holdings Ltd (DCHL) for the next financial year, and the changes deal with its role as a corporate citizen, and its communication with the council.

      At a council finance, strategy and development committee meeting last week, committee chairman Cr Syd Brown said, after “a lot of email traffic”, an amended statement of intent had been circulated the night before the meeting, and he was happy for that to be debated.

      Read more

      • Elizabeth

        ### ODT Online Mon, 20 Feb 2012
        Directors’ fee rise of 200% advised
        By David Loughrey
        Recently revealed, previously censored parts of a report on the future of the Dunedin City Council’s holding company show advice to the council was for a three-fold increase in directors’ pay. That suggestion came as the council looked for ways to deal with an $8 million shortfall in dividends from its companies. The man behind the report, independent consultant Warren Larsen, said “penny-pinching” in such an environment would be a mistake.
        Read more

  38. Does DCHL also run the poo factory? Heard there is some massive cost overruns happening there, along with large time delays….

    • Elizabeth

      ### ODT Online Mon, 27 Feb 2012
      No word on restructuring
      By David Loughrey
      The new director of Dunedin City Holdings Ltd has again put off answering questions about his work restructuring the company. Denham Shale earlier this month promised he would give an account of the restructuring of the companies, owned by ratepayers through the Dunedin City Council, last week. The Otago Daily Times requested an update on issues including the employment of a third director, work on the restructuring, and the implementation of recommendations listed last year in a report from independent consultant Warren Larsen. But contacted last week, Mr Shale, of Auckland, refused.
      Read more

  39. Elizabeth

    ### ch9.co.nz March 8, 2012 – 6:12pm
    Half year results of the DCHL released
    Dunedin City Holdings Limited released their half year result today, for the six months to December 2011. And despite the world’s difficult global economic situation, the Holdings Group reports a steady after-tax profit of $5m, plus increased revenue of 8%.



    ### ODT Online Fri, 9 Mar 2012
    DCHL reports $5 million profit
    By David Loughrey
    The Dunedin City Council’s holding company yesterday reported a “steady” $5 million after-tax profit from the first six months of the financial year, as work on finding new directors begins.

    Profit before tax was down from $9.3 million for the comparable period the year before to $8 million this financial year, while term borrowings rose from $404 million to $602 million.

    Read more

  40. Elizabeth

    I’m just glad City Forests, rightly or wrongly, is seeing potential risks – unlike this riff-raff council.

    ### ODT Online Wed, 18 Jul 2012
    ‘Massive’ cost warning
    By Chris Morris
    Dunedin company City Forests says the Government should abandon the Kyoto Protocol, rather than commit to revised rules it fears could lumber forestry companies with “massive” additional costs. City Forests chief executive Grant Dodson yesterday told the Otago Daily Times changes to the Kyoto Protocol agreed last year, and due to come into force next year, included the removal of the “fast forest fix” rule. The rule allowed forestry companies to claim credits for carbon sequestered – or stored – in forests, and sell the credits, but only for carbon stored since 2008. Companies were also required to pay when those trees were harvested, but also only for credits claimed since 2008.

    The bill for City Forests – a Dunedin City Council-owned company – would reach “tens of millions” of dollars, and “across the sector you’re talking hundreds of millions of dollars”, Mr Dodson said. “If that came to pass, we’d be stuffed, really. We’d have no choice but to pull out of the emissions trading scheme.”

    Read more


    I doubt Mr Dodson ‘disturbed the peace’ without what he saw as good reason. I hope he keeps talking, to the public – we need to know more. Cull and MacTavish can get real.

    ### ODT Online Mon, 23 Jul 2012
    Kyoto comments discord
    By Chris Morris
    Temperatures appear to be rising inside the Dunedin City Council, after the chief executive of one of its own companies called for the Kyoto Protocol to be abandoned. The comments by City Forests chief executive Grant Dodson last week have prompted a complaint from Cr Jinty MacTavish and a ticking-off from Mayor Dave Cull.
    Read more

  41. Hype O'Thermia

    You don’t need to sign anything to do the right thing. Look how many individuals can be honest, generous, planet-respecting, charitable in word and deed – how many people display social grace as well as contributing mightily to the community? – without signing up to any club, church or other organization. Same goes for countries, NZ can act sensibly JUST BECAUSE IT’S THE RIGHT THING TO DO! No point in saddling ourselves with a mountain of expensive bureaucracy, let’s devote the money time and effort to DOING the right things not engaging in puffery on the world stage.

  42. Calvin Oaten

    Hype, what did you just actually say? I got lost in your hyperbole and confused (not difficult for me) but didn’t Mr Dodson speak a few salient facts? If he didn’t, who would? Not, with all due respect Jinty MacTavish for sure. It was topical and now, the situation he referred to. It wouldn’t stand the delay and obfuscation that council and fellow bureaucrats treat it with. Why is it that everyone has to be so ‘precious’ about protocol and form. That is not what I elect councillors to do.That’s why the world is in the mess it is in. The whole world (including Dunedin) is going rapidly down the financial gurgler and the the ‘meddlers’ and ‘improvers’ can only play their violins.

  43. Hype O'Thermia

    Calvin, I totally agree with Mr Dodson. Signing the Kyoto Protocol was a massive job creation scheme for bureaucrats, masquerading as planet-salvation. The expense associated with these various “noble” schemes is money taken away from addressing the real problems. Not only that but there are delays and frustrations introduced e.g. by administration of carbon credits, and shaping tree-planting and -harvesting to qualify for these credits instead of concentrating on the essentials, using common sense along with the most up to date research to tailor practice according to what works best in the soil, land use, needs for timber/firewood etc which vary from region to region.
    Down with feelgood photo-op grandstanding talkfest treaties that only add expensive layers of compliance to the jobs that need to be done!

  44. Anonymous

    Describing the City Forests’ CEO comments as “public lobbying of Government” is a bit off the mark. It’s a valid observation and he is quite within his remit as CEO to make it. Technically as a CCTO, Council has oversight, but not direction of operational matters. This is an important protection against Councillors pushing the wheelbarrow of their own agenda.

    • Elizabeth

      City Forests does some good.

      ### ODT Online Wed, 25 Jul 2012
      Wood-processing plant saved but potential job losses still unclear
      By Helena de Reus
      A wood-processing plant near Milton will not be mothballed, although just how many of the 31 jobs under threat have been saved remains unclear after news a Southland timber company has secured the mill’s lease. The news follows City Forests’ decision in April to progressively downsize the plant and have it closed by September, a move which would have cost the jobs of all employees based there. City Forests chief executive Grant Dodson said the company had leased the mill to Craigpine Timber Ltd of Winton, effective from the start of this month.
      Read more

      “In April, Mr Dodson said City Forests, a Dunedin City Council-owned company, established the plant in 2006, at an estimated cost of $15 million, primarily to supply the US housing market, but construction activity there had since dropped from 2 million homes a year to about 600,000.”

      Then there was (slow moving) Christchurch….

      • Elizabeth

        ### ODT Online Fri, 14 Sep 2012
        Mill may stay closed for up to 8 months
        By Simon Hartley
        Global oversupply of wood chips for paper pulp means Dunedin City Council-owned City Forests’ joint venture softwood chipping plant at North Taieri may remain temporarily closed for up to eight months. The suspension of operations four months ago is not expected to have any significant financial effect on City Forest’s full-year result, and the plant’s two staff are working with a neighbouring contractor.
        Read more

  45. Johnboy

    This was another failure of Farry’s. Remember when he was chair of EDU of council. He failed to get the wood processing plant established at North Taieri, so they went down to Clutha. Thank god the Taieri never got stuck with this white elephant. The locals have suffered enough with job failures. Is there any chance that the DCC can get out of business and stick to their knitting. Roads, water, sewerage, etc.

    • Elizabeth

      We imagine Syd’s colleagues in business have already lined up the ratepayer assets they want to buy in the fire sale. On the other hand, so many of the assets are heavily mortgaged against. What to believe. Would you trust Syd or Lesser Dunedin to protect your interests? Or look out for their own.

      ### ODT Online Wed, 15 Aug 2012
      DCHL turns attention to subsidiaries
      By Chris Morris
      Dunedin City Holdings Ltd – flush with a full complement of new directors – is now expected to turn its attention to a review of its subsidiary companies’ assets. But, first, the search is on for new directors for each of the holding company’s subsidiary boards, DCHL chairman Denham Shale said yesterday.

      The aim was to replace some, but not all, of the directors who had remained on the subsidiary boards after opting to quit – or being removed from – the DCHL board last year.

      Earlier this year, it was reported DCHL was to review its company assets. A report to councillors – expected by last month – was to identify those that were underperforming and possible candidates for sale. Yesterday, Cr Syd Brown, chairman of the council finance, strategy and development committee, said that had not happened, but the report was now expected by November, in time for the council’s next annual plan process.

      Read more

  46. Calvin Oaten

    Johnboy. No chance. You see, these amateurs, who are only there at the whim of an unknowing less than 50% of the electors, have neither expertise nor business acumen to make a cup of tea, let alone discern what is of value or concern for the city from the bundles of ‘visionary’ projects. These ‘wish lists’ of the ‘improvers and meddlers’ are always supported by ‘economic benefits going forward robustly’ that mesmerise the elected.
    The only road that they would recognise is the John Wilson Drive and even after about six years they can’t make up their minds whether it is a road or not. Worse, they can’t even recognise impending bankruptcy when they see it. But they are ‘suckers’ for a good story, like the one sold them by Malcolm Farry about the merits and economic benefits of a roofed $300 million stadium. Oh! and then there is the one about ‘International Convention Centres’ something that no self respecting city should be without. That story was fully to the credit of admin staff, complete with all elastic benefits which expanded magically in line with the escalation of costs from a starting line of $14 million progressively to $18.5m, to $29m, to $42m, to now over $50m (including finance costs). It got from an additional 3 conferences per year to 20 more at last count. Never mind that every other city on the planet is also expanding conference facilities. The Otago Settlers Museum is now the biggest $40 million secondhand shop with the biggest real estate footprint in Dunedin with no stock actually for sale, just to look and oooh-aaah! at.

    Roads, water sewerage? Don’t be daft.

  47. Tomo

    There is talk of asset sales. Unfortunately that leaves out the Great White Elephant. As that ain’t no asset to anyone. Then there is Syd. Is he an asset?

  48. Calvin Oaten

    Yes Tomo he is as in “ass et al’ or should that be “El Cid”?

  49. amanda

    Yeah. I noticed in the ORT article signalling assets sales (way in an obscure corner of the paper) that they explained this was due to DVL not being able to finance the dividend to the DCC. No discussion of why they cannot (due to the stadium’s debt) and then they quote pinhead councillor Brown with his ‘wise’ insights, and do not tell us that this one is one of the financial incompetents who caused the debt. Incompetent Brown needs to do us all a favour and start thinking about retiring.

  50. Anonymous

    The Stadium Councillors failed in their duty to act in the best interests of the Dunedin City Ratepayers. At least one of them boldly holds to those failures in the best interests of Stakeholders. It has always been about stripping the assets.

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