Fraud: Li v. R.

Television New Zealand went undercover to expose an academic scam, paying $12,000 to get a business diploma from the NZ Academy of Studies after attending no classes and doing no course work.  Zhiwei Li was convicted in July 2015 of fraud and sentenced to four months home detention for his role in the scam.  

The court was told Mr Li advertised in the Auckland Chinese language paper Mandarin Times offering educational services.  He described himself as a sales rep for NZ Academy.  Asked by undercover reporter Chi-Wei Chen how he could get a tertiary qualification without doing any work, Li brokered a deal with NZ Academy at a cost of $12,000 with Li himself getting a $3000 cut.  Two months after his supposed enrolment,  Mr Chen was supplied with a New Zealand Diploma of Business together with an academic transcript recording a C grade in each of the twelve course subjects.  Mr Li was unwilling to work the same scam for a non-Chinese, one of Mr Chen’s fellow journalists, because in Mr Li’s words, this colleague was a “foreigner” and had “a different way of thinking from Chinese” which could lead to trouble.

Li appealed conviction saying he did not provide any false tertiary qualifications, NZ Academy was responsible.  The Court of Appeal said Li procured NZ Academy to commit the fraud and that was sufficient to hold him criminally liable.

Li v. R. – Court of Appeal (31.05.16)

16.090

Bankruptcy: Inland Revenue v. Tait-Jamieson

With debts in excess of $7.5 million, Peter John Tait-Jamieson was bankrupted after the High Court cancelled a 2012 court-approved debt restructuring scheme because of his failure to make promised payments.

Saved from immediate bankruptcy four years previously by telling creditors he was taking legal action against Broadlands Finance Ltd for allegedly unpaid director’s fees, Mr Tait-Jamieson promised to make quarterly payments to creditors in part reduction of money due.  The High Court was told promised quarterly payments were made on time for the first year, paid late in the second year and that no payments at all had been made in the last two years.

Inland Revenue, owed some $32,600 for unpaid taxes incurred prior to 2012, applied to have the scheme cancelled and Mr Tait-Jamieson bankrupted.

Associate judge Christiansen cancelled the scheme.  Only half the promised instalment payments had been made, some of them late, and no progress had been made on the alleged claim against Broadlands Finance, he said.  The scheme was cancelled over Mr Tait-Jamieson’s objections that he should first be allowed to give his side of the story to creditors.  A creditors’ meeting in August 2015 voted to cancel the scheme, but Mr Tait-Jamieson and a number of creditors received no notice of the meeting having changed adresses.

Inland Revenue v. Tait-Jamieson – High Court (26.05.16)

16.089

Fraud: R. v. Rose

Senior Mighty River Power manager Paul Kenneth Rose was sentenced to three years two months jail for defrauding his employer and former wife Jane Clare Rose was sentenced to nine months home detention for her complicity in the fraud.

Mighty River suffered minimal financial losses when Rose together with his spouse diverted company purchase orders through a dummy company they set up, but his actions were in direct breach of his employment contract which required disclosure of any conflicts of interest.

The High Court was told Mr Rose had been a long-standing and trusted senior employee at Mighty River with primary responsibilities for the company’s Southdown power plant in South Auckland.  Back in 2006, there were instances of Rose putting Mighty River purchase orders through a company run by his then partner, without disclosing the family link.  To further hide direct involvement, he later invited his mother to become a director.  Then from 2010, a series of Mighty River purchases were routed through Aero Automation Ltd a dummy company set up as an intermediary for sourcing electrical parts and services required for Mighty River Power.  His new wife Jane Rose was sole shareholder and director.  She provided day-to-day administration, drawing salaries totalling $339,000 over a three year period.  An alias was used to disguise her involvement in company activities and to distance Mr Rose from the connection.  Payments totalling some $1.8 million were processed through the company.  There was evidence of services ordered for Mighty River by Mr Rose through Aero Automation being performed personally by him signing in for the work under an assumed name.

Mighty River said it spent $203,000 investigating the fraud.  In total, Mighty River probably suffered minimal losses of some $60,000, Justice Edwards said.  There was no clear evidence, reaching the criminal standard of proof, of mark-ups imposed by Aero Automation on all its invoices being in excess of what independent third-party intermediaries might have charged.  In addition, Aero Automation was left out of pocket for parts valued at $143,000 supplied but unpaid when the fraud was exposed.

A pre-sentence report described Mr Rose as having a deep sense of entitlement and limited insight into his offending.  The fraud involved an abuse of trust and was premeditated and repetitive, Justice Edwards said.  Mrs Rose was described as being genuinely remorseful once the fraud was uncovered.          

R. v. Rose – High Court (25.05.16)

16.088

SOEs: Hubbard v. Kiwirail

Commercial tenants on Kiwirail land were told by the High Court to settle a rental dispute by using arbitration provisions in their lease.  Complaints to the court that Kiwirail as an SOE should charge below market rates were to no avail.

Brent Hubbard and Harley Haynes sell palms for landscaping on 4.9 hectares of industrial land leased from Kiwirail in Onehunga, Auckland.  Their lease began in 2009 with an annual rental of $34,300 plus GST; a rental Kiwirail described at the time as being a concessionary rate, below market rent.  At the first rent review after five years, annual rent jumped to $123,200 plus GST.  Messrs Hubbard and Haynes refused to pay any more than a fifty per cent uplift in rent.  They admitted their business could afford to pay a higher rate.

There were inconclusive negotiations between Kiwirail and its aggrieved tenants before Kiwirail gave notice threatening to cancel the lease. Hubbard and Haynes sued in the High Court complaining that since Kiwirail is a state-owned enterprise it must show a sense of social responsibility and have regard to the interests of the local community when setting rentals.  Justice Fogarty said the whole point of state-owned enterprises is to have enterprises formerly run by government departments put on a business footing.  They can charge commercial rents for their property.  There is no suggestion Kiwirail has deliberately imposed an unjustified rent in order to destroy Hubbard’s and Haynes’ business, he said.

Justice Fogarty urged them to use arbitration provisions in the Kiwirail lease for disputing rental increases, rather than taking further court action. 

Hubbard v. Kiwirail – High Court (20.05.16)

16.087

Price-fixing: Commerce Commission v. Unique Realty

Unique Realty Ltd has been fined $1.25 million dollars after admitting it colluded with eleven other Manawatu real estate agents by agreeing to pass on Trade Me’s 2014 price increases.  The Commerce Commission is also pursuing Property Brokers Ltd and LJ Hooker Palmerston North.

This price-fixing agreement collectively raised fees for property vendors; the real estate agents involved agreed not to compete on price by making vendors pay Trade Me’s newly imposed fee of some $180 per listing.  Previously, agents paid a flat rate subscription for unlimited Trade Me listings and absorbed this cost as a general business overhead.

Unique Realty, Property Brokers and LJ Hooker Palmerston North collectively hold about 75 per cent of the Manawatu market.  Evidence was given that Manawatu real estate agents got together in a series of meetings in late 2013, responding to Trade Me’s plan to switch from a subscription listing model to a charge for individual listings.  Their decision to collectively force clients into paying individual listing charges amounted to price-fixing, reducing consumer choice and preventing different agencies from competing on price.

Trade Me reverted to its earlier subscription-based model just over six months after imposing individual listing fees.  The court was told Manawatu real estate agents still required clients to pay for on-line listings after Trade Me reverted to a subscription charge.

Commerce Commission v. Unique Realty – High Court (20.05.16)

16.086