Sharechat Logo

OIO probe into Motukawaiti Island sale fails to uncover enough evidence to prosecute

Tuesday 2nd February 2016

Text too small?

A five-year investigation into the sale of Motukawaiti Island near Northland's Matauri Bay failed to turn up enough evidence for the Overseas Investment Office to launch a prosecution.

The Land Information NZ unit closed its probe into New Zealand company St Morris NZ's acquisition of the island using funds from Chinese businessman Zhang Jun on Oct. 30 last year without enough evidence to support criminal prosecution for breaching the Overseas Investment Act, the OIO said in a statement.

While there was enough evidence to chase civil penalties, which have a lower burden of proof, that route was barred by a two-year limitation applying to the transaction, which would have required the office to act in July 2012. At that time, the OIO didn't have sufficient evidence to seek a civil penalty, according to the OIO's report on the sale. 

"While the investigation found evidence to a possible breach of the Overseas Investment Act, there is not enough to prove this beyond reasonable doubt," OIO manager Annelies McClure said. "After weighing up all the evidence, our final conclusion is that there is not enough to prosecute for a breach of the act in this case." 

St Morris bought the island in July 2010 for $12 million, and a motor launch, marina berth and two cars for a further $2 million from its sole shareholder and director Wenning Han, who had paid $10 million for the island and $2 million for the boat, cars and berth a week earlier. The acquisition was financed from a loan by Chinese businessman Zhang Jun, who later served a demand for repayment of the loan in 2013, and later became the registered proprietor of the island. 

The OIO report said Ray Arnesen, one of the trustees of the island's original vendor Motukawaiti Island Trustee Co, was in financial difficulty and the government entity believed he arranged to pay three finders' fees to induce the sale, the biggest of which was to be paid to Han. 

The LINZ unit found two competing stories emerged from its investigation: one that Han and St Morris bought the island on behalf of Zhang with the view that the Chinese businessman would ultimately become the owner, and the other that Han and St Morris bought the island for their own purposes financed by Zhang. 

"During the investigation, we uncovered credible evidence of (redacted) on Mr Han's part, to the detriment of Mr Zhang," the report said. "This (redacted) involves the inflation of the purchase price for the island for the purpose of paying a finder's fee to Mr Han." 

While that could be a feature of either story, the OIO is of the view that it was more consistent that Han and St Morris bought the island for their own purposes, using Zhang's money. 

The report found considerable evidence that Han and St Morris are associates, which would have required OIO approval for the purchase, but that the finder's fee, Zhang's efforts to enforce the loan and Han's account cast enough doubt to deter the agency from prosecuting.

BusinessDesk.co.nz

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ economy probably grew 0.6% in 1Q but more rate cuts still expected
Local travellers boost guest nights in April on Easter, Anzac holidays
Hisco's departure from ANZ becomes permanent amid personal expenses concerns
NZ services sector activity picks up in May but still tepid
Contact's Barnes to depart
17th June 2019 Morning Report
NZ dollar lower on stronger than expected US retail data
MARKET CLOSE: NZ shares edge higher; US rate uncertainty buoys local blue chips
NZ dollar weakens on global tensions, weak local manufacturing
General Capital (GEN:NZ) releases strong preliminary result

IRG See IRG research reports