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Digi-Tech witnesses in court

By Deborah Hill Cone

Friday 7th March 2003

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Investors in the Digi-Tech deal have provided evidence to the Auckland District Court saying they believed the insurance company involved in the structure was a legitimate and arm's-length entity.

Briefs of evidence of 20 witnesses obtained by The National Business Review at press time yesterday show how some lawyers and accountants surrounding the tax scheme claim they were kept in the dark about the details of the insurance and loan side of the arrangement.

The documents were handed to the Justices of the Peace hearing the depositions case by the Crown against John Reid, Peter Connolly, Peter Russel and John Currie.

The foursome will face fraud and moneylaundering charges if the Serious Fraud Office proves a prima facie case to be answered in the hearing.

Investors signed sale and purchase agreements to buy shares in Wellington firm Digi-Tech with the bulk of the price payable 10 years in the future. As part of the scheme they took out an insurance policy guaranteeing the shares' value would treble in that time and receiving a loan to pay for the insurance premium.

But the SFO claims the insurer and bank used were "entirely fictional" and the transactions were a sham.

One of the SFO's witnesses, accountant Richard Herbert, formerly with Carley & Co, said he thought the lender, the Bank of New York Inter Maritime Branch Geneva, and the insurer were legitimate and real companies.

"I was not aware of any circularity in the arrangements," Mr Herbert's evidence reads.

Another lawyer investor, David Jones, gave evidence that he believed, apart from the relationship between Mr Reid's company Milloy Reid Wong and Digi-Tech, that all other relationships in the scheme were at arm's length.

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