Two former public servants who used official information to seek to profit from the Christchurch earthquake rebuild have today been found guilty on Serious Fraud Office corruption charges.
Gerard Gallagher was found guilty on three charges of corrupt use of official information. Simon Nikoloff was found guilty on one charge of corrupt use of official information and not guilty on one charge.
The defendants were employed as Investment Facilitators by the Canterbury Earthquake Recovery Authority (CERA), which was set up to encourage the rebuild and regeneration of the city.
They were tasked with attracting investors to the central city, including through connecting landowners with potential purchasers and addressing any barriers to development. Later when CERA became Ōtākaro their roles included finding buyers for unused Crown land.
“The defendants were employed to help a damaged city recover and rebuild. Instead, they abused the power they had been entrusted with and put considerable effort into furthering their own commercial interests,” says SFO Director Karen Chang.
Gallagher and Nikoloff used information obtained in their official capacities to try and set up business deals which would benefit them personally. Although ultimately unsuccessful, Nikoloff and Gallagher had an unfair advantage because of their inside knowledge.
The charges laid by the SFO related to obtaining a commercial advantage from having access to this information. Nikoloff and Gallagher were both found guilty over a deal related to the Youth Hostel Association (YHA) building, while Gallagher was also found guilty on charges related to a piece of land known as Stonehurst.
“Nikoloff and Gallagher knew how much owners were willing to sell for, what investors were willing to pay and what was planned for the city,” says Ms Chang.
“Rather than use this information to get the best outcome for Christchurch, they attempted to set up private business deals in an effort to profit by hundreds of thousands of dollars.
“Seeking to profit personally from information obtained in a public role is corrupt, regardless of whether they were successful.
“This was a complex case highlighting the importance of organisations having robust internal controls, especially around conflicts of interest when administering public funds. A reminder of the need for these controls is particularly relevant as New Zealand faces another post-disaster rebuild following Cyclone Gabrielle and the flooding.
“The SFO will continue to investigate and prosecute cases which have the potential to undermine trust in our public service and threaten the success of projects which are intended to benefit New Zealand, including in times of disaster recovery.”