Lawyer guilty of conducting investment theft

Lawyer guilty of conducting investment theft

Former Dunedin lawyer, John David Milne (79) has today pleaded guilty in the Christchurch District Court to 34 Crimes Act charges laid by the Serious Fraud Office (SFO).

The charges relate to Mr Milne eliciting money from clients or associates on the premise that he would invest that money and pay them a return on their invested funds. Mr Milne's activity had hallmarks of a Ponzi scheme as he had in fact been paying investors from funds received for investment from other clients. Mr Milne had not actually invested any of his clients' money.

Mr Milne operated the scheme for a period in excess of 20 years from 1991 to 2012 and involves a total figure of approximately $2.8 million.

Mr Milne had a loyal client base in Dunedin derived from his previous legal work in a sole practise. SFO Director, Julie Read says that clients, who trusted Mr Milne, were keen to be involved with a scheme that paid such good returns.

"Mr Milne's victims were vulnerable, and although there is a sense of relief that he has pleaded guilty, for many it is too late to recover from the impact of his dishonesty," she said.

The SFO laid the charges in August last year. Mr Milne has been remanded on bail to reappear for sentencing on 26 November 2014.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Background to investigation

John David Milne is a former lawyer with Harewood Law Office in Christchurch; this office was owned by Craig Paddon. Prior to that, he ran a sole practice in Dunedin from 1960 to 2008.

The New Zealand Law Society found Mr Milne guilty of professional misconduct over his handling of client funds, and he has been struck off the Register of Lawyers.

Mr Milne was declared bankrupt in October 2012.

Crimes Act offences

Section 220 Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person-
(a) to account to any other person for the property, or for any proceeds arising from the property; or
(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.

(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.

(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.

(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.

Section 224 Theft by misappropriating proceeds held under direction (pre October 2003)
Every one commits theft who, having received, either solely or jointly with any other person, any money or valuable security, or any power of attorney for the sale of any real or personal property, with a direction that the money or any part thereof, or the proceeds or any part of the proceeds of the security or property, shall be applied to any purpose or paid to any person specified in the direction, in violation of good faith and contrary to the direction, fraudulently applies to any other purpose or pays to any other person the money or proceeds, or any part thereof:
Provided that where the person receiving the money, security, or power of attorney, and the person from whom he receives it, deal with each other on such terms that all money paid to the former would, in the absence of any such direction, be properly treated as an item in a debtor and creditor account between them, this section shall not apply unless the direction is in writing. 

About the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO's role is the detection, investigation and prosecution of serious or complex financial crime. The SFO's focus is on investigating and prosecuting criminal cases that will have a real effect on:

• business and investor confidence in our financial markets and economy
• public confidence in our justice system and public service
• New Zealand's international business reputation.

The SFO operates three operational teams; the Evaluation and Intelligence team along with two investigative teams.

The SFO operates under two sets of investigative powers.

Part 1 of the SFO Act provides that it may act where the Director "has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud."

Part 2 of the SFO Act provides the SFO with more extensive powers where: "...the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed..."

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:

• the suspected nature and consequences of the fraud and/or;
• the suspected scale of the fraud and/or;
• the legal, factual and evidential complexity of the matter and/or;
• any relevant public interest considerations.

The SFO's Annual Report 2013 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO's strategic goals and performance standards. Both are available online at www.sfo.govt.nz