SFO announces outcome in Kiwi Finance Limited investigation

SFO announces outcome in Kiwi Finance Limited investigation

The Serious Fraud Office (SFO) today announced that it had completed a review of its investigation into the affairs of Kiwi Finance Ltd (Kiwi), and decided not to pursue a criminal prosecution, for the time being. 
“Based on investigations to date, further inquiries could be warranted to determine whether there is sufficient evidence to support a prosecution. However, even if a criminal prosecution was warranted, it is not always the most effective outcome,” said SFO Director Adam Feeley.
Mr Feeley said that there was ongoing collaboration between the SFO and the Securities Commission on the matter, and the SFO considered that there were better options available to regulators. 

“Having considered the circumstances of the Kiwi case, including the scale and nature of the alleged conduct, we believe that this is best suited to a civil or administrative remedy that provides some opportunity for compensation of the Kiwi Finance depositors.  The Securities Commission has powers and functions that enable such an outcome, and this is a case which seems best suited to application of those powers.”

Mr Feeley said that the SFO’s decision was conditional on the Securities Commission being able to reach a satisfactory outcome.

“If, for any reason, the Commission is unable to reach a suitable resolution within a reasonable time, we will reassess our position and may re-open the investigation.”

For further information

Simon McArley
General Manager, Financial Markets & Corporate Fraud
Serious Fraud Office
Phone: 021 308 953

Note to editors

1. Background to Investigation

Kiwi Finance Limited carried on business as a finance company, accepting deposits from the public.  Kiwi was placed into receivership on 15 April 2008 owing approximately 42 investors $1.7 million.   After considering a referral received from the Securities Commission, the Director determined that there were reasonable grounds to believe that an offence involving serious or complex fraud may have been committed.  An investigation under Part II of the Serious Fraud Office Act was commenced on 1 November 2010.

SFO staff and external experts worked closely with the Securities Commission, the Receivers and former KFL on the investigation.  The investigation focused on a number of transactions entered into between Kiwi, its parent company Kiwi Capital Limited and the shareholders of Kiwi Capital Limited.

2. Solicitor General Prosecution Guidelines

The purpose of the Guidelines is “to ensure that the principles and practices as to prosecutions in New Zealand are underpinned by unified values. These values aim to achieve consistency in key decisions and trial practices. If these values are adhered to, New Zealand will continue to have prosecution processes that are open, fair to the defendant, witnesses and the victims of crime, and reflect the proper interests of society.”

The Test for prosecution is met if:

(i) The evidence which can be adduced in Court is sufficient to provide a reasonable prospect of conviction – the Evidential Test; and

(ii) Prosecution is required in the public interest – the Public Interest Test.

The Evidential Test must be satisfied before the Public Interest Test is considered. The prosecutor must analyse and evaluate all of the evidence and information in a thorough and critical manner.

The Evidential Test

A reasonable prospect of conviction exists if, in relation to an identifiable individual, there is credible evidence which the prosecution can adduce before a court and upon which evidence an impartial jury (or Judge), properly directed in accordance with the law, could reasonably be expected to be satisfied beyond reasonable doubt that the individual who is prosecuted has committed a criminal offence.

The Public Interest Test

The Solicitors General’s Prosecution Guidelines state that even if there is sufficient evidence to provide a reasonable prospect of a successful prosecution, the public interest in bring a prosecution must also be considered. The Guidelines refer to UK law as a “time-honoured statement” that “… It has never been the rule… that suspected criminal offences must automatically be the subject of a prosecution.”
Public interest considerations against prosecution include:

• Where the victim accepts that the defendant has rectified the loss or harm that was caused (although defendants must not be able to avoid prosecution simply because they pay compensation);
• Where the recovery of the proceeds of crime can more effectively be pursued by civil action;
• Where any proper alternatives to prosecution are available.

Role of the SFO

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

The SFO operates three investigative teams:

• Fraud Detection & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.

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…”

The SFO’s Statement of Intent 2010-2012 sets out the SFO’s three year strategic goals and performance standards.  It is available online at: www.sfo.govt.nz(external link)