SFO charges former lawyer with investment theft

SFO charges former lawyer with investment theft

The Serious Fraud Office (SFO) has announced that 33 criminal charges have been laid against former Dunedin lawyer John David Milne (78) in the Christchurch District Court.

Charges under Section 224 (for offending that occurred prior to 1 October 2003) and Section 220 of the Crimes Act 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.

SFO alleges that none of that money had been invested and that some early investors had been repaid with monies received from later clients.

It is believed that Mr Milne operated the scheme for a period in excess of 20 years from 1991 to 2012. The charges relate to approximately $2.8 million.

Mr Milne had a client base in Dunedin derived from his previous legal work in a sole practise there.

SFO Acting Chief Executive, Simon McArley says, "A sad fact of this case is that a significant number of Mr Milne's clients were elderly and vulnerable people, often widows living alone. We remain deeply concerned for these victims, who have lost their investments at a time in their lives when they should be living comfortably."

A complaint was received from the New Zealand Law Society Otago Standards Committee regarding Mr Milne's activities around client funds in June last year. An investigation was opened under Part II of the SFO Act in July.

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 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.

SFO's role is the detection, investigation and prosecution of serious or complex financial crime. 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.

SFO operates three investigative teams:

• Evaluation and Intelligence;
• Financial Markets and Corporate Fraud; and
• Fraud and Corruption.

SFO operates under two sets of investigative powers.

Part I 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 II 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..."

SFO's Annual Report 2012 sets out its achievements for the past year, while the Statement of Intent 2013-2016 sets out the SFO's three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz(external link)