Insufficient evidence to progress VTL Group investigation

Published

Insufficient evidence to progress VTL Group investigation

The Serious Fraud Office today announced that there insufficient evidence to lay charges against the Vending Technologies Limited (VTL) Group directors or management, and had closed the investigation.
 
In conjunction with its earlier investigations in relation to lending by Nathans Finance, SFO had been investigating three licensing transactions entered into by VTL with US a US company in December 2005, June 2006 and December 2006. 

These licences had a significant effect on the financial results of VTL for the full and half year accounting periods ending December 2005, June 2006 and December 2006.   

The investigation related principally to the authenticity of these licensing transactions.

SFO Director, Adam Feeley, said “We have accepted the advice of the Crown Solicitor that there is insufficient evidence to pursue the matter further.”

Mr Feeley said that in order to lay criminal charges the SFO had to be satisfied there was a reasonable prospect, based on credible evidence which could be admitted in Court, that an impartial jury could be satisfied, beyond reasonable doubt, that the person prosecuted has committed a criminal offence.

Mr Feeley said “this investigation has been ongoing in one form or another since December 2008.  We have considered all sources of evidence available to us, and interviewed a number of key witnesses, but cannot satisfy ourselves that there is sufficient, reliable evidence which could sustain a criminal prosecution.” 

He said that the matter was the last of SFO’s legacy cases and a tough decision had to be made to apply the SFO’s limited resources to areas where a more positive outcome could be achieved.

“The SFO’s work is now focused on current cases where conclusions can be expected to be reached in quicker timeframes.”

Mr Feeley noted that the matter would be reviewed if further fresh evidence became available.

For further information

Adam Feeley
Chief Executive
Serious Fraud Office
Phone 021 333 539

Note to editors

1. Case summary

Nathans Finance and Vending Technologies

Nathans Finance NZ Limited traded as a finance company accepting deposits from the public.  Nathans was placed into receivership on 20 August 2008 owing 7,082 public investors approximately $174 million. 

Nathans parent company VTL Group Limited operated a vending machine franchise business in New Zealand, Australia, North America and Europe.  VTL was listed on the NZSX market.  The proceeds of the deposits accepted by Nathans were almost entirely lent to VTL or individuals and entities participating in VTL’s franchising program.  VTL was placed in receivership on 5 November 2008.

After considering a referral received from the receivers of VTL Group and Nathans, the Director determined that an investigation into the affairs of Nathans Finance may disclose serious or complex fraud.  An investigation under part II of the Serious Fraud Office Act was commenced on 8 December 2008.

The investigation related principally to the authenticity of three licensing transactions entered into by Vending Technologies with a US company System Services Group LLC in December 2005, June 2006 and December 2006.  The entry into these licences had a significant effect on the financial results of Vending Technologies as identified in the following table:

Date of Transaction/Reporting Period/Operating Result Before Tax Result Excluding Sale of SSG Licenses Change
    
22-Dec- 05/Half Year to 31-Dec-05/3,138,000 - 4,287,000 7,425,000
20-Jun-06/Full Year to 30-Jun-06/5,350,000 - 5,706,319 11,056,319
31-Oct-06/Half Year to 31-Dec-06/554,000 - 3,948,476 4,502,476

2. The role of SFO

The Serious Fraud Office (SFO) 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

3. 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

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 

Once a prosecutor is satisfied that there is sufficient evidence to provide a reasonable prospect of conviction, the next consideration is whether the public interest requires a prosecution. It is not the rule that all offences for which there are sufficient evidence must be prosecuted. Prosecutors must exercise their discretion as to whether a prosecution is required in the public interest.

Considerations:

The predominant consideration is the seriousness of the offence. Where a conviction is likely to result in a significant penalty including any confiscation order or disqualification, then there is a strong public interest for a prosecution. Factors considered in this regard include:

1. Where the defendant was in a position of authority or trust and the offence is an abuse of that position;
2. Where the defendant was a ringleader or an organiser of the offence;
3. Where the offence was premeditated;
4. Where the offence was carried out by a group;
5. Where the offence has resulted in serious financial loss to an individual, corporation, trust person or society;
6. Where there is any element of corruption;
7. Where the defendant has previous convictions, diversions or cautions which are relevant;
8. Where there are grounds for believing that the offence is likely to be continued or repeated, for example, where there is a history of recurring conduct.

Public interest considerations against prosecution include:

1. Where the Court is likely to impose a very small or nominal penalty;
2. Where the offence is not on any test of a serious nature, and is unlikely to be repeated;
3. Where there has been a long passage of time between an offence taking place and the likely date of trial such as to give rise to undue delay or an abuse of process unless:
a. the offence is serious;
b. delay has been caused in part by the defendant;
c. the offence has only recently come to light; or
d. the complexity of the offence has resulted in a lengthy investigation.
4. Where a prosecution is likely to have a detrimental effect on the physical or mental health of a victim or witness;
5. Where the defendant is elderly or a youth;
6. Where the defendant has no previous convictions;
7. Where the defendant was at the time of the offence or trial suffering from significant mental or physical ill-health;
8. 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);
9. Where the recovery of the proceeds of crime can more effectively be pursued by civil action;
10. Where any proper alternatives to prosecution are available.