SFO concerns regarding duty evasion as Zespri investigation closes
The Serious Fraud Office (SFO) has concluded its investigation into the affairs of Zespri Group Limited concerning allegations of criminality arising from the practice of dual invoicing.
SFO Director, Julie Read, has closed the investigation having determined that the conduct did not meet the high evidential standard for laying criminal charges.
The allegations investigated by the SFO were that Zespri facilitated tax evasion while exporting kiwifruit to the People’s Republic of China (PRC) until mid-2011 by providing false invoices for its importer to use when making duty declarations to PRC Customs Officials. The SFO was concerned about both Zespri’s dual invoicing practice and subsequent efforts by it to distance itself from the importer’s offending in the form of letters written to Chinese investigation and prosecution agencies.
Dual invoicing is not necessarily illegal, however the SFO advises that New Zealand exporters should approach the practice with extreme caution as it is a warning flag for duty evasion being committed in foreign jurisdictions.
Julie Read said, “In this case the practice of dual invoicing facilitated criminal offending in China. The lower valued invoice was used by Zespri’s importer to evade duty and resulted in him being convicted for the Chinese offence of smuggling. The instrument of that offending was created by Zespri in New Zealand. For that reason the matter properly came to the attention of the SFO.”
She added, “The Zespri investigation has been lengthy and reflects the fact that we were required to review complex and unusual arrangements between Zespri and their Chinese importers. The gathering of documentary and witness evidence took much longer than usual in this matter.”
Serious Fraud Office
027 705 4550
Note to editors
Dual invoicing describes a process whereby two invoices of differing values are produced for the same product but for different purposes, such as one invoice being used for Customs declaration purposes and the second for revenue recognition.
About the SFO
The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act.
The SFO is the lead law enforcement agency for investigating and prosecuting serious or complex financial crime, including bribery and corruption.
The presence of an agency dedicated to white collar crime is integral to New Zealand’s reputation for transparency, integrity, fair-mindedness and low levels of corruption.
This work contributes to a productive and prosperous New Zealand and the SFO’s collaborative efforts with international partners also reduce the serious harm that corrupt business practices do to the global economy.
The SFO has 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.
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