Winebox connection to SFO boss

17:00, May 25 2013
LINKED: SFO acting chief executive Simon McArley has been linked through documents to the 1990s Winebox affair.

An AUT University PhD student has uncovered documents linking former Kensington Swan solicitor and current Serious Fraud Office acting chief executive Simon McArley with European Pacific, the company at the centre of the 1990s Winebox affair.

Simon Boyce is poring over evidence presented to the Winebox Commission of Inquiry which was established to determine whether the Inland Revenue Department and the Serious Fraud Office had acted legally and competently in their investigations into Cook Islands tax transactions that cost the New Zealand Government millions.

He found two fax covering letters dating from 1989 sent from McArley to two European Pacific employees at the centre of the Cook Islands deals, George Couttie and David McNair.

LINKED: One of the documents linking the acting head of the SFO to the Winebox affair. Click on the links in the story to read the documents.

Click on the names above to read the faxed documents

The faxes appear to relate to shelf companies used by European Pacific in redeemable preference share transactions that created favourable tax structures for clients.

"Since the IRD actually prosecuted in the case of the redeemable share deals, involving the BNZ, there is a question over Kensington Swan's role," Boyce said. "That litigation failed on the basis that there was not proof of a ‘meeting of minds', and the BNZ knowing in advance how all the transactions worked."


Boyce said the main issue is that McArley appears to be a "poacher turned gamekeeper".

"That might be all right, but the public should at least be aware of

it before he becomes the permanent head of the SFO."

McArley said he was employed as a solicitor by Kensington Swan in Wellington from 1987 to mid-1989, and practised mainly in banking and finance and securities law.

"At that time the practice was involved in a number of structured finance transactions, most of which involved preference share issuance. As part of the practice, I was working for a number of clients, including Fay Richwhite in the BNZ transaction.

"The work I was involved in was specific to drafting and negotiating between the parties the core borrowing and investment documents, completing supporting commercial documentation to effect the transactions and settlement of those transactions.

"This was standard legal work for the time and was working for the tax partner involved. I was not involved in the design of these transactions. There was nothing illegal about the transactions, though they did take advantage of an existing opportunity in the tax legislation to realise tax losses."

Changes in tax law in New Zealand put an end to the business soon after that, he said.

"I had no involvement in the subsequent tax litigation and so have no knowledge of what any of the specific issues were. Equally I wasn't involved in the ‘Winebox' inquiry at all and was not called to give evidence."

The redeemable preference share deals differ from the famous Magnum transaction at the centre of the Winebox inquiry which involved tax credits being issued from the Cook Islands.

At the High Court in 2000, Justice McGechan found that as a whole there was no reason for such complicated structures except to avoid tax. However, from BNZ's perspective as an investor it appeared conventional and therefore the bank was not involved in tax evasion.

New Zealand First leader and MP Winston Peters, who tabled documents in Parliament that led to disclosure of the Winebox transactions and pushed for inquiries into the affair for more than a decade, said the Serious Fraud Office acted "abysmally and shamefully" in its investigations into the Winebox structures.

However, he said, someone working for a law firm could get caught in circumstances beyond their control that were being driven from higher up.

McArley said the SFO was aware of his full work history, including this period of time.

"I have practiced in the commercial markets for a long period and this experience has given me an invaluable understanding of the work we are dealing with at SFO," he said.

Sunday Star Times