The Serious Fraud Office failed to consider key evidence in the $1.7 billion South Canterbury Finance investigation which has led to charges against two senior executives being dropped.
Adam Feeley, the head of the SFO when charges were laid two years ago, described the 14-month inquiry as the "most resource-intensive and time-consuming in recent history". He said the "value of the fraud alleged to have been committed exceeds anything in the history of white-collar crime in New Zealand".
The agency laid 21 charges against five SCF executives for fraudulent transactions alleged to total $1.7 billion - including $1.58 billion from the government bailout after the finance company collapsed.
But charges against two of the accused have been withdrawn before the case reached trial, most recently accountant Terry Hutton who faced two charges alleging false accounting in relation to the recording of a $25 million loan advance and a $10 million loan advance.
"What had been touted as the South Canterbury Five is now down to three," Hutton said.
"I believe the withdrawal of the charges reflects the poor standard of investigation work initially undertaken by Adam Feeley and his investigation team."
His defence team of leading barrister Jonathan Eaton QC and forensic expert Gib Beattie - a former assistant director of the SFO - were able to reconstruct the transactions with the lawyer for Graeme Brown, another SCF accused whose charge was dropped.
They were able to do this with information provided by the SFO under the discovery process, along with other documents which Hutton said had been supplied to investigators but "apparently not considered relevant".
This evidence, with supporting explanations, was provided to prosecutors who in turn discussed the material with Simon McArley, who was the acting head of the SFO after Feeley's resignation.
McArley, who has since resigned after Julie Read was appointed as a permanent replacement, determined that both charges against Hutton fell short of the Solicitor-General's guidelines for prosecution and should be withdrawn.
The trial of the three remaining defendants, Lachie McLeod, Edward Sullivan and Robert White, is set down to start in the High Court at Timaru in March.
Feeley did not respond to a request for comment.