A five-year investigation into the sale of Motukawaiti Island near Northland's Matauri Bay failed to turn up enough evidence for the Overseas Investment Office to launch a prosecution.
The Land Information NZ unit closed its probe into New Zealand company St Morris NZ's acquisition of the island using funds from Chinese businessman Zhang Jun on October 30 last year without enough evidence to support criminal prosecution for breaching the Overseas Investment Act, the OIO said in a statement.
While there was enough evidence to chase civil penalties, which have a lower burden of proof, that route was barred by a two-year limitation applying to the transaction, which would have required the office to act in July 2012. At that time, the OIO didn't have sufficient evidence to seek a civil penalty, according to the OIO's report on the sale.
"While the investigation found evidence to a possible breach of the Overseas Investment Act, there is not enough to prove this beyond reasonable doubt," OIO manager Annelies McClure said. "After weighing up all the evidence, our final conclusion is that there is not enough to prosecute for a breach of the act in this case."
St Morris bought the island in July 2010 for $12 million, and a motor launch, marina berth and two cars for a further $2 million from its sole shareholder and director Wenning Han, who had paid $10 million for the island and $2 million for the boat, cars and berth a week earlier. The acquisition was financed from a loan by Chinese businessman Zhang Jun, who later served a demand for repayment of the loan in 2013, and later became the registered proprietor of the island.
The OIO report said Ray Arnesen, one of the trustees of the island's original vendor Motukawaiti Island Trustee Co, was in financial difficulty and the government entity believed he arranged to pay three finders' fees to induce the sale, the biggest of which was to be paid to Han.
During the investigation, we uncovered credible evidence of (redacted) on Mr Han's part, to the detriment of Mr Zhang," the report said. "This (redacted) involves the inflation of the purchase price for the island for the purpose of paying a finder's fee to Mr Han.
SHARE THIS QUOTE:
The LINZ unit found two competing stories emerged from its investigation: one that Han and St Morris bought the island on behalf of Zhang with the view that the Chinese businessman would ultimately become the owner, and the other that Han and St Morris bought the island for their own purposes financed by Zhang.
"During the investigation, we uncovered credible evidence of (redacted) on Mr Han's part, to the detriment of Mr Zhang," the report said. "This (redacted) involves the inflation of the purchase price for the island for the purpose of paying a finder's fee to Mr Han."
While that could be a feature of either story, the OIO is of the view that it was more consistent that Han and St Morris bought the island for their own purposes, using Zhang's money.
The report found considerable evidence that Han and St Morris are associates, which would have required OIO approval for the purchase, but that the finder's fee, Zhang's efforts to enforce the loan and Han's account cast enough doubt to deter the agency from prosecuting.