Isaac Davison is a NZ Herald political reporter.

Foreign buyers may be forced to sell $6 million farm, as OIO review announced

Louise Upston said legal action could be considered against the buyers of Onetai Station in Taranaki. Photo / Supplied
Louise Upston said legal action could be considered against the buyers of Onetai Station in Taranaki. Photo / Supplied

Two Argentine investors could be forced to sell a $6 million New Zealand farm if they are found to have misled the Overseas Investment Office, the Government says.

Land Information Minister Louise Upston said legal action could be considered if the buyers of Onetai Station in Taranaki were found to have breached "good character" rules for foreign investment.

"I don't want to pre-judge what happens ... but when there is a breach, one of the enforcement actions available is to force the sale of the property," she told reporters at Parliament this afternoon.

It would not be the first time the OIO has taken drastic action against a foreign investor.

In 2014, a Russian businessman was forced by the Overseas Investment Office (OIO) to sell a 10ha block of land in Waiwera after he failed to fulfil a promise to build a winery on the site.

Earlier today, Ms Upston confirmed she had launched an independent review of the OIO's decision in 2014 to approve the sale of Onetai Station to Ceol & Muir, a company owned by Argentinian brothers Rafael and Federico Grozovsky.

The independent review would focus on the way the OIO applied the "good character" test to the Argentinian investors.

It was prompted by revelations by the Labour Party on Friday that the brothers had previously been prosecuted for discharging toxic chemicals into a river in Buenos Aires.

The details about the pollution case in 2011 embarrassed the Government because it came a day after an OIO review had concluded that due process was followed in granting the application.

"It is fair to say I am not happy about the position we are currently in," Ms Upston said, when asked about the OIO's handling of the issue.

But she described the incident as an isolated one, and said she backed the OIO and Land Information New Zealand (LINZ) chief executive Peter Mersi.

LINZ revealed today that information about the applicants' involvement in the pollution incident was not passed on to ministers when the sale was approved two years ago.

Mr Mersi described this as a "regrettable lapse" and said that he had apologised to the minister.

The OIO had a robust process for dealing with applications, he said, "but on this occasion it does not appear to have been followed".

Before the details about the pollution incident were publicised, the OIO was already investigating Ceol & Muir for another reason - its links to Mossack Fonseca, the firm at the centre of the Panama Papers controversy.

The independent review was launched as Prime Minister John Key promoted the OIO process in a speech to the NZ Institute of International Affairs at Parliament today.

He said New Zealand's increasingly multi-cultural, global outlook did not come at the expense of safeguards or restrictions.

"Foreign buyers of sensitive land must go through a rigorous application process and prove they offer greater benefits to New Zealand than would be obtained through a domestic sale."

He added: "I believe we have the right balance between encouraging investment and ensuring that investment benefits New Zealand."

Labour's David Cunliffe said the OIO's failure to disclose the pollution offences to the minister was "the tip of a very nasty iceberg".

He questioned whether other applications would now have to be reviewed to check whether investors had breached "good character" criteria.

"LINZ has been relying excessively on statutory declarations by potential investors.... and not independently-tested bona fides," he said.

- NZ Herald

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