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One of the defendants in the Digi-Tech tax avoidance case is threatening legal action against the Serious Fraud Office over its pursuit of him and his co-accused.
Peter Connolly was one of the four acquitted Digi-Tech defendants who yesterday had about $1 million in costs reinstated by the
Supreme Court. The original costs, awarded by Justice John Fogarty in the High Court three years ago, were slashed by the Court of Appeal in a controversial majority decision last year.
The original amount of costs was not set, but was expected to total over $1 million. As well as upholding Justice Fogarty's ruling, the Supreme Court awarded the four up to $32,000 each in additional costs related to the Court of Appeal and Supreme Court hearings.
Connolly, who says he will still be out of pocket even with the higher amount of costs, said the Supreme Court's decision was "a further endorsement" of his innocence and that of his co-accused.
"It's now up to the state to pursue the conduct of those officers who were involved in this prosecution," he said.
"If they don't, we will. We're not going to let it sit."
"If the Serious Fraud Office gets clipped for a million dollars there must be some wickedness here."
The Court of Appeal cut the costs awarded to Connolly, John Anthony Reid, Peter William Russel, John Donald Currie after finding Justice Fogarty had erred in his decision.
The Court of Appeal's findings on costs raised concerns because two of the three judges who heard the case said such a large amount in damages could hinder the SFO's ability to pursue other cases that were "in the public interest".
In yesterday's judgment, the Supreme Court upheld Justice Fogarty's decision and said the two Court of Appeal judges' concerns about the fiscal impact of the costs awarded were misplaced.
They pointed out that in such a case, costs would be paid by the Ministry of Justice rather than by the SFO itself. They also said there would have been provision for the SFO to pay out if Justice Fogarty found it had acted "negligently or in bad faith" in bringing charges but: "There was no such order in this case".
The SFO took action against the Digi-Tech four in 2004, alleging their scheme was a "legitimate, if marginal, tax scheme" rendered a fraud by fictional insurance and loan transactions. The scheme offered tax-deductible expenses during its 10-year life with the bulk of the investment paid in the last year.
Up to 75 loss-attributable companies were set up by investors.
The two parts of the scheme involved technology company Digi-Tech and a company called New Zealand Investments Ltd.
Investors were to buy $1 million of shares over 10 years, but pay more than 80 per cent in the last year.
They took out insurance, with premiums mostly paid with tax-deductible borrowed money, guaranteeing the shares would be worth $3 million at the end of the period.
