A former board member of a failed financial firm has lost an effort to recover $1.14 million in legal costs after he was partially exonerated of fraud charges and freed from prison.
Despite two High Court trials, the first of which was aborted after an unprecedented disclosure failure by the Financial Markets Authority (FMA), Paul Bublitz's claim for compensation was turned away by Justice Mark Woolford last week.
Bublitz, Bruce McKay and Richard Blackwood had all been found guilty in February last year of some of the charges the FMA had laid.
The trio, who were part of a wider group first investigated in mid-2011, were accused of deliberately misleading investors in an attempt to rescue failing investments during the financial collapse of 2007/2008 (GFC).
McKay and Blackwood were serving as directors of Viaduct Capital, while Bublitz was a board member for Mutual Finance, when the two firms went into receivership in 2010 - owing investors $17m.
However, after a Court of Appeal challenge, several but not all of the men's convictions were overturned last August. Bublitz also had his prison sentence overturned in favour of home detention.
It prompted Bublitz, who is represented by Rachael Reed QC, to seek compensation under the Costs in Criminal Cases Act 1967.
Bublitz wanted $1.14m, which amounted to 75 per cent of the costs incurred by him towards his defence, which was attributed to the charges that were dismissed or he was acquitted of.
The man who began his financial career as an 18-year-old saw his costs from the first trial balloon to $1.52m before he exhausted his resources and continued on legal aid.
However, following a hearing in the High Court at Auckland earlier this month, Justice Mark Woolford dismissed Bublitz's application for "three major reasons".
"First, a costs award would sit uncomfortably with the verdicts of guilty, namely, the four theft convictions entered against Mr Bublitz," Justice Woolford said in his judgment, released to the Herald on Friday.
"The offences of which he has been convicted are not minor or technical. They formed a substantial part of the Crown case."
Secondly, no reparation was ordered or contemplated at sentencing because of Bublitz's impecuniosity, Justice Woolford said.
"The funds stolen by Mr Bublitz totalled $1.17m. He now seeks almost the same amount, $1,145,462.50, for his costs, yet does not offer reparation.
"In effect, he asks for the Crown to pay twice - once for the payout made in terms of the Crown guarantee to investors in Mutual, who were out of pocket in respect of charges of which Mr Bublitz was convicted, and a second time to pay his own costs in respect of charges which were dismissed or on which he was acquitted."
For Bublitz's thefts, some $310,000 has been repaid by the borrowers, leaving a loss to the Crown of about $860,000, the decision reads.
Thirdly, Justice Woolford said Bublitz's costs had already been indirectly taken into account in the 19-month discount on his sentence for the first trial's abortion.
"Counsel for Mr Bublitz argued that the discount was purely for delay, but I am of the view that it encompassed more."
The Court of Appeal had already stated in an earlier ruling: "It is not disputed that the extraordinary delays have had profound consequences for the appellants and their families, affecting their health, reputations and financial positions. The judge allowed a discount of 30 per cent for this at sentencing."
The remedy, the Court of Appeal added, was for the breach of Bublitz's right to be tried without delay.
Justice Woolford said if Bublitz had been acquitted on all the charges, he would have had a strong case for a large award of costs "but the Crown has suffered a substantial unrecovered loss" caused by his crimes.
Both Viaduct Capital, which was also investigated by the Serious Fraud Office and Treasury, and Mutual Finance were part of the government's GFC insurance scheme - meaning any losses would be passed on to the taxpayer.
The Crown had also sought costs for the charges Bublitz was convicted of - if the businessman had been successful in his own application.
In separate High Court proceedings, the Companies Registrar is also seeking to permanently ban Bublitz and McKay from acting as a director.
Compensation already awarded for FMA's 'procedural failure'
The FMA's prosecutions also included former Mutual Finance board member and chartered accountant Lance Morrison, who managed the financial affairs for Hunter Capital.
Bublitz, McKay, Blackwood and Morrison's first trial, which lasted nine months, was aborted in May 2017 after prosecutors failed to disclose some 14,619 documents.
Justice Woolford earlier described the FMA's blunder as an "extreme example of procedural failure".
"The volume of late disclosure is seemingly unprecedented in New Zealand," the judge said.
It resulted in several charges being dismissed against the four men, including the FMA completely dropping its case against Morrison.
Justice Woolford also ordered the FMA to pay $10,000 each to Bublitz, McKay, Blackwood and Morrison and $10,000 to the Ministry of Justice for the foul-up.
Morrison was paid a further $75,000 towards the costs of his defence.
When the case was taken to the Court of Appeal last year after the second trial, Bublitz saw two of the six charges he was found guilty of quashed. He had earlier been acquitted of six charges of theft by a person in a special relationship.
His three year and two month prison sentence was also set aside and he was ordered to serve a home detention sentence of 11 months.
Blackwood, who had been sentenced to nine months' home detention, was completely exonerated by the Court of Appeal. He had been found guilty of four charges of theft by a person in a special relationship and not guilty of one charge of making a false statement by a promoter.
But McKay, who was a chartered accountant and also sentenced to home detention, failed in his appeal against his convictions.
He was found guilty of three charges of theft by a person in a special relationship, but had also been found not guilty at trial on two counts of making a false statement by a promoter and one charge of making a false statement to a trustee.
Property developer Peter Chevin was also charged and pleaded guilty to nine charges of theft by a person in a special relationship. He was sentenced in 2017 to nine months' home detention.
Nick Wevers, the former chief executive of Blue Chip and director of Viaduct Capital, was another charged as part of the case but after he died in 2014 the FMA withdrew the charges against him.
The Blue Chip group of companies failed in 2008 owing $84m to investors. Founder Mark Bryers was fined $38,000 and sentenced to 75 hours' community work for poor record-keeping.
Bryers is now facing charges in Australia over allegations of a multimillion-dollar tax conspiracy.
In 2017, the trustee of Viaduct Capital, Prince and Partners, also settled civil proceedings brought by the FMA for $4.5m after admitting a series of failings.