The Serious Fraud Office has closed its investigation into an accounting scandal at Fuji Xerox New Zealand – saying it is not in the public interest to progress it further.
The investigation focused on allegations that former executives at Fuji Xerox NZ used inappropriate accounting mechanisms to inflate the company's total revenue between 2011 and 2016. These revenue figures were used in reporting to its Japanese parent company.
The office supplies company, which has changed its name to Fujifilm Business Innovation New Zealand, suffered massive losses and had to be recapitalised by its Japanese parent.
The "inappropriate accounting" over a six-year period from March 2011 to March 2016 culminated in parent company Fujifilm booking losses of $473 million, including about $355m from the New Zealand company.
The root cause, according to an independent report commissioned by the Japanese parent, was a "sales first at any cost culture" to meet sales targets, along with lucrative sales commissions and irregular accounting.
Lavish bonuses were handed out while holidays to senior executives and their wives were later costed at up to $25,000 a head, the report highlighted.
Following media attention by the National Business Review, the findings were translated into English and released publicly.
The report found Fuji Xerox NZ consistently exaggerated sales revenue, including through double recording of sales, recording fictitious sales and fictitious recording of expenses. The New Zealand company was ultimately required to restate its accounts by $355m in 2017.
In a statement announcing the end of its investigation, the SFO noted that no New Zealand investors were affected by this restatement.
In August 2022, Fuji Xerox New Zealand (now named FujiFilm Business Innovation New Zealand) settled a civil case brought against its former auditor EY and three of its former senior executives in connection with the restatement.
The matter involved a complex range of issues and a large volume of financial data.
The SFO said its investigation was carried out in stages and included "refining the scope of inquiry to matters within the agency's remit". The scale of potential offending under consideration was a fraction of the original restatement figure, the agency said.
"Having completed this work, we have now reached a stage where we are not satisfied that continuing this investigation is in the public interest," said SFO Director Karen Chang.
"In making this decision we considered the high evidential standard needed for commencing criminal charges, the time and resources still required to complete the investigation, as well as the scale of potential offending that would fall within our remit.
"In assessing public interest, a key factor was the absence of any New Zealand-based or vulnerable investors.
"As the new Director of the SFO, I am taking a fresh look at where we apply our specialist resources and where we can make the most impact in the current environment. It's important that we focus our time and skill on the cases that matter the most to New Zealanders and their economic wellbeing."
The decision was made following advice received from the SFO’s independent Prosecution Panel members, Michael Heron KC and Nick Williams.