After months of staunchly maintaining his innocence former Heart of the City chief executive Alex Swney phoned his parents on Tuesday night to say he was going to plead guilty to nearly $1.8 million worth of tax evasion.
Swney, who once challenged John Banks in the Auckland mayoralty race, appeared in court yesterday for what was expected to be an administrative hearing looking ahead to trial. However, he entered a surprise guilty plea that leaves him facing up to five years in jail and/or a fine of up to $50,000.
The 57-year-old pleaded guilty after the 39 charges laid by the IRD were condensed to four representative counts during what was meant to be an administration hearing. When contacted on Tuesday, Swney said he wasn't sure what was happening in court the following day.
Swney, who left Auckland District Court by the back door, wouldn't comment last night. But his Morrinsville-based father Gordon Swney told the Herald it was good to get the court process over with, rather than letting it drag on.
"We were right up with the play on [the guilty plea], he told us last night [Tuesday]... We knew that was going to be the strategy." Asked how he felt about his son's admission of guilt, he replied: "How would you feel if it was one of yours?"
Gordon Swney said the Morrinsville community had been very supportive of his family, and his son also had a network of sympathetic people.
"He's contributed a lot to the city. He's a passionate man about the city, and it's just unfortunate the way it's unfolded."
He would not say whether he thought his son's tax evasion was a mistake, but he said he was still proud to be Swney's father.
Judge Grant Fraser yesterday bailed Swney to the Grey Lynn address - a spacious, open-plan, modern property on the edge of Ponsonby Rd, where the entrepreneur lives with his wife Ange, the owner of a boutique shoeshop, and their two daughters.
Judge Fraser ordered Swney to surrender his passport, despite defence counsel Murray Gibson saying he was "not a flight risk".
The judge ordered a pre-sentence report without considering home detention and indicated a term of imprisonment was the only viable outcome at sentencing in April.
Swney staunchly maintained his innocence last year but that changed when the case was pushed forward with new lawyer Murray Gibson and a fresh Crown prosecutor taking over the file.
Heart of the City - a city centre business association registered by Swney in 1994 - has income-tax exemption on the basis that it was created to develop or increase amenities for the Auckland public.
The amended charges cover personal tax evasion of $1,757,147 over 12 years to July 2012. Court documents stated Swney did not provide tax forms or returns over extended periods "and did so intending to evade the assessment of tax".
The charges also outlined how he committed the offending while acting as an independent contractor to Heart of the City, while sole director of his own company AGS Services Limited.
He provided "taxable supplies" but did not register for GST or provide any returns.
Creditors, including Heart of the City, have taken steps to protect their position in the wake of Swney's downfall. AGS Services was placed into liquidation on November 14.
Liquidators Colin McCloy and Craig Sanson said in their first report that Swney "was using the company to invoice for the provision of personal consultancy services he provided" to Heart of the City.
McCloy and Sanson's report said they would conduct a thorough investigation of his actions, but noted all communication with him was being conducted through lawyers.
Last month, Heart of the City's board announced it had launched civil proceedings against Swney and because of that, refused to comment on yesterday's developments.
The organisation confirmed an independent investigation had been completed by McGrathNicol and civil proceedings had been launched as a result.
Chairman Terry Gould said they had also obtained interim asset freezing and disclosure orders from the court.
Heart of the City had its annual meeting at the end of October at which Mr Gould told stakeholders he was in close communication with the Serious Fraud Office.
Yesterday, the office confirmed it was investigating Swney but would not go into further detail.
Heart of the City, which collaborated on the Auckland Tourism, Events and Economic Development-developed "The Show Never Stops" marketing campaign and events like Artweek Auckland, last year received more than $4.2 million from Auckland Council, which came up with about 80 per cent of the organisation's funding. The council too refused to comment until Swney had been sentenced.
According to QV, Swney jointly owns four properties around the upper North Island with a combined value of $3.82 million.
His company, Crummer Rd Trustee Company Ltd, owns the house where he lives which has a CV of $1.65 million, bringing the combined value of the property portfolio up to $5.47 million.
How the case unfolded
February 21, 2014: IRD lays 39 charges against Swney alleging he knowingly avoided paying taxes.
April 15, 2014: Swney appears for the first time at Auckland District Court.
May 2, 2014: Judge Grant Fraser allows Swney interim name suppression to protect the defendant's reputation and that of Heart of the City
Oct 5, 2014: Swney's name suppression lapses as he pleads not guilty to all charges
Jan 28, 2015: Swney pleads guilty to four amended charges and is told he will face a jail term
April 30, 2015: Swney will face a maximum sentence of 5 years imprisonment and/or a $50,000 fine