Link to US insider trading case highlights 'easy NZ' pitfalls
BUSINESSDESK: The downside of New Zealand being an easy place to do business has been highlighted again after an international company with links to Central Asia was accused in the US of insider trading.
New Zealand-registered Ergoport Experts Ltd is accused by the US Securities and Exchange Commission of carrying out $US5.3 million of illegal trades in Tyco International, InterMune Inc and Global Industries through accounts held at Latvia-based JSC Baltic International Bank, according to Bloomberg News.
The embarrassing naming of New Zealand as the location of the shell company in a case in the US District Court in the southern district of New York comes as the country is named as the easiest place to start a business globally by the World Bank.
That accolade comes with brickbats that lax laws have made New Zealand an attractive destination for global tax dodgers and those seeking secrecy in business dealings.
Previous scandals over shell companies, some involving arms dealers, prompted the government to tidy up the law in the Companies and Limited Partnership Amendment Bill.
It requires a New Zealand-resident administrative agent for companies and limited partnerships and aims to increase confidence in local financial markets and regulation of corporate forms.
"New Zealand has an international reputation as one of the best and most trusted places in the world to do business," former Commerce Minister Simon Power has said. "However, that is threatened by overseas interests using New Zealand-registered shell companies to undertake criminal activity."
According to the World Bank's Doing Business report, it takes just one day and one procedure to register a private company in New Zealand and costs just 0.4% of income per capita.
Ergoport Experts was registered on February 23, 2010, to an address in Johnsonville in Wellington. It has directors based in Latvia and Cyprus, and the application to incorporate was made by Glenn Smith of The Company Net Trust.
Company Net claims to have registered more than 13,000 companies since it was founded in 1997 and says it "enjoys a close professional relationship with the Companies Office, which comes from being their biggest client for many years", its website says.
The SEC does not identify the subjects of the Ergoport criminal probe but the Wall Street Journal says Maksim Bakiyev, the son of former Kyrgyzstan leader Kurmanbek Bakiyev, is under investigation.
Taiyyib Ali Munir, a British citizen, is accused of passing on tips to a person managing the accounts of a high-level government official of the Central Asian country.
Ergoport has denied it made the trades or acted on inside tips.
New Zealand is ranked overall the third most business-friendly country out of 185 economies globally by the World Bank.