SFO fails to charge Zespri after four-year investigation
After years of investigating Zespri over its operations in China, the Serious Fraud Office has failed to bring charges though it has issued a warning over dual invoicing.
In a statement, the SFO says the investigation is closed because the conduct did not meet the high evidential standard for laying criminal charges.
NBR first revealed in 2013 that the SFO was investigating Zespri over its Chinese operations. In that year an employee of Zespri subsidiary Zespri Management Consulting Company, Joesph Yu, was convicted of under-declaring of customs duties in China in 2008 and 2010.
Today the SFO confirmed its investigation related to allegations that Zespri facilitated tax evasion while exporting kiwifruit to China until mid-2011 by providing false invoices.
The fraud agency’s director Julie Read said: “In this case the practice of dual invoicing facilitated criminal offending in China. The lower-valued invoice was used by Zespri’s importer to evade duty and resulted in him being convicted for the Chinese offence of smuggling. The instrument of that offending was created by Zespri in New Zealand. For that reason, the matter properly came to the attention of the SFO.”
The SFO said it was concerned about both Zespri’s dual invoicing practice and subsequent efforts by it to distance itself from the importer’s offending in the form of letters written to Chinese investigation and prosecution agencies.
The fraud watchdog said New Zealand exporters should approach the practice with extreme caution as it is a warning flag for duty evasion being committed in foreign jurisdictions.
In September this year, the SFO was told off by the High Court for misusing its powers in relation to the investigation. It was found to have acted unlawfully when trying to stop former Zespri chairman John Loughlin from having his lawyer of choice present in an interview.
Earlier this year Zespri made a $750,000 provision in its 2017/18 financial accounts against any potential outcome of the SFO investigation, to add to the $7.3 million already budgeted last year.
Zespri says it was pleased the SFO had publicly confirmed the end of its investigation.
“As we have always been clear, we relied on our former importers to comply with their legal obligations under local customs laws and, based on our own internal investigations, we know that we did not benefit from their customs fraud. It is satisfying to finally have the SFO confirm that its investigation of Zespri has closed and that there are no further actions,” Zespri chair Peter McBride says.
The kiwifruit organisation says it changed its operating model in China since the offending of its former importer in 2011.
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