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Nov 2003 Edition----to page back through Previous Editions click here

Sorry about no Oct edition but in the interval there has been the biggest revisit of the invalid 1990 Bank of New Zealand annual accounts and related issues, by the New Zealand press.

This is indeed heartening news. It stems from premeditated action by certain small shareholders in opposing the appointment of L C “Provisioning” Pyne to the board of Telecom. Justaccounting is proud to have been part of the alerting process.

Of the press the NZ Herald lead the way including this piece by Brian Gaynor prior to the meeting.

The interesting revelation of Mr Gaynor is that Theresa Gattung, now CEO of Telecom was appointed Marketing Manager of the BNZ during MR Pyne’s tenure as BNZ managing director. The abuse of accounting standards by BNZ then and Telecom now is remarkably similar as observed in our last edition.

Mr Gaynor states a few inaccuracies however, such as in his 7th paragraph when he quotes the 1990 reported profit as if it were valid and says that the BNZ made a strong recovery that year. One has to read much further to discover that there was no such strong recovery as the reported profit was a fake.

Although he ridicules Mr Pyne’s statement in the 1990 accounts that "the outlook for the bank is extremely positive" Mr Gaynor fails to disclose Mr Pyne’s admission dated 20 Aug 1990 that before releasing the 1990 results the BNZ chairman and himself as BNZ Managing Director, approached the Minister of Finance to indicate that as a consequence of the position (losses) in Australia it was likely that the Bank would require an increase in capital. They then proceeded to release the report including the “extremely positive” statement. This is contained in para 15.96 of the Securities commission report.

Mr Gaynor puts emphasis on Pyne’s involvement because “because he signed the published accounts and was a member of the audit sub-committee that had been advised by the auditors that the accounting policy was not appropriate”. The auditor’s prime responsibility is in reporting to the shareholders and public as per their statutory Audit Report. If they were serious about a policy not being appropriate they should have said so in the Audit Report. It needs to be acknowledged (without excusing him) that Pyne was operating within a conspiracy between directors, management, auditors and solicitors in line with the allegations which initiated the enquiry. The major inaccuracy in the allegations was that they were directed at the 1988 BNZ accounts when it should have been the 1990 ones. The 1988 accounts were sufficiently overstated by simply failing to recognise bad debts.

Perhaps also good news for tidying up accounting is the appointment of Don Brash as the new National political party leader. His predecessor Bill English seemed to be tied to supporting Fay Richwhite because of his Roman Catholic affiliations. Mr Brash seems not to have belittled these scandals. But he is pandering to the rich with his war on welfare and the rich stand to be hurt by the needed new broom on accounting scandal so one must wait and see.

The bad news is that Don Trow has been made one of eight life members of the Institute of Chartered Accountants of New Zealand. Professor Trow appeared before the Securities Commission on behalf of the Bank of New Zealand in the 1993 enquiry into the “certain arrangements” of the bank that Mr Gaynor and this site refer to. Professor Trow claimed that “the arrangements” were within generally accepted accounting practice in 1990, contrary to the Commission’s opinion. He went on television the night the Commission’s report was released decrying the state of accounting standards so as to imply that the BNZ fake insurance scheme had complied with them. He implied that the standards needed to be rules rather than principle based. This is contrary to the Institute’s opinion.

Professor Trow was presented with his membership and lauded by the Institute’s President, Pat Waite, Mr Wait just happened to be one of Mr Pyne’s subordinates on the BNZ staff in 1990. Among his seven life member colleagues are Peter Hays, who also appeared for the BNZ at the enquiry and Michael Fenton who has chaired the Institutes Professional Conduct function, which has consistently failed to see anything wrong with those who participated in the arrangements.