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March Edition----Previous Edition here

In this drama packed edition we acknowledge departure from New Zealand of the Americas Cup and reflect on the chaos and torture inflicted on the New Zealand accounting scene from 18 odd years in pursuit and defence of the auld mug along with the mugs in the general public. We also investigate the much heralded final report on Corporate Transparency from the Institute of Chartered Accountants of New Zealand and the report of the official independent reviewer of the consulting process. Due out in 2002 these reports now seem to be on the backburner until they see what the rest of the world is getting up to. And from the New Zealand Court of Appeal we have the latest findings on allegations of the misleading of the shareholders of Tui Milk Products prior to their voting to merge the company in 1996. Scroll on down and take it all in.

Americas Cup

New Zealand’s involvement started in the mid 1980s when two of its citizens (Michael Fay and David Richwhite) surprisingly to most, financed a yacht into the challenger series in Australia. They did quite well in this and two further attempts to win the cup, all having cheeky aspects without actually winning it. These cup challenges brought hero status to the financiers in NZ which they craftily channelled into success of their “merchant banking” business as a result of widespread corruption of the accounting and legal professions.

Politicians flocked to be associated with these instant heroes and encourage their professional employees to make public funds and debt securities available for these “superior” financiers to restructure. The assumption was that the restructuring was for the public good but in practice it was for the good of the merchant banker’s coffers. Public sector professionals who did not see fit to go along with such restructuring got reported back to the politicians as not being with it and in need of replacement. As “corrective” action was taken the public service rapidly denigrated.

Laws and rules relating to the merchant banker’s operations went by the board as the result of “loopholes”. Rules that were worded well enough to be confirmed if challenged by any other individuals suddenly were perceived to have subtle but genuine loopholes if Fay Richwhite was involved in their breech. Major accounting firms were to the fore in “seeing” such loopholes and validating improper behaviour, probably fearing a loss business as the Fay Richwhite camp came to dominate boards of directors. Safety in numbers was about the only rule which applied although formal declaration of it is not to be found. As a result the Institute of Chartered Accountants of NZ will not criticise any of the practices about from admitting that the 1980s was a wild west. But the practices have continued until at least 2002 when Tranzrail, with substantial Fay Richwhite shareholding, is accused of overcapitalising maintenance expenditure so boosting the share price prior to the FR exit. The Securities Commission is supposed to be investigating.

A common tactic of deception was to encourage laws and rules to be adopted which tended to clarify the legal situation and to make it clear that no loophole existed. The public thinks that at least the authorities are on the ball and that clarification can only be a good thing. But the clarification is used to argue that the law or rule was previously inadequate and extensive breaches of a law before its clarification go uncorrected because of the claimed loophole.

Fay and Richwhite are apparently in some form of unofficial exile in Switzerland, ironically the new home of the Americas Cup. They presumably have taken the NZ public sector wealth with them. The yachting expertise which they instigated was harnessed by others to give NZ an 8 year cup tenure.

This site is largely dedicated to evidence of the above alleged behaviour and its correction. The BNZ enquiry of 1993, The Winebox enquiry and subsequent appeal rulings refer. Lets end with a quote from Michael Fay concerning the profit declaration of the Bank of New Zealand in 1990. “..we had three things available to us that year, we had the insurance policy, we had the general provision which was as I recall, quite large that year, nearly 2% of the risk weighted or adjusted balance sheet of the bank, and then specific provisioning..”

Corporate Transparency

The Institute of Chartered Accountants of New Zealand has gone quiet on its Corporate Transparency exercise. It was going to hear from submitters and prepare a public report for the Minister of Commerce by the end of 2002. They did the consulting but have gone silent. The excuse is they are waiting on similar reports from other countries. The truth more likely is they won’t face the criticism that they will recognise bad accounting in the USA and other parts of the world but not in NZ, which should be their prime interest.

Tui Milk Products Merger 1996

Certain shareholders of this company (288 in total) have challenged the validity of financial advice given to all the shareholders of this company prior to them voting to merge the company in 1996. The High Court judgement which came out in late 2001 found against the challenge as did that of the Court of Appeal in late 2002.