New Zealand Law Society - SFO closes Zespri investigation

SFO closes Zespri investigation

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The Serious Fraud Office says it has concluded its investigation into the affairs of Zespri Group Ltd concerning allegations of criminality arising from the practice of dual invoicing.

It says SFO Director Julie Read has closed the investigation "having determined that the conduct did not meet the high evidential standard for laying criminal charges".

The allegations investigated by the SFO were that Zespri facilitated tax evasion while exporting kiwifruit to the People’s Republic of China (PRC) until mid-2011 by providing false invoices for its importer to use when making duty declarations to PRC Customs Officials.

The SFO says 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.

Dual invoicing is not necessarily illegal, but the SFO says it advises that 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 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," Ms Read says.

"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.”

She says the Zespri investigation has been lengthy and reflects the fact that the SFO was required to review complex and unusual arrangements between Zespri and their Chinese importers. The gathering of documentary and witness evidence took much longer than usual in this matter.