All charges brought by the Serious Fraud Office over political donations to National and Labour in a milestone case have now been quashed – leaving just one defendant guilty of lying to the SFO
The Court of Appeal has quashed convictions against three Chinese donors to the National Party who had been found guilty of deception over $100,000 payments – leaving the Serious Fraud Office case in ruins.
Just one defendant remains convicted – of lying to the SFO but not of the actual donations – from a total of seven who faced a seven-week High Court trial in 2022 over donations to National but also Labour in 2017 and 2018.
The appeal court judgment says the case exposes a significant weakness in the offence provisions of the Electoral Act.
The case followed accusations made in late 2018 by former National MP Jami-Lee Ross that then-National leader Simon Bridges had committed breaches of the donation provisions of the Electoral Act. These involved two $100,000 donations broken up into smaller amounts and given to the party under a range of names.
The Serious Fraud Office investigated, broadened its inquiry to the Labour Party and an art auction, and took charges against seven covering both parties. Three were convicted after the High Court trial.
Now the Court of Appeal has ruled the three donors, Yikun Zhang, and twin brothers Colin and Joe Zheng, who appealed their High Court convictions for obtaining by deception should not have been found guilty because they did not obtain a benefit, as required under the law chosen by the SFO under which to prosecute them.
An alternative SFO claim that the 'benefit' was in the men obtaining protection from public scrutiny by hiding their donations to National was also rejected by the Court of Appeal. It said it was not possible to put a financial value on such privacy and therefore impossible to convict the men on that basis.
The SFO did not prosecute for breaching the Electoral Act but instead took the case under the Crimes Act.
At the High Court, it lost its case against former MP Ross and three other defendants (whose names remain suppressed) charged over donations to Labour via the art auction. Now it has also lost over the three charged in relation to two separate $100,000 donations to National which were broken up into sums under the legally declarable threshold of $15,000.
The Court of Appeal judgment even offers the SFO what could have been an alternative prosecution strategy in the case – saying under another section of the Crimes Act, it might have been possible to argue that the men had 'caused loss by deception'.
"Such an approach would have required evidence about by [sic] the National Party either returning the donation, or relinquishing it to the Electoral Commission pursuant to s 207I of the Electoral Act. It would also have required evidence about the costs incurred by the National Party in investigating the appellants’ conduct (including any audit and legal fees, etc). Such an approach would have been entirely consistent with [case law]. We cannot, however, find any evidence from the trial that directly addresses this issue."
National did not repay the two $100,000 donations, despite the controversy and prosecutions.
Yikun Zhang is a wealthy Chinese community leader, former president of the Chao Shan General Association in Auckland and was made a Member of the NZ Order of Merit; Colin Zheng is also a former leader of the association and he and Joe, his twin brother, were associates of Zhang. Zhang courted political leaders here and has close associations with international Chinese groups connected with key officials and politicians in China.
When convicted by Justice Gault in the High Court of what the judge called "moderately serious offending", the trio was sentenced to community detention to be served from home (effectively a domestic curfew) and community service.
Justice Gault told them at sentencing: "There was an element of planning. You acted together ... you must have known the donation was being concealed, you wanted to avoid public disclosure, you had knowledge of the steps that they took. I consider the offending moderate in seriousness."
But the Court of Appeal accepted arguments from Zhang's lawyer, Brian Dickey, that the judge had erred in accepting the defendants had gained a benefit as required under the provision of the Crimes Act under which they were prosecuted.
Its judgment said the three-judge panel of Justice Christine French, Justice David Collins and Justice Peter Wyllie had considered substituting the Crimes Act offences with charges under the Electoral Act.
"However, [SFO lawyer Katie] Hogan made clear the SFO was not asking us to substitute convictions pursuant to s 234 of the Criminal Procedure Act 2011, and in any event, the SFO candidly acknowledged that it was vexed by the lack of connection between the conduct in this case and the offence provisions in the Electoral Act."
The judges say: "The SFO concluded it was unable to charge any of the defendants with committing offences under the Electoral Act. The inability to charge the defendants with offences under the Electoral Act exposes a significant weakness in the offence provisions of that Act."
Joe Zheng remains convicted of lying to the SFO when it called him in for a compulsory interview under its special powers. He had claimed a substantial deposit to his account which formed part of one ultimate donation had been for a house deposit for work his building firm would do for Yikun Zhang's sister, Shaona Zhang.
At appeal, Joe Zheng argued the High Court didn't take sufficient account of Chinese cultural values. The appeal judges said the logical consequence of his argument was he had to mislead out of duty to his brother. But the appeal judges said there was no indication Teochew cultural traditions included lying to enforcement authorities.
They said: "The Judge’s reasons for concluding that Joe Zheng deliberately set out to mislead the SFO are unimpeachable."
He will have to serve his sentence of three months' community detention and curfew and 150 hours of community service.
* In the other half of the original case, Labour had a net gain of $35,000 from a $60,000 donation for artworks which ended up in Yikun Zhang's home, but an error by the SFO in valuing particular artworks ultimately contributed to that part of the prosecution failing against the three name-suppressed defendants and Zhang and Colin Zheng. Labour also did not have to repay the money.
