Labour was considering the future of the SFO before it 'coincidentally' was drawn into a political donations investigation by the office, a defence lawyer claims
The High Court has heard a suggestion the Serious Fraud Office might have targeted insiders in the Labour Party in a political donations inquiry in 2020 because that party was in Government and considering merging the SFO into the police.
Marc Corlett, QC, acting for one of the defendants with name suppression who is linked to a donation to Labour, highlighted for the court media stories that said when Labour had last been in power - with NZ First in 2008 - it had considered changes to the SFO. The office had launched a prosecution against NZ First and any prospect of restructuring was put on hold.
He wondered, in questioning of SFO principal investigator Lee Taylor, if the former director of the office Julie Read could have considered her own re-appointment chances as well as preserving the office's future when it came to deciding whether to pursue and charge Labour defendants in the current case.
"From your perspective," he asked Taylor, "Labour looked to disband the SFO, and we have got another political investigation, just as we had in 2008 with NZ First. It is just a coincidence, is it?"
Taylor: "In terms of what the Labour Party would or would not have done in relation to the Serious Fraud Office, I'm not privy. But what I can say is the decision to a) open the investigation and b) charging, was ultimately Ms Read's but I would suggest it would be highly swayed by the team reporting to her."
Corlett added: "And anything else she had in her mind as to her own future, the Serious Fraud Office's future. Again, you would not be privy to that."
The exchange came as Corlett cross-examined Taylor on the investigator's fourth day on the witness stand in the SFO case against seven defendants charged with obtaining by deception by concealing donations to either Labour in 2017 or the National Party in 2017 and 2018.
Corlett's client is one of three people with name suppression who have been charged in connection to the net $35,000 donation to Labour after an art auction in March 2017. Three other defendants, Auckland businessman and Chinese community leader Yikun Zhang, and twin brothers Colin and Joe Zheng, are charged over that Labour donation and also with the two National donations. Former National MP Jami-Lee Ross is charged over the National monies.
The seven are accused of engaging in a fraudulent 'trick or stratagem' to conceal the identity of the donors by breaking them up into multiple smaller donations beneath the Electoral Act threshold at which parties must declare who provided them the money.
Corlett said his client had been the victim of an "ambush" by the SFO as it had not put key parts of its allegations to him in a compulsory interview at its office, or followed up with questions to him or his solicitor.
The SFO's theory that a draft letter found on the defendant's computer about the art purchases showed he had been involved in a cover-up had never been raised, Corlett said. Nor had the SFO's belief that a March 24, 2017 meeting with the defendant Yikun Zhang had been where the pair had discussed the paintings.
Corlett asked Taylor: "You regard it as an 'operational matter' not to ask him about the key meeting that means he is now on trial?" Taylor said he did see it as operationl, as he asked open questions rather than tainting interviews with his own theories.
Not only had a former director of the Serious Fraud Office Simon McArley acted as solicitor for Corlett's client in offering to answer any of the agency's questions beyond that interview, but former Solicitor-General Mike Heron had complained to both Julie Read, without success, and then the Public Service Commissioner Peter Hughes about poor practices in the inquiry.
Copies of the Heron letters were filed by Corlett as exhibits in the trial.
Heron's complaint to Hughes in a December 2020 letter said issues of concern went "to the director's performance and integrity and beyond normal operational considerations". His client had instructed him to lay a formal complaint against her.
In targeting his client over the Labour donation, Heron wrote, "the office has sought to project an appearance of political neutrality in the context of this investigation in an apparent attempt to balance the investigations and subsequent prosecutions related to National and New Zealand First."
In court, Corlett asked Taylor if he had been party to discussions at the SFO on "the desirability of remaining neutral" over the three political investigations.
"Desirability?" Taylor asked. "No. In a general sense, setting aside these investigations, the SFO along with any other government department should be politically neutral and just serve the government of the day. Those conversations have been had.
"In terms of relating directly to the investigations in terms of any decisions, operationally or otherwise - political neutrality, I can't say that was a direct topic of conversation."
Corlett: "Were there any conversations within the SFO about the desirability of having a Labour Party prosecution with a parallel party insider, as it has been described, to ensure the appearance of political neutrality in the prosecution?"
Taylor: "No."
He said he had discussions about evidence. "But talking at a strategic level, I'm not aware of any conversations where party insiders were discussed."
Taylor added: "Maybe I can sign off by saying that if I became aware of any issue such as - to put it bluntly - the need to target an insider to make it look like we are politically neutral, I would have taken appropriate steps. I do not know what that would be.
"From what I have done and what I have observed, I'm comfortable with the integrity of the investigation."
Corlett asked if it was Read who made the decision to prosecute. "Correct."
In presenting three media stories about the SFO as formal exhibits, Corlett said they showed that throughout her time as director there had been criticism of Read, including over the number of cases being investigated and convictions gained, and over spending on leadership training in Australia.
In 2018, with Labour and NZ First in government together, the NZ Herald reported the SFO's future was up in the air. Corlett said to Taylor: "The very future of the SFO was under consideration ... and similarly Ms Read's tenure as chief executive was coming around for reconsideration."
"Yes."
But, as that article noted, the issue of disbanding the SFO was put on hold when investigations were commenced by the SFO into political donations, Corlett said.
Heron's letter of complaint to Peter Hughes said the SFO should have engaged an independent reviewer to examine its investigation into his client.
In his letter to Read directly, Heron asked if the office had taken into account cultural and language factors, and was told in a reply days later by an SFO counsel that it had done so.
Quoting Heron's letter, the SFO response said: "Our operational decisions are not 'calculated to inflict the maximum degree of distress'."
Taylor was the Crown's final witness after 20 days of hearings. Possible challenges by defence lawyers to Justice Ian Gault's pre-trial rulings on the admissibility of hearsay evidence related to the 'furtherance of a conspiracy' are expected to be heard on Thursday, ahead of bids by some defendants to have charges dismissed.
*Read returned to Australia in early 2022 after completing her second term as SFO director
