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January 2005 Edition ---- to page back through Previous Editions click here

Welcome to 2005 on the site. We plan an invigorated effort this year. There is sure a lot of need there, with no sign of any reform on the New Zealand accounting scene. The Securities Commission is complicating things by putting the emphasis on insider trading rather than blatant financial misreporting.

Just where to start is the big problem. Let us first consider an article in the Dominion Post of 17 Dec 2004. a section of which is herewith displayed. Insider Training or Insider Trading would seem to be all the same to this newspaper which would seem to have been assigned the task of paving the way to get those charged with insider trading in Tranz Rail shares off the hook.

. Yes this first prosecution for Insider Trading sure is turning out to be a case of Insider Training for all those insider traders who want further tips on how to escape any force that might happen to be in the law.

The article brings out of the closet Mr Peter McKenzie of 1993 BNZ Arrangements Enquirey fame. Mr McKenzie chaired the quorum of the Securities Commission which produced the report which found fault with most all the parties associated with the 1988 arrangements but strangely could not find any evidence of a conspiracy and found no evidence of improper conduct on anyone's part. Interesting the only person who seemed to cop any action arising from the report was Mr Peter Garty, now of Telecom, who the Dominion Post brought into the limelight in an article on auditing just a few weeks back. Well the Commission pointed the finger Mr Garty's way but the actual accountants who copped it were all those who could not afford the extensive futile compulsory "education" courses that the Accountants Society imposed.

Then as now Mr Mckenzie appears reluctant to criticise Fay Richwhite camp.

Just how Mr Mckenzie got quoted by the Post would be most interesting to know. Who approached who, or was it jacked up by a third party, possibly some of the defendents, who would possibly have influence over the two parties.

The Secuities Commission is taking action against a company called Midavia which has Fay Richwhite connections. Midavia's lawyers are relying on Section 4(5) of the Limitation Act 1950 which says an action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of two years from the date on which the cause of action accrued.

One would have thought that any legal provisions restriction insider trading would have been repealed at the request of the Securities Commission long ago. They have been making big noises about tidying up the legislation and that provision would not be hard to find were there any will to succeed in the tidyup, Mr Mckenzie does not seem to express much dismay.

However the action being taken is possibly to get a conviction from which the court will impose penalties and forfeitures and so is not an action for recovery and so the limitations provision might not apply.

Incidentally Mr McKenzie's (and associate's) 1993 masterpiece has now been put on line by the Securities Commission. If one has adequate computer capacity it can be downloaded at http://www.http://www.justaccounting.co.nz/bnzfilraccess.html Perhaps the Commission could chop it up a bit so everyone can get a look into what should be essential reading. The problem can perhaps be overcome by using a browser which will save the file to disk and then using Acrobat (Adobe) to access the file. This site might make a practice of providing guided tours of the (still most relevant) report. An opener follows in the next paragraph. Get your loaded Acrobat alongside otherwise perhaps skip the paragraph. They don't write them like this report anymore. Subsequent Securities Commission reports tend to just advise findings.

Use the page find (control + N) to find page 190 of the file which equates to page 181 of the report. Scroll down a bit and it can be seen that Mr Garty the audit partner says they were looking into the perpetual note (and not too much else) as part of their 1990 audit finalisation. Then find page 389 which is the auditor's unders and over schedule as they wrote it. No mention of the perpetual note(s) there. Despite somehow knowing to "look into" it they did not find a problem. Many of the items on that schedule are not valid but that is another story. The commission's findings on these notes are to be found starting at page 193 of the file scrolling to para 15.133. A journal entry of $32m went to increase profit. Surely that would be noticed. Then at page 394 we see the unders and overs schedule for the 1991 year. Note that there are a lot more items this year. He must be getting more fussy! Fortunately it only added up to $1m net which is trivial. How convenient!. The perpetuals appear on the list this time but as an understatement of profit not as an overstatement as it should be. He somehow woke up to the fact that there was a problem but (if you believe it) didn't get the direction right. All three years 89-91 were apparently lumped into this $30m figure although the schedule was only about variations in the 1991 profit calculations. The Commissions comments on this are at (file) pages 218 and 219. The same sort of thing is reported for the 1992 year (page 395). We would not lampoon the efforts of a hapless accountant appointed to a position beyond his capability but this accountant is currently Group Financial Controller at Telecom, NZ biggest listed company by far. Such people don't make such mistakes, As 1990 BNZ auditor he should go from the Telecom staff just as the 1990 BNZ Managing Director went from the Telecom board last year.

The latest news is that the former Managing Director of Tranz Rail, Michael Beard, one of those charged, has decided to pay up, without pleading guilty to anything. He has undertaken to help the Commission which might bring more evidence to light. There are no accountants charged in these proceedings, but everywhere there would seem to be an involvement of complicit accountants and there is a chance that they are going to be shown up.

The Institute of Chartered Accountants of New Zealand's (ICANZ's) site is looking rather drab. There is no big fanfare to herald in the new President this time. It is Roy Tiffin, a migrant from South Africa it is thought. We will try and get a bit more background. It will probably all be in their journal, but that seems to be a members only publication. The Institute is becoming more insular.

The ICANZ Professional Conduct Committee has had a change of chairperson, believe it or not. Michael Fenton has gone for the second time (could have to be dragged back though if the committee seems a bit stroppy) and John Falloon takes over with a somewhat new look rank and file. Perhaps Mr Falloon might like to open the 1993 BNZ complaints file. The pages which contain these committee member names don't have any headings so it is harder to prove what has been announced.

The audit report for the 1990 BNZ accounts is of course in the name of Ernst and Young. The indications are that a partner of this firm, David Jackson, is in line to be the next ICANZ president. A challenge is to stop this happening.

However there are prizes to be won if one gets in fast. Here is the link to their questionnaire. There are several questions for you to tell them who you are and one broad one for you to tell them about them. Whether a prize can be won from giving abject criticism is an interesting question. The professional integrity sector would say "yes" but the public relations interest would probably say "no" and they tend to win the day.

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