Where to begin. Well top billing must go to the fact that Peter Garty has finally hit the headlines in quite controversial circumstances. This of course should have happened back in May 1993 when the "Report of an Enquiry into Certain Arrangements entered into by the Bank of New Zealand in March 1988" was issued by the Securities Commission. Mr Garty was the Audit Partner of Ernst and Young responsible for the audit of the 1990 Bank of New Zealand annual accounts where such arrangements were put to use to falsely inflate the Bank's reported profit to $100m when it should have been near zero. Mr Garty was well aware of the nature of these arrangements but oversaw a whole series of "mistakes" in the audit work papers such that the casual observer might think that the unqualified audit report was justified or the result of some excusable incompetence. He was the person in the best position to have stopped the declaration of the inflated profit but he did not do so. He no doubt was under great pressure from many quarters to produce an unqualified audit report and we suspect that he was assured from influential quarters (so far accurately) that he would not get into trouble for doing so, but the buck must stop with him. Auditors must not yield to pressure or the whole process becomes a farce. The news media did play up the release of the Securities Commission report but chose to focus on high profile Bank directors, politicians and lawyers who were involved, and will not even yet tell of Mr Garty's role. There would appear to have been some pact entered into in 1993 for it not to so do.
This site feels fully justified in going into the "We told you (this fellow cannot be trusted) so" mode. Mr Garty's 1990 actions have been the recurring theme of this site from Day 1. We protested when in November 2004 the Dominion Post chose to utilise him as a commentator on Enron consequences and suggested he should be locked up because of his 1990 to 1992 role. When the 1990 BNZ Managing Director, Lindsay Pyne, resigned from the Board of Directors of Telecom(NZ) after getting a lot of flack at the meeting which appointed him for his role in signing the 1990 BNZ accounts (flack which we helped initiate by alerting surfers to Mr Pyne's past), we said that Mr Garty as 1990 BNZ auditor should similarly go from the Telecom staff. If this had been brought about the current leakage circus (concerning Government intentions to unbundle the country's telecommunication wire network making it available to competing companies without being subject to Telecom conditions) would probably not have happened. And we have offered surfers guided tours of relevant passages of the lengthy Securities Commission report which show off the inconsistency of Mr Garty's actions. These are still available. Nobody as incurred our greater wrath.
Actually despite all the publicity nothing much critical seems to have been said against Mr Garty in respect of this latest incident. He seems to have been granted immunity against criticism by the major political parties, and hence the government, and the news media. Such immunity is a very handy thing to have. The immunity seems to have arisen because the two main political parties seemed to have people mixed up in the Bank of New Zealand affair and have somehow bought the silence of the news media. The United Party MP Mr Copeland does seem to be taking a firmer stand it should be said. Radio New Zealand news did report Mr Copeland's accusations concerning Mr Garty albeit in the middle of the night (20-21 May). The Prime Minister has now shown some support for Mr Copeland as this issue is launched so it is still a moving situation.
Then we have the finding of the State Services Commissioner, Mr Prebble. His finding was quite clear that Mr Garty was not in anyway to blame for the leaking incident and he seemed to put quite a lot of emphasis on this. But his brief should have been to check out the role of State employees and state systems with respect of the leak. Putting such emphasis on Mr Garty's role seems strange and outside the matters which Mr Prebble is responsible for. We suspect that there was pressure from his political masters. Mr Prebble expressed much confidence in his findings but it is hard to see why. The perceived two main players, Messrs Ryan and Garty, would seem to have had the opportunity to rehearse their stories together after the leak allegation was made, so their testimonies under oath to Mr Prebble would be sure to be quite consistent. A small exception can negate the "too good to be true" perception and add to credibility. We got the feeling that Mr Prebble added "but Mr Garty did no wrong" on to the end of many of the statements he made with similar effect to Brer Rabbit adding "but please please don't throw me into the briar patch" to his statements.
It is time the Institute of Chartered Accountants of NZ came into the picture. The old NZ Society Accountants seemed to do virtually nothing following the release of the 1993 Securities commission report. We believe it did suffer consequences by way of having its reciprocal qualifications agreements with some overseas accounting bodies cancelled. But rather than take action against those who downgraded its name it decided on an expensive continuating education regime so ridding itself of many dissidents.
Let us supply another small extract from the 1993 report, this time concerning the audit of the 1991 BNZ annual accounts where matters not properly dealt with in 1990 were still cropping up. The full report is of course available at www.sec-com.govt.nz/publications/pre-sep-97.shtml.