Potentially dangerous gaps in New Zealand’s company registration system have been revealed as an investigation continues by the Society into the operations of a number of NZ registered companies owned by a US-registered corporation, as well as the activities of its Principal and registered agent who directs the NZ companies. A NZ-based co-director of one of his other companies is also under investigation.
Society investigators were invited to meet with the Manager of the National Enforcement Unit (NEU), Shane Keohane, and Operations Manager, Phil Day, at the Ministry of Economic Development in Wellington on 4 November 2009, to set out its serious concerns which had been carefully documented with the NEU and the Companies Office Legal Team in a series of ten reports over the four months preceding the meeting.
The Society is concerned, among other things, that shell companies, with no apparent trading purpose, could be being used to launder money derived from the hard-core porn industry and associated illegal activities. A series of NZ registered companies all directed by a US-based company director who operates from what appears to be a “virtual office” and “residential address” in Auckland, have been listed for years as owned by one apparently bogus shareholder – a ‘defunct’ US corporation – under a name that had not been valid since March 1999.
The Society warned Mr Shane Keohane and his enforcement Unit staff that a number of essential gaps existed in the legislation and in the way the Companies Office was enforcing the Companies Act 1993. It complained about the NZ-based company director – linked to the US-based one, using a limited liability company name which did not exist as a registered company, over 30 times over many years, to make online entries onto the Companies Office website. Mr Keohane wrote to the NZ based director on 23 November 2009 pointing out a whole series of offences he had committed against the Companies Act 1993. On the same day he wrote to the US-based director asking for explanations in relation to allegations made against him and his companies by the Society. The NEU has received no response from that director and received nothing from him in regard to other requests for information sent to him by the NEU officials since early August 2009.
Mr Shane Keohane left the job as NEU Manager at the end of November 2009 soon after it came under damning criticism at the Commerce Select Committee hearings in Wellington.
The Society recognises that there are rational and legitimate reasons for shelf companies to be able to be registered but suggests they may be being used to launder money and enable directors of failed companies, such as the hardcore porn companies under investigation (following liquidation), avoid their obligations to unsecured debtors when their failed companies are liquidated.
Police and customs officers regularly seize consignments of hard-core porn destined for specific outlets in New Zealand. Those persons intercepted regularly claim no knowledge of the content matter, or contend that the DVDs constitute mere “soft porn” rather than “objectionable” material. Some high profile lawyers have been quick to help defend such importers of porn sleaze arguing that their “rights to freedom of expression” are being thwarted by do-gooders and wowsers. One such lawyer argued that his client had no idea the sexually explicit content matter dealt with coprophagia, “golden water sports” and paedophilia, even though the promotional material stated this content matter as a marketing pitch on the overseas-based website from where the material had been ordered.
Company registration documents often show no stated trading function for the companies under investigation that are involved in the purchase of multi-million dollar NZ properties, property development and the promotion of hardcore pornography.
The Society wonders whether any enforcement agency (or for that matter investigative journalist!) is willing to carry out the due diligence needed to identify the beneficial owner of a US-registered Professional Association (P.A.) that it has identified that owns millions of dollars of properties in New Zealand as well as owning multiple porn companies. Does the Principal of this P.A. who directs the NZ companies it owns, actually possess a true residential address where he actually resides in New Zealand? The Overseas Investment Office is currently pursuing an investigation into this individual over a 3 million dollar property purchase by a company he directs.
International trading in hardcore pornography is not illegal in New Zealand provided the content matter supplied is not objectionable. However, supplying restricted content to minors is a serious offence. And yet tens of thousands of websites make such material, including video/DVD content, directly available on their homepages for any minor to access without restrictions and often without any appropriate warnings.
The Society has referred a website linked to the US company director noted above to the Censorship Compliance Office of the Department of Internal Affairs, calling on it to consider prosecuting those involved in the dissemination of objectionable porn content.
It is noteworthy that the Dominion Post (7/01/10) reports: The Financial Action Task Force’s report Anti-Money Laundering and Combating the Financing of Terrorism in October found that New Zealand had no legal requirements for financial institutions to “identify the beneficial owner”. “Important elements are not addressed in either law, regulation, or other enforceable means.”