THE GOVERNMENT has revealed why it dropped charges against an American businessman, after an official information request from a private investigator.

The reasons included: “The defendant consents to the withdrawal of charges.”

[Sunday Star Times 19/05/13]

The American, Terry Hay, attracted the attention of the National Enforcement Unit (NEU) of the Companies Office after one of his former businesses became embroiled in allegations a fictitious liquidator was used during a debt dispute.

The allegations were never tested in court, and now won’t be. The Ministry of Business Innovation and Employment, which took over the unit’s duties, this year dropped an arrest warrant and 22 charges it had laid against Hay under the Crimes Act and Companies Act, including one charge of “carrying on a business fraudulently.”

Honolulu-based Hay is a major shareholder in the ultimate parent company of New Zealand – based flight catering Pacific Flight Catering, which supplies in -flight catering to several airlines including China Southern Airlines and Cathay Pacific.

He could not be reached for comment on the case last week.

The case began when a former Hay company supplying fruit for in-flight meals, Fresh Prepared, ran up a $64,000 legal bill to two Auckland barristers. When the bill remained unpaid, the barristers, Clayton Luke and Richard Harrison, tried to have the company wound up but before that hearing occurred, Fresh Prepared was put into voluntary liquidation in January 2007.

The liquidator was a Babubhai Patel of Patel & Patel, whose Auckland mailing address was PO Box 53002, the same mailbox used by Fresh Prepared.

The move led the barristers to hire private investigator Grace Haden to probe Patel’s identity.

After an application was made in the High Court claiming the appointment of the liquidator was a sham, Leading Associate Judge Jeremy Doogue said: “There is a serious question as to whether or not Mr Patel actually exists.”

However, further liquidation documents were filed under the name Patel and Fresh Prepared was duly struck off in June 2010. It is understood the barristers had reached a confidential settlement with the company.

Nevertheless an investigation had led the NEU to believe Patel was not real and it charged Hay and his business partner Lynn Pryor, a former director and shareholder of Fresh Prepared. Pryor pleaded guilty to one charge of carrying on business fraudulently and was fined $18,000 and banned as a company director until July 2015.

Sentencing Pryor, Judge Josephine Bouchier said it was quite clear that “as a result of a debt owed to lawyers, Mr Haye [sic] who controlled the company’s accounts, embarked upon a systematic course of action to deregister the company to try to avoid that debt… It appears then however, that Mr Haye [sic] has not stayed around to face the music himself.”

An OIA request from Haden produced the following reasons why the ministry dropped charges against Hay.

There were six relevant factors behind the decision, said the ministry. These included that the victims had been compensated in full; that medical evidence confirmed the defendant suffered depression at the time of the alleged offending and had had ongoing psychological problems and serious health issues.

Another factor considered relevant was that “the defendant consents to the withdrawal of the charges.”

Haden has written to Attorney-General Chris Finlayson protesting against the decision.

Source:

Ministry opens up on case against US man. Sunday 19 May 2013.

Story by Rob Stock – a  finance journalist in the Fairfax Business Bureau and money editor of Sunday Star-Times.

Fairfax NZ News