24 Jun 2016

OIO review a whitewash - Labour

2:35 pm on 24 June 2016

The good character test carried out by the Overseas Investment Office for overseas applications to buy sensitive land or assets is fit for purpose, a review has found.

But that finding has been condemned by Labour MP David Cunliffe, who has called it a whitewash.

It delivered no censure for what he said was "gross malpractice" by the office.

The review was ordered after the office had to apologise to its minister for failing to conduct a robust inquiry when it approved the sale of Onetai Station in Taranaki to two Argentinian brothers.

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Photo: 123rf

Rafael and Federico Grozovsky were found criminally responsible for chemical dumping from their tannery near Buenos Aires, but that information was not passed on to the minister.

Queen's Counsel Terence Stapleton has found the process for carrying out the good character test itself is sound.

David Cunliffe

David Cunliffe Photo: RNZ / Alexander Robertson

Mr Cunliffe said the good character test was anything but sound.

"And I have to say this review is a shameful whitewash".

The first two-thirds of the report set out the law and what the process should look like, but after that it was weak in its recommendations.

"There is no sanction; the causes of this gross breach is understated and the severity of the consequence is also understated."

Mr Stapleton has recommended "that vigilance be undertaken by the OIO and its supervising staff to ensure that relevant factors raised by internet searches on any relevant overseas person be advised to ministers; or other relevant decision maker, when the OIO Recommendation is issued".

Terence Stapleton QC has been appointed to review the OIO good character test.

Terence Stapleton QC has been appointed to review the OIO good character test. Photo: SUPPLIED/Terence Stapleton QC

Mr Stapleton also recommended the office keep a full record of internet searches "under the name, or identifying number of the relevant applicant, and the date of the search, so that this record is available later if further inquiries are made or give rise to questions."

The office could look at requiring police checks from applicants, covering the previous five years, but he was not presenting it as a formal recommendation, as he said such a requirement would come with its own difficulties.

"In some jurisdictions a police check can take considerable time and add to the length of the process".

As OIO applications often involved "high profile persons", the request for a police check "could create tensions and be perceived as offensive".

In light of those considerations, he said it was best left to the office to decide for itself whether to go down that path.

Mr Cunliffe said "the status quo is broken" and the report found ministers could rely on statutory declarations about good character, as furnished by applicants.

The statutory declaration for the Grozovsky brothers was "obviously false and misleading", and he questioned whether that was the same for others.

"Clearly additional checks are required, causing offence to the investors, frankly, is the least of the government's problems.

"At the moment they're giving away sensitive land consents to people who ought not have them."

Land Information New Zealand chief executive Peter Mersi would not be interviewed on the findings of the report.

But in a statement he said he welcomed the report and its "recommendations are being implemented immediately".

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