Two men have been ordered to pay a combined $440,000 after illegally purchasing sensitive farmland and attempting to bypass New Zealand's overseas investment rules.
Australian citizen Daniel Klaus illegally purchased 91 hectares of farmland in northern Hawke's Bay for $4.5 million, with assistance from New Zealand citizen Michael Newcomb.
The land is classified as sensitive under the Overseas Investment Act due to the size and nature of the property, meaning Overseas Investment Office consent was required for an Australian citizen to purchase it.
Court documents show Klaus, who held cryptocurrency he was seeking to convert to cash, attempted to bypass the Act's requirements by forming a New Zealand-registered company, using Newcomb as a local associate to help facilitate the purchase via a non-cash arrangement.
The arrangement was found to breach the Act's "associate" provisions, which prevent overseas investors from using local front persons to avoid consent requirements.
After the purchase, the partnership deteriorated and Newcomb exited the company, transferring all shares to Klaus.
The move left Klaus in direct ownership of sensitive land without consent — a further breach of the Act. The property was later sold to a New Zealand entity for $3.1 million.
Land Information New Zealand (LINZ) launched an investigation after it became aware of the transactions.
Both men left the country during the probe. LINZ took court action against the pair over breaches of the Overseas Investment Act in their absence.
LINZ compliance leader Susan Smith said the case reinforced the importance of the legislation.
"The Overseas Investment Act is designed to protect New Zealand’s sensitive land and ensure any overseas investment is in New Zealand’s interests," she said.
"Mr Newcomb illegally acted as a front-person for Mr Klaus and by doing this breached the Overseas Investment Act."
The High Court ordered Klaus to pay a $350,000 civil penalty and $15,000 in costs. Newcomb was ordered to pay a $90,000 penalty and $15,000 in costs.
Both men remained outside New Zealand and did not appear in court.
“The penalties imposed by the High Court are a clear reminder that attempts to evade the law will be pursued, even if individuals are no longer in New Zealand," Smith said.
The NZ entity that purchased the land from Klaus' company was not in breach of the OIA and there is no suggestion it did anything wrong.
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