Solicitor Fined $60,250 For Obstructing The Overseas Investment Office

Dr Jaeho Choi has been fined $60,250 after pleading guilty to one charge of obstruction under the Overseas Investment Act 2005. Dr Choi appeared in the Auckland District Court on Thursday 25 June 2020.

Dr Choi is an Auckland solicitor who - with his client Dr Won Joo Hur - obstructed the Overseas Investment Office during an investigation into the acquisition of sensitive land in Helensville. Dr Hur was sentenced in February 2020 and ordered to pay a fine of $100,000 for his role in the offending.

In late September 2016, Dr Choi was approached by Dr Hur to help buy the lifestyle property in Helensville. Dr Hur is a Korean citizen who lives in Seoul and is an overseas person under the Act. Dr Hur had entered into an unconditional sale and purchase agreement for the Helensville property for $3 million.

“As an overseas person, Dr Hur should have obtained consent from the Overseas Investment Office first before entering the agreement,” says Vanessa Horne, Group Manager for the Overseas Investment Office. “When he learned of that, he took legal advice from another solicitor who said he should cancel the agreement and forfeit his deposit. He disregarded that advice.”

After unsuccessful attempts to find a way for Dr Hur to settle on the property without further breaches, Dr Choi recommended the use of HK Search Limited, a company owned by Dr Choi’s wife, to settle the transaction. They discussed that HK Search would hold the property for Dr Hur until he found another purchaser for the property or obtained consent.

Dr Hur nominated HK Search as purchaser of the property and provided the funds to settle the property. The purchase was completed on 19 October 2016, with HK Search as the title holder. “This breached the Overseas Investment Act as Dr Hur retained control of the property and HK Search, in holding the property on his behalf, was acting as his associate,” says Vanessa Horne.

“The Overseas Investment Office began an investigation in April 2017 after becoming aware of the transaction. When we asked Dr Choi to explain the transaction, he and Dr Hur produced a false loan document and incorrectly advised that the involvement of HK Search had been at arm’s length. They then subsequently admitted that the documents were false, and that HK Search had been used to avoid complying with the Act.”

The Overseas Investment Office has commenced separate, civil proceedings in the High Court in relation to the transactions in breach of the Act, seeking civil penalties and a disposal order for the property. Those proceedings are ongoing.

“The Overseas Investment Office urges investors to seek specialist legal advice on the Overseas Investment Act,” says Vanessa Horne.

“The Office will continue to enforce New Zealand’s overseas investment law and take strong action against anyone who breaks the rules.”

NOTES:

• The Overseas Investment Office completed over 150 new compliance investigations and achieved 46 enforcement outcomes in 2019/20. This includes the highest civil penalty for a breach of the Overseas Investment Act (nearly $3 million) and the first ever criminal prosecution by the Overseas Investment Office.
• In July 2019 the overseas owners of two rural properties at Warkworth were ordered to pay $2.95 million after an Overseas Investment Office investigation found they were bought without consent.
• In December 2019 the developers of a Birkenhead property were ordered to pay $123,000 for failing to get consent from the Overseas Investment Office.
• In June 2020, an overseas investor was ordered to pay $539,914.47 for purchasing a property in Karaka, South Auckland, without Overseas Investment Office consent.
• The maximum penalty for this charge is 12 months imprisonment or a fine not exceeding $300,000.
• Under changes to the Overseas Investment Act - which came into force on 16 June 2020 - the Overseas Investment Office has been given stronger enforcement powers to act against investors.
• These changes include:
• increasing the ability to act against those that break the rules, including being able to seek injunctions and accept enforceable undertakings
• increasing maximum fixed civil pecuniary penalties from $300,000 to $500,000 for individuals and $10 million for corporates
• introducing a range of new tools that will manage investors who pose significant national security and public order risk, including (in extreme cases) placing a business into statutory management to cut off an investor’s access and control.

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