Media Release

10 November 2016

Former solicitor manipulated the system, sentenced to home detention

Edward Errol Johnston has been sentenced at the Auckland District Court today in a Serious Fraud Office (SFO) prosecution.

He received 11 months’ home detention and ordered to pay $50,000 in reparation.

The former solicitor pleaded guilty in September this year to three Crimes Act charges of ‘Dishonestly taking or using document’.

During the period December 2011 and January 2012, Mr Johnston owned properties in the Auckland area and had fallen into arrears on his loan repayments to his bank. When faced with a requirement to reduce his existing debt, Mr Johnston manipulated the system. He submitted false Sale and Purchase Agreements to his bank. The bank accepted the fictitious transactions. In reality, the properties were either sold for a higher price than he had stated, or transferred to another Trust and refinanced with a loan from another bank. In January 2012 Mr Johnston submitted a false Statement of Assets and Liabilities to the bank when obtaining the refinanced loan.

SFO Director, Julie Read said, “Mr Johnston breached his professional duties and deceived the bank for personal gain. The first decision to take a dishonest path may seem insignificant but often means that there is no way back. Mr Johnston’s decision left him in a far worse position, he failed to carry out his duty of care for his clients, he deceived the bank and now he will suffer the consequences of his actions.”

ENDS

Note to editors

Background to investigation

Edward Errol Johnston, former solicitor, operated as a sole practitioner in Henderson under the name Ed Johnston & Co, Barristers and Solicitors. Mr Johnston was adjudged bankrupt on 20 November 2012. He was struck off the role of barristers and solicitors by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal in July 2013.

Crimes Act offences

Section 228 Dishonestly taking or using document

(1) Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration,—

(a) dishonestly and without claim of right, takes or obtains any document; or

(b) dishonestly and without claim of right, uses or attempts to use any document.

(2) Every person is liable to imprisonment for a term not exceeding 3 years who, without reasonable excuse, sells, transfers, or otherwise makes available any document knowing that—

(a) the document was, dishonestly and without claim of right, taken, obtained, or used; and

(b) the document was dealt with in the manner specified in paragraph (a) with intent to obtain any property, service, pecuniary advantage, or valuable consideration.

About the SFO

The SFO was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO’s role is the detection, investigation and prosecution of serious or complex financial crime. The SFO’s focus is on investigating and prosecuting criminal cases that will have a real effect on:

business and investor confidence in our financial markets and economy

public confidence in our justice system and public service

New Zealand’s international business reputation.

The SFO operates three operational teams; the Evaluation and Intelligence team along with two investigative teams.

The SFO operates under two sets of investigative powers.

Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”

Part 2 of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:

the suspected nature and consequences of the fraud and/or;

the suspected scale of the fraud and/or;

the legal, factual and evidential complexity of the matter and/or;

any relevant public interest considerations.

The SFO’s Annual Report 2016 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO’s strategic goals and performance standards. Both are available online at www.sfo.govt.nz

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