A receiver appointed by the Hubbard statutory managers has been found guilty of breaching accountancy ethics, following the dissolution of a $10 million dairy farm owned by a South Canterbury family.
The New Zealand Institute of Chartered Accountants (NZICA) has found Invercargill WHK rural partner and accountant James Hennessy guilty of breaching the institute's ethics in a receivership by failing to be seen at all time to be independent and free from conflicts of interest.
He was censured and ordered to pay $19,376 to the institute in costs.
In the decision released by the institute, it said Hennessy "accepted an appointment as receiver of a farming partnership when he acted for the incumbent sharemilker on that farm", who was also a potential purchaser of the farm.
The South Otago farm was put into receivership by statutory managers Grant Thornton, as it owed Aorangi Securities $10m. Aorangi is in statutory management.
The South Canterbury family laid the complaint with the institute.
"Although the member [Hennessy] advised the sharemilker he would no longer act for him, numerous decisions made in the course of the receivership impacted both his former sharemilker client and the outcome of the receivership - for example leases entered into with the sharemilker and sales of stock to a third party financier immediately leased back to the sharemilker," the decision stated.
"The sharemilker was also a potential purchaser of the farm, and during the receivership, companies of which the member [Hennessy] was a director, entered into grazing and stock-leasing arrangements with the sharemilker."
The institute did state all key decisions were taken after Hennessy took independent professional advice and Grant Thornton which appointed him was kept informed and consulted about the decisions.
At the hearing on December 17, 2012, via video teleconference, Hennessy rejected the initial conflict of interest charge, but indicated he was willing to admit to a lesser charge of a perception of having a conflict of interest.
His defence was that all actions were vetted by another partner at the firm, as well as the Aorangi statutory manager, Grant Thornton.
While WHK had not advised Hennessy to step down as receiver due to his involvement with the sharemilker an outside law firm recommended he should no longer act to avoid any conflict of interest. He did not and WHK filed three successive company office returns for the sharemilker's company.
Hennessy was contacted for comment yesterday but referred Fairfax Media to his lawyer who did not return calls.
The decision suppressed the identity of the South Canterbury family. The decision was to be published in the Chartered Accountants' Journal and on the NZICA website. The appeal period for the decision ends on Friday.
- ? Fairfax NZ News
Source: http://www.stuff.co.nz/business/money/8156015/Receiver-guilty-of-failing-to-uphold-ethics
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