Police freeze $11m of assets in alleged tax fraud; Gisborne farmers say 'we've done nothing wrong'

Several utes including a late model Dodge Ram, a fishing boat as well as property in Opotiki, Gisborne and the $7 million farm have been frozen. Photo / Driven

A 1680ha farm, three residential properties, a holiday home, $650,000, tractors, quad bikes, a digger, several utes and a 6.5m fishing boat belonging to John Bracken have been restrained by the police.

About $11 million of assets belonging to a farming family have been frozen following allegations of tax fraud.

John and Margaret Bracken live on a 1680ha farm near Gisborne, which was restrained by the High Court in December after a police application under the Criminal Proceeds Recovery Act.

The farm - valued at $7 million - was frozen along with three residential properties in Gisborne, a holiday home in Opotiki, $650,000 in bank funds, tractors, quad bikes, a digger, several utes including a late model Dodge Ram, as well as a 6.5m fishing boat.

The Brackens are the subject of a joint investigation by the Police and the Inland Revenue Department, which alleges a $16m GST fraud over four years up to June 2018.

A spokeswoman for IRD declined to comment, but Detective Inspector Craig Hamilton said the investigation was ongoing.

He did not rule out criminal charges being laid.

John Bracken told the Weekend Herald that having his assets frozen made him feel "basically guilty" before any evidence was heard in court.

"It's quite a horrible situation here. Our funds are frozen, we don't have a lawyer, we're not really sure what avenue we're going down to fight it," said Bracken.

"[We've done] absolutely nothing wrong. What I've done is fine [regarding tax affairs], I've done it for 20 years and a lot of other people do it.

"I sort of can't say much, I don't really know anything."

Hamilton, who is in charge of the police Asset Recovery Units nationwide, declined to comment specifically about the Bracken case as the matter was before the court.

But speaking generally, Hamilton said the police work closely with different government agencies to pursue profits of alleged crime.

"What I can say is people should pay their taxes," Hamilton said.

"If they are defaulting, the Commissioner of Police can use legislation to chase down any assets."

The IRD has its own powers to recoup unpaid tax or prosecute offenders.

But cases taken under the Criminal Proceeds Recovery Act are determined by the civil level of proof, the "balance of probabilities", rather than the much higher criminal evidential threshold of "beyond reasonable doubt".

So far, alleged tax crimes have been used rarely by the police to take action under the legislation, which effectively requires someone to explain how an asset was paid for.

In one of the first cases, an Auckland plumber who declared less than $1000 in income over five years lost nearly $5 million worth of property following an investigation into his tax affairs.

Yu Ping Gong and his company earned $2.1m in that time, according to police, who claimed the undeclared income paid for a property portfolio worth more than $9m.

The eight properties were frozen by the High Court under the Criminal Proceeds Recovery Act when the police alleged Gong had profited from tax evasion.

He denied tax evasion but agreed six of the eight Auckland properties, worth $4.9m, could be sold in a deal cut with police.

Without any acceptance of liability, Gong wished to "regulate his tax affairs" and an outstanding tax bill of $1.2m was paid from the sale of the properties.

At the time of the Gong case, Stuart Nash - the minister responsible for police and revenue - told the Weekend Herald he wanted greater collaboration between the agencies on these types of cases.

While the IRD and the police can work together under the current laws, Nash said work was being done to strengthen the information-sharing agreements.

"This is the hidden economy. It's not fair to the vast majority of tradies who pay taxes and get undercut by the competition doing cash jobs."

The Criminal Proceeds Recovery Act has most often been used to seize wealth accumulated by drug dealers, but has pushed into new territory with global investigations in recent years.

The police restrained at least $40m of assets in New Zealand belonging to William Yan and alleged they were purchased from the proceeds of a $130m fraud in China.

Yan, also known as Bill Liu, eventually cut an unusual deal with the police.

He agreed to pay $43m - without admitting civil or criminal liability - which is easily the largest settlement in the history of the legislation in New Zealand.

As part of the deal, Yan agreed to return to China to face trial where he pleaded guilty to embezzlement.

He also agreed to be charged with money laundering in New Zealand and was sentenced to five months of home detention after pleading guilty.

In a similar case, nearly $70 million in New Zealand bank accounts has been frozen as part of a global investigation into a wealthy Chinese businessman accused of running a massive pyramid scheme from Canada.

Xiao Hua Gong - the brother of plumber Yu Ping Gong - has built a business empire in Toronto including a hotel chain and television channels, as well as attending fundraisers for Canada's Prime Minister Justin Trudeau and donating to the governing Liberal Party.

He was arrested in Canada and charged with fraud and money laundering in connection to the alleged pyramid scheme involving the "fraudulent sale of hundreds of millions of dollars" in shares in China.