Commissioner of Police v Rodriguez
[2021] NZHC 2223
•14 December 2021
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2019-419-150
[2021] NZHC 2223
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
ANDREINA GAMEZ RODRIGUEZ
First Respondent
MAP AND ASSOCIATES TRUSTEE COMPANY LIMITED
Second Respondent
AND
BANK OF NEW ZEALAND
Interested Party
Hearing: 22 September 2021 Appearances:
J N Hamilton for Applicant
K E Cornegé for First Respondent
Judgment:
14 December 2021
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 14 December 2021 at 1 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors:Hamilton Legal, Crown Solicitor, Hamilton Tompkins Wake, Hamilton
Counsel: R A Kirkness, Wellington
COMMISSIONER OF POLICE v RODRIGUEZ [2021] NZHC 2223 [14 December 2021]
[1] By application dated 23 August 2021, the Commissioner of Police (“Commissioner”) seeks an order extending the duration of a restraining order (“order”) for (a further) 12 months.1
[2] The order restrains the disposition of USD11,850,000 (“funds”) held in an account at the Bank of New Zealand in the name of the second respondent (“MAP”). MAP does not oppose the extension sought.
[3] The first respondent, Ms Gamez Rodriguez, is said to be the beneficial owner of the funds. I say “said to be” as Ms Gamez Rodriguez has not filed any affidavit evidence to that or indeed any other effect.
[4] Ms Gamez Rodriguez opposes an unconditional extension. Ms Cornegé, counsel for Ms Gamez Rodriguez, submits that any extension should be conditional on the Commissioner commencing an application for forfeiture by 10 December 2021 (that date has come and gone) and giving an undertaking as to damages as provided for by s 29 of the Criminal Proceeds (Recovery) Act 2009 (“Act”).
[5]The Commissioner does not agree to either condition.
Background
[6] As the relevant background is set out in earlier judgments, it is unnecessary for me to say more than what follows to put this judgment in context.
Ms Gamez Rodriguez
[7] Ms Gamez Rodriguez is married to Mr L C De Leon Perez (“Mr De Leon”). Ms Gamez Rodriguez is a Venezuelan citizen, while Mr De Leon is a dual Venezuelan and United States citizen. Mr De Leon has been convicted in the United States on charges of corruption and money laundering. As the Crown summarised it in their submissions:
1.4Mr De Leon’s offending arises from his conduct as an attorney for a Venezuelan state owned and controlled oil company and involves both
1 Criminal Proceeds (Recovery) Act 2009, s 41.
the receipt by him and his co-conspirators of multi-million dollar payments by way of bribes and the subsequent laundering of those funds. This conduct took place between 2011 and 2013.
Procedure
[8] The funds were deposited into the account in late March 2019. The BNZ were on enquiry from the outset, and immediately requested information from MAP.
[9] The Commissioner became aware of the transaction, obtained information from the BNZ, and then, pursuant to s 25 of the Act, made a without notice application for a restraining order in respect of the funds. This application was made on the basis that there were reasonable grounds to believe Ms Gamez Rodriguez had benefited from significant criminal activity. Woolford J granted this application on 13 June 2019.
[10]The Commissioner filed an on-notice application the following day.
[11] On 12 December 2019, Moore J granted the on-notice application, making a restraining order in respect of the funds for 12 months (“order”). In doing so the Judge rejected submissions for Ms Gamez Rodriguez that the Commissioner should have sought a “foreign” restraining order and that there was no or insufficient evidence to believe that Ms Gamez Rodriguez had benefited from significant criminal activity.2 The Judge was satisfied there were reasonable grounds for such a belief. The significant criminal activity alleged, then and now, is money laundering, a crime pursuant to s 243(2) Crimes Act 1961.
[12] On 26 November 2020, the Court of Appeal declined Ms Gamez Rodriguez’s and MAP’s appeal against Moore J’s decision.3 Amongst other things, the Court upheld the Judge on the two points to which I have just referred.
[13] The Commissioner then applied to extend the order for a further 12 months, that is until 12 December 2021. Ms Gamez Rodriguez did not oppose an extension but sought as a condition that the Commissioner make an application for forfeiture
2 Commissioner of Police v Rodriguez [2019] NZHC 3265.
3 Rodriguez v Commissioner of Police [2020] NZCA 589.
within six months, and that the Commissioner provide an undertaking such as is now sought.
[14] This application came before Davison J, and many of the arguments made to him have been made to me.
[15] In his decision of 8 March 2021, Davison J declined to order the provision of an undertaking but extended the order until 10 September 2021, so nine months rather than the 12 months that had been sought.4 The basis on which Judge granted a nine month extension is set out in the passage below:5
However, while I am satisfied that further extension of the restraining order is both necessary and justified, I do not consider an extension for a further year is appropriate. A period of nine months from 12 December 2020 should enable the Commissioner to gather further information from the overseas jurisdictions and progress the investigation to the point where a decision can be made to commence proceedings seeking civil forfeiture orders. This further period also takes account of Ms Rodriguez’s interests and the objective of limiting the further time during which she will be unable to access or utilise the funds by reason of the restraining order.
[16] On 7 September 2021, Lang J granted a further extension pending determination of this present application.
[17] As Ms Cornegé submits, it is important to record that Ms Gamez Rodriguez has not been charged with any criminal offence in New Zealand; she is not the subject of any US criminal investigation; the “Magnolia account”, identified by US authorities as the destination account for bribes Mr De Leon received, has been frozen; and no connection has been established between the funds in that account and the funds restrained in New Zealand.
Evidence
[18] The Commissioner’s investigation of the source of the funds is being conducted by the Commissioner’s Asset Recovery Unit (“ARU”). As appears from earlier judgments, Mr Bruce Russell, an investigator with the ARU, has been involved
4 Commissioner of Police v Rodriguez [2021] NZHC 425.
5 At [49].
in the investigation since its inception and he has updated the Court on the progress of the investigation in several affidavits filed in the proceedings.
[19] Mr Russell’s affidavit of 20 August 2021 updates the Court on developments since an affidavit he swore in January 2021, which was before Davison J. Mr Russell’s affidavit of 13 September 2021 is a response to affidavits filed in opposition to the application.
Affidavit of 20 August 2021
[20] In his affidavit of 20 August 2021, Mr Russell states that, although the investigation has continued to be diligently pursued and progress has been made since January 2021, the investigation has not yet reached a point at which the Commissioner is able to make an application for a civil forfeiture order, and that it will be at least 12 months before the Commissioner is able to do so.
[21] The need for further time reflects the time consuming process which the ARU must follow to obtain information to advance its investigation, and which is summarised at [23] to [25], [45] and [46] of Davison J’s decision.
Developments
[22] The ARU has previously established that the funds in the account were transferred from an account in Ms Gamez Rodriguez’s name at Lombard Odier and CIE (Bahamas) Ltd (“Lombard account”).
[23] At the time of Davison J’s judgment, Mr Russell had outstanding requests of the relevant authorities in the Bahamas, Switzerland, Venezuela, and Panama. In his August 2021 affidavit, Mr Russell sets out the information received and his subsequent steps. From these, the ARU has established that the funds in the Lombard account derive from account number 728680 in the name of Sands Trading International at Société Générale Private Banking in Nassau in the Bahamas (“Sands account”). Mr Russell’s recent focus has been on the source of the funds that were transferred from the Sands account to the Lombard account. Mr Russell has good reason to believe USD2,943,256.65 of the funds transferred comprised bribes paid by four
different companies to the Sands account on Mr De Leon’s direction. Mr Russell now has affidavits to this effect from directors of the companies concerned.
[24] Mr Russell continues to investigate the source of the remaining funds transferred from the Sands account to the Lombard account. In particular, Mr Russell is focusing on several deposits to the Sands account totalling USD7,857,782 and
€460,000 from a Panamanian registered entity, Fribourg Consulting Corporation (“Fribourg”). Ms Gamez Rodriguez is said to be a shareholder of Fribourg, and Mr De Leon is also associated with the company.
[25] At the time of his August 2021 affidavit, Mr Russell had made a request of the Panamanian authorities for information regarding those deposits. However, at the time of his affidavit of 13 September 2021, Mr Russell had just received a response to his enquiries of the Panamanian authorities which he thought unlikely to provide answers to the questions he had asked. Given that, Mr Russell was in the course of preparing a further request under the “Mutual Legal Assistance Treaty” (“MLAT”) to the competent authority in the Bahamas; had sought information from the Financial Intelligence Unit in Antigua and Barbuda; and, from the initial response to that enquiry, expected that a further MLAT request or requests would be required.
Opposition
[26] Since their restraint, the funds have been under the control of the Official Assignee and have been converted to NZD17,941,380.36. The submission for Ms Gamez Rodriguez, that the Commissioner should be required to provide an undertaking, reflects losses (in the form of unrealised gains) presently said to be incurred by having the funds held in this way.
[27] Ms Simon’s affidavit of 20 September 2021 annexes the Official Assignee’s report of 13 September 2021 which states that interest of approximately NZD480,000 had accrued and that the funds are held on term deposit, at interest rates between
0.25 percent and 1.03 percent per annum. As of 13 September 2021, the total fund was NZD18,420,660.30.
[28] Mr Fine’s affidavit of 3 September 2021 is to the effect that a significantly greater return on the restrained funds might have been obtained had they been invested elsewhere since their restraint. To illustrate this Mr Fine refers to rates of return achieved by several local fund managers over the last 12 months, and calculates the difference in income between holding the funds on term deposit at 1.2 percent per annum as opposed to, say, a return of 2.3 percent per annum (if the funds were invested on a conservative basis in equities), the difference being NZD293,786.
[29] Mr Fine also refers to the exchange rate loss over that period, said to be NZD1,573,225. It is not apparent to me that it is open to claim both for the return that would be obtained by a local fund manager and exchange rate loss but, in any event, the point is made that the rates of return achieved by the Official Assignee, whose duty is to “preserve”, is less than likely to be achieved elsewhere.
[30] Ms Findley’s affidavit of 3 September 2021 puts in evidence a letter (and translation) dated 29 July 2021 from Swiss prosecutors to Fribourg’s solicitors. The letter refers to Mr Russell’s request to Switzerland dated 3 June 2021 for, amongst other things, assistance in relation to Fribourg’s accounts with two banks in Switzerland. The information that the prosecutor obtained from those banks did not match the facts described in Mr Russell’s request for assistance. Mr Russell therefore withdrew his request, so far as it related to Fribourg. Mr Russell does not refer to this unsuccessful aspect of his request in his affidavits and the gist of Ms Cornegé’s submissions on this point is that he should have done so, and also that this evidences a degree of “fishing” and/or ineptitude on Mr Russell’s part.
Submissions
Commissioner
[31] Ms Hamilton submits that the extension sought should be granted, unconditionally. The ARU is acting diligently and expeditiously, and significant progress has been made bearing in mind what appear to have been deliberate attempts to obfuscate the ultimate source(s) of the funds.
[32] Ms Hamilton also repeats her submission to Davison J that it is within Ms Gamez Rodriguez’s power to expedite the ARU’s investigation by submitting to an examination by the Commissioner and/or by providing information to assist him. An examination cannot be compelled as Ms Gamez Rodriguez is not within the jurisdiction. She could, however, elect to be examined, and she could provide information. Given that she has not done so, Ms Hamilton submits that Ms Gamez Rodriguez cannot complain about the length of time the investigation is taking or prejudice (if any) caused by the delay.
[33] Ms Hamilton referred me to Grice J’s decision in Commissioner of Police v Cheng in which the Judge extended a restraining order made four years earlier, and in circumstances where the Judge had previously indicated she was expecting the Commissioner to file an application for forfeiture before the expiry of the then extant extension.6
[34] Accordingly, Ms Hamilton submits that it is reasonable for the Court to grant the extension sought, and, indeed, absent the Court doing so, New Zealand will be seen as a jurisdiction unable to adequately investigate criminal activity of this nature and will become a haven for the same.
Opposition
[35] Ms Cornegé submits, correctly, that the power to extend the duration of a restraining order must be exercised in a reasonable manner having regard to the purposes of the Act and the nature and purpose of a restraining order.7
[36] Ms Cornegé submits that factors considered relevant to the exercise of the Court’s discretion to extend a restraining order include the extent to which the order prejudices the respondent and whether any delay is so unreasonable that it requires the refusal of an extension.8
6 Commissioner of Police v Cheng [2020] NZHC 1861.
7 Commissioner of Police v Reed [2013] NZHC 802 at [34].
8 Commissioner of the New Zealand Police v Eddy [2018] NZHC 736 at [28] and [61].
[37] Ms Cornegé submits the delay in the investigation is unreasonable. She submits that the Commissioner appears to have undertaken “wide-ranging investigations in the hope of substantiating his suspicions about the funds. Some of the ARU’s enquiries seem to be little more than fishing expeditions”.
[38] Secondly, Ms Cornegé submits that it appears Mr Russell’s investigations are intended to assist the US on some “informal” basis. The evidence said to support this submission is a request, in the MLAT request to the Bahamas of 3 June 2021, for permission to share any information provided with the US authorities on an informal, police-to-police basis. The MLAT request says this permission is sought on the basis that the information is or is likely to be relevant to the parallel US investigation into Mr De Leon and his co-offenders.
[39] With respect to Ms Cornegé, this request is a long way from providing a basis for a submission that Mr Russell’s investigations appear intended to assist the US.
[40] Thirdly, Ms Cornegé says that Mr Russell’s affidavits make clear that the end date of the investigation is “far from being in sight”. Ms Cornegé submits that it is not acceptable that all Mr Russell can offer is an undertaking to ensure an application for forfeiture is brought as soon as possible. Moreover, Ms Cornegé submits the Commissioner could have proceeded down the “foreign” pathway and obtained information more speedily but rather chose the “domestic” pathway and now complains that the process to obtain information is convoluted.
[41] In response to this, Ms Hamilton submits this contention is incorrect. This is because the underlying criminal activity alleged is the use of New Zealand for money laundering purposes. The alleged offending is not offshore but is in New Zealand.
[42] In summary, Ms Cornegé submits that there comes a point at which the Commissioner’s restraint of property, whilst he or his staff pursue lines of enquiry on the basis they may substantiate an application for forfeiture, becomes unreasonable. Ms Cornegé submits that point will soon be reached, if it has not been already. Hence the conditions proposed.
[43] In support of her application for the provision of an undertaking, Ms Cornegé referred me to the leading case on the principles to be applied in determining whether to require an undertaking, being the Court of Appeal’s decision in Yan v Commissioner of Police.9
[44] In Yan, the Court said the discretion to require an undertaking should be exercised according to considerations of justice and fairness and to diminish the possibility of oppression and injustice, with the enquiry being essentially fact-dependent. The Court also gave a non-exhaustive list of factors to be taken into account in undertaking that enquiry, several of which Ms Cornegé submits fall in Ms Gamez Rodriguez’s favour, being: the delay in the filing of an application for forfeiture, even if not the Commissioner’s fault; the nature of the asset which, on Mr Fine’s evidence, was intended for investment; the likelihood and extent of the loss being suffered as a result of the restraint; the strength of the Commissioner’s case — weak on Ms Cornegé’s view of it; the absence of any meaningful alternative avenue of redress for Ms Gamez Rodriguez; and the conduct of the Commissioner.
[45] Ms Cornegé refers to two instances of what she submits is unsatisfactory conduct by the Commissioner. The first is Mr Russell’s attempt to serve Ms Gamez Rodriguez with an order that she submit to examination. This is a reference back to events in February 2020, when Mr Russell emailed Ms Gamez Rodriguez attaching an order made ex parte by the District Court, purporting to require Ms Gamez Rodriguez to submit to examination. In his email, Mr Russell explained the order’s legal effect as follows:
The order of course has no application outside of New Zealand and it does not bind you in any way. However you might see the order as a means of progressing the matter concerning the restraint of your funds in New Zealand and as an opportunity to reinforce the position asserted to the Bank of New Zealand that the restrained funds are the proceeds of your work as an architect in Venezuela.
[46] Ms Cornegé characterises this as an attempt by Mr Russell to mislead Ms Gamez Rodriguez.
9 Yan v Commissioner of Police [2015] NZCA 576, [2016] 2 NZLR 593.
[47] The second matter to which Ms Cornegé referred is Mr Russell’s failure to disclose his unsuccessful attempt to obtain information from the Swiss authorities regarding the Fribourg bank accounts.
[48] Thus Ms Cornegé submits her proposed conditions would strike a fair balance between the Commissioner’s interests and the prejudice to Ms Gamez Rodriguez caused by another extension.
Discussion
[49] I accept that it is now more than two years since the order was made and I also accept that Ms Gamez Rodriguez can be said to be incurring loss, in the sense that the funds might be invested for a better return than is presently achieved on term deposit. I also accept Ms Cornegé’s submission that, in declining to require the Commissioner to give an undertaking, Davison J appears to have anticipated that Ms Gamez Rodriguez could sue the Commissioner for damages if it transpired that the order was unjustified, whereas that may not be so.
[50] However, I consider these matters outweighed by others, and I am satisfied that it is appropriate to extend the duration of the order by 12 months, and without imposing a condition that the Commissioner file an application for a civil forfeiture order by a particular date, or that he provide an undertaking. Rather, the extension is conditional on the Commissioner providing Ms Cornegé with an update on progress no later than 31 March 2022; continuing to progress the investigation with all possible expedition; and his filing an application for forfeiture as soon as he is able to do so, if that point is reached within the term of the extension. Any further evidence from Mr Russell must address compliance with these conditions.
[51]The countervailing matters to which I referred are as follows.
[52] First, I accept that the investigation is complex. For instance, I said in [24] above that Mr Russell was continuing to investigate the source of the remaining funds transferred from the Sands account to the Lombard account. On the latest iteration of Mr Russell’s “wiring diagram”, and if Mr Russell’s present understanding is correct, the USD component of the sum to which I referred reflects four payments from a
Fribourg account with the “International Union Bank” in Panama. It is the source of these funds that Mr Russell is now seeking to ascertain.
[53] Secondly, I am satisfied the Commissioner is acting expeditiously. It is, of course, incumbent upon the Commissioner to conduct his part of the investigation as quickly as possible and, on my view of it, he is doing so. However, the Commissioner has no control over how quickly the overseas authorities respond to requests for information, if they respond at all. I am not persuaded that anything much turns on the unsuccessful request to the Swiss authorities for information on Fribourg, or Mr Russell’s failure to disclose this. The part of Mr Russell’s request to the Swiss authorities in relation to the Sands account is progressing, so it was not a wasted exercise. As to Ms Cornegé’s submission that Mr Russell ought not to have sent the order for examination referred to above, Ms Gamez Rodriguez would have understood from Mr Russell’s email that her participation was voluntary. Certainly her participation was not forthcoming.
[54] Thirdly, progress is being made. As I have said, Mr Russell now has the affidavits referred to in [23] above.
[55] Fourthly, I do not accept Ms Cornegé’s submission that the Commissioner’s case is weak. As matters stand, there is a Court of Appeal judgment, upholding Moore J, that there are reasonable grounds to suspect Ms Gamez Rodriguez of having benefited from significant criminal activity. Davison J described it as a “strong” prima face case.
[56] Fifthly, Ms Gamez Rodriguez might expedite the investigation by providing information to the Commissioner. As I understand it from counsel, Ms Gamez Rodriguez may also make a proposal to the Official Assignee as to how the funds might be invested. Accordingly, it is open to Ms Gamez Rodriguez to mitigate the adverse effects of the order but she has not done so. In those circumstances, I do not consider it would be fair to require the Commissioner to give an undertaking.
[57] Sixthly, although I accept that a better return might have been achieved on the funds, I have reservations as to whether any alternative investment option is available
to Ms Gamez Rodriguez at present, at least in New Zealand. I asked Ms Cornegé how Ms Gamez Rodriguez’s position would be advanced if the order were to expire. Ms Cornegé submits this would have the effect of “untainting the funds”. Ms Hamilton submits that this is not so and the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 would continue to apply.
[58] I consider Ms Hamilton likely to be correct on this score, at least in present circumstances. Any financial institution asked to receive and invest the funds, even in smaller tranches, will still be required to satisfy themselves of the legitimacy of the source of the funds. As I have said, the BNZ was on immediate enquiry and there is no reason to believe another institution will respond differently.
[59] I have not imposed a condition requiring the Commissioner to file an application for a civil forfeiture order during or at the end of the extension, I see no advantage in doing so as it may only see the application filed prematurely.
Result
[60] I extend, for 12 months from 10 September 2021, the restraining order first made by Moore J on 12 December 2019. The extension is conditional on the matters referred to in [50] above.
[61]The parties may make (brief) submissions on costs absent agreement.
Peters J
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