R v Gallagher

[2023] NZHC 1770

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CRI-2019-009-7271

[2023] NZHC 1770

THE KING

v

GERARD ANTHONY GALLAGHER SIMON CARL NIKOLOFF

Hearing:

6 July 2023

Appearances:

A M Toohey, M Thomas and S J O’Brien for the Crown

J R Rapley KC and D M Kirby for the Defendant Gallagher S J Shamy for the Defendant Nikoloff

Judgment:

6 July 2023

SENTENCING REMARKS OF HARLAND J

Introduction

[1]    Mr Gallagher and Mr Nikoloff, you appear before the Court today for sentence having each been found guilty by a jury of charges of corrupt use of official information. Mr Gallagher you were convicted on three such charges, and Mr Nikoloff you have been convicted of one such charge. The maximum penalty for each charge is a term of imprisonment of seven years.1

[2]    It is accepted that a starting point of imprisonment is required. The question for me in sentencing you both today is what that starting point should be and what

1      Crimes Act 1961, s 105A.

R v GALLAGHER & NIKOLOFF [2023] NZHC 1770 [6 July 2023]

deductions should be taken into account for personal and mitigating matters. Both will impact on the end sentence, be it imprisonment which the Crown submits is appropriate, or something less than that, which is the submission made by your lawyers.

The facts

[3]    I first address the facts of your offending and, by necessity, these will be a summary only. For both of you, the facts as they relate to the proposed sale and purchase of the YHA building are relevant. These facts concern charges 1 and 3 in respect of which each of you,2 in that order, were found guilty. The remaining facts relate to the Stonehurst property, which concerns you Mr Gallagher, as you were convicted of charges 5 and 7 which relate to this property.

YHA Building

[4]    So, dealing first with the YHA building. Both of you were convicted by the jury of corruptly using and/or disclosing official information to obtain a commercial advantage for a company known as Project and Investment Management Limited or PIMCO in relation to transactions involving the sale and purchase of the YHA building at 273 Manchester Street, Christchurch. At the relevant time, both of you were employed by the Christchurch Earthquake Recovery Authority (CERA).

[5]    CERA was established in 2011 to coordinate the rebuild of Christchurch following the February 2011 earthquake. You were both employed by CERA as investment facilitators from 2014 to 2016. As such, you were public officials. Your role was to bring vendors and purchasers of land and/or buildings together to facilitate investment in the central Christchurch rebuild. Your role was not to act for any party on a transaction rather, as the job title suggests, you were to facilitate or effectively introduce the parties to each other.

[6]    During your employment at CERA, you both became aware of an earthquake damaged building at 273 Manchester Street, known as the YHA building. You were

2      Charge 1 - Mr Gallagher; Charge 3 - Mr Nikoloff.

put in touch with Mark Wells, the then Chief Executive of the YHA, who was seeking at that time CERA’s assistance to locate a new property for the YHA backpacker business. At that point, the YHA building was subject to an agreement for sale and purchase between a third party and the YHA. But matters evolved into you both providing, through PIMCO, a new agreement for sale and purchase to purchase the YHA building for a larger amount. And when I say through PIMCO, the company actually proposed was Manchester 273 Ltd but the arrangements you were proposing, that eventually benefitted yourself, concerned PIMCO. This agreement for sale and purchase, which eventually was submitted to the YHA, was for a larger amount than the earlier agreement for sale and purchase by the third party which, of course, was attractive to the YHA. PIMCO was a company in which you had interests, so you sought to benefit personally from the agreement and the arrangements surrounding it.

[7]    Both of your counsel submitted that care needs to be taken with my assessment of the facts for several reasons.

[8]    The first relates to what the jury may have decided in relation to the information you each obtained about to the YHA building. The information alleged by the Crown at trial included details about the YHA’s intentions for its building, the details of developers in Christchurch and information about what they were interested in obtaining, various reports about the earthquake damage the building experienced, a repair cost evaluation report, information about the operating costs of the building and information provided to CERA about the demand for worker accommodation in Christchurch. The latter was important because the YHA building, given it had previously been used as backpacker accommodation, would have been ideally suited for worker accommodation for those involved in the actual rebuild.

[9]    Secondly, Mr Rapley KC submitted, and this was also adopted for Mr Nikoloff by Mr Shamy, that, although the jury, by their verdicts, must have been sure that both of you engaged in a course of conduct involving two or more uses and/or disclosures of the information acquired by you both, it was not clear which of the seven occasions alleged by the Crown were in fact accepted by the jury.

[10]   Having heard the evidence at trial, I consider the information acquired by you both while you were public officials employed by CERA included all of the material alleged by the Crown, but I accept that the position is slightly less clear in relation to the uses and/or disclosures of that information to others. However, I consider it beyond doubt that you learned the YHA building was for sale and that there was a conditional sale and purchase agreement in place in respect of it. You then came up with a plan to secure the property to benefit yourselves.

[11]   I also consider it beyond doubt that, in your official capacity as CERA employees, you made false representations to Mr Wells about the existence of an anonymous investor who was interested in purchasing the YHA building but who required additional information to undertake due diligence. Mr Wells, on behalf of the YHA, was prepared to release this information if a confidentiality agreement was signed. Mr Gallagher, you signed a Confidentiality Agreement on behalf of the fictitious anonymous investor in order to obtain the due diligence material, that being the geotechnical, electrical and engineering reports, the earthquake repair architectural assessment, the repair cost evaluation report and information about the operating costs of the YHA building that I have already referred to.

[12]   You would not have otherwise received this highly confidential information but for your role at CERA. You both then used that information to obtain a commercial advantage over other potential purchasers. The information was used to secure the conditional agreement for sale and purchase agreement over the YHA property that I have already referred to concerning Manchester 273 Ltd. In this regard, it can be said that you prevented other potential purchasers from securing that property.

[13]   You created a brochure and fashioned a kind of marketing campaign to attract investment in PIMCO, the company that you both were involved in. The idea was that an investor would purchase the building or an interest in PIMCO. It was submitted that the YHA building was known to be on the market for sale but, although Mr Cleverley considered it was Mr Wells and Mr Taggart that is your lawyer’s evidence was that it was not. The existing offer had been achieved without testing the market and the YHA Board paper Mr Wells said that suggested this should occur was put on

hold once it was indicated you had the anonymous investor for it on more favourable terms.

[14]   Although it was submitted that the preparation of marketing material was in your job description and therefore not fundamentally inconsistent with your respective duties, the fact that you sought investment in PIMCO and marketed this to potential investors is a matter of concern.

[15]   You contacted and met with potential investors you were dealing with in your capacity as employees of CERA to seek investment in PIMCO to assist you with the purchase of the YHA building and the accommodation business, which was likely worker accommodation, from the site. You used and disclosed the information from Mr Wells, including copies of the various reports, to assist the potential investors with their due diligence enquiries. One option you put to investors attracted a finder’s fee of $300,000 for PIMCO. Another option offered that PIMCO project manage the repairs, find a tenant and manage the accommodation operation. PIMCO would receive up to $1.2m if this option was accepted.

[16]   Your knowledge that this conduct was wrong is evident in the number of steps you took to disguise what you were doing from both CERA and the YHA. This included incorporating a company via your lawyer, Mr Dale,3 advising Mr Dale from Lane Neave, who was the lawyer for CERA, that you had declared your conflict of interest to CERA when you had not done so, and stating that PIMCO was not active when questioned about your activities by Ms Noble, an in-house lawyer for CERA.

[17]   Your plan to obtain an investor and complete the purchase of the YHA building using PIMCO did not come to fruition. An investor you had dealt with, Tulla Group, privately negotiated an agreement to purchase the building from the YHA. However, by their verdicts, the jury found that you obtained a commercial advantage and sought to profit personally from it and you did this while you were public officials at CERA.

3      In my sentencing remarks, I referred to Mr Dale. He referred both Mr Gallagher and Mr Nikoloff to his partner Mr Taggart who incorporated the company.

[18]   I will address the role each of you had in this offending and against these background facts when I assess the culpability, or blameworthiness, that each of you has for your offending in relation to the YHA building.

Stonehurst

[19]   I now deal with the facts as they relate to the Stonehurst property. This is only relevant to you Mr Gallagher and it concerns your two remaining convictions for corruptly using official information.4

[20]   CERA was disestablished in April 2016. Ōtākaro took over the large infrastructure projects from CERA and was responsible for divesting surplus land acquired by the Crown for the anchor projects.

[21]   Mr Gallagher, you were an employee of Ōtākaro from April 2016 to March 2017. You were the manager of the divestment team and were directly involved in selling Crown land. As at CERA, you were a public official. It was in this capacity that you acquired official information about a property known as Stonehurst.

[22]   Stonehurst was a privately owned site owned by a company controlled by Mr Glynn. Ōtākaro owned an adjacent site. You knew from your role at Ōtākaro that BUPA were looking to build an aged care facility on the Ōtākaro site, but that they also needed more land from the neighbouring Stonehurst site to make it work.

[23]   You used the knowledge you had of BUPA’s intentions to develop your own business plan to acquire the neighbouring Stonehurst land personally from Mr Glynn through a company, Gallchobhar Ltd, in which you were a director and a shareholder as to one-third with your two sons each owning a one-third share as well.

[24]   You received commercially sensitive information from Mr Stephenson of BUPA, including confidential architectural drawings for their planned care facility and a formal expression of interest in the Ōtākaro site. You forwarded this information

4      Charge 5 and charge 7.

via email to your son, Morgan Gallagher. One of your charges arose from this specific disclosure.5

[25]   BUPA advised that the more they paid for the Stonehurst land, the less they could pay for the Ōtākaro land. This information gave you a commercial advantage, which you then used to try to secure finance to purchase the rest of the Stonehurst site. You approached BUPA suggesting it purchase the Stonehurst site and lease part of it back to you and your sons for your business proposal. Significantly, you said that, if BUPA owned the Stonehurst site, it would be in a much stronger position negotiating with Ōtākaro.

[26]   As was the case in relation to the YHA building while working for CERA, you were not successful in completing your plan. However, by virtue of your convictions, the jury found you did obtain a commercial advantage and sought to benefit personally from it while you were a public official at Ōtākaro.

Approach to sentencing

[27]   So, I am now going to outline the approach I need to take as a matter of law to sentencing you both. In sentencing you, I must consider the purposes and principles of the Sentencing Act 2002 (the Act).6 While the sentence I must impose must be the least restrictive outcome, I must also take into account the gravity, or seriousness, of your offending, including the degree of culpability or blameworthiness you have for it and, as well, the seriousness of the offence. The seriousness of the offence can be indicated in part by the end maximum penalty that Parliament has decided should apply to the offences. Any sentence I impose must denounce your conduct, deter you and others from committing similar offences in the future and hold you accountable for the harm your offending has caused in the community. As well, it must promote in you a sense of responsibility for, and an acknowledgement of, that harm.

[28]   The process I must follow in sentencing you requires me to set a starting point for your offending with reference to case law. In relation to case law, there is no

5      Charge 7.

6      Sentencing Act 2002, ss 7 and 8.

guideline judgment that applies in this case. In addition, there have been very few cases dealing with offending under the section is which you were both convicted, that is s 105A of the Crimes Act. I was referred to the cases that might assist me to assess the appropriate starting point for you both and I am grateful to the lawyers for the work put into analysing those cases in their written submissions and how they have developed them in oral submissions before me today. I have carefully considered all of the authorities prior to today’s hearing7 but, ultimately, your sentences must be determined with reference to their own facts as they relate to your offending.

[29]   The starting point will be based on the seriousness of your offending, including any aggravating and mitigating factors relating to it. Having set the starting point, I will then move on to consider circumstances personal to each of you which may operate to reduce the starting points I adopt. And this will produce the end sentence.

Mr Gallagher

[30]   So, dealing first with you Mr Gallagher. Mr Gallagher, because your offending is more serious than Mr Nikoloff’s and given that you were found guilty by the jury of three charges,8 I will sentence you first. I am mindful that your total end sentence must reflect the totality of your offending.

Starting point

[31]   Dealing first with the starting point. Both counsel agree that a starting point of imprisonment should be adopted. Ms Toohey for the Crown submits a term of three and a half to four years’ imprisonment is appropriate, whereas Mr Rapley submits two years.

[32]   Ms Toohey submits that there are four aggravating features that are applicable to your offending, namely, the extent of loss and harm resulting from it, your abuse of

7      R v Borlase [2017] NZHC 236 and Borlase v R [2017] NZCA 514; Field v R [2011] NZSC 129; R v Nua [2001] 3 NZLR 483; R v Palmer [2004] NZCA 41; Sarah v R [2013] NZCA 446; R v Goel [2023] NZHC 585; R v Bubna [2023] NZHC 158; R v George [2016] NZHC 2067 and R v George [2016] NZHC 1730 (sentence indication); R v McFarland [2014] NZHC 2985; Serious Fraud Office v Hossu [2022] NZDC 11114; R v Rasila [2020] NZHC 964; and R v Pakau [2014] NZHC 3020.

8      Charges 1, 5 and 7.

a position of trust, premeditation and the duration of your offending.9 She cites a number of cases to support her submissions, and I refer to these shortly. Mr Rapley submitted I must take care to assess the extent of those features that apply to your offending, having particular regard to the organisation, namely CERA and Ōtākaro, in which the corruption took place and the type of official involved. And you heard him today develop his argument about that with reference to the role that the various officials in other cases played in the organisations they represented at the time their offending occurred.

[33]   I found the Court of Appeal’s approach in relation to fraud-related offending to be helpful in assessing your culpability. The circumstances and nature of your offending, the harm caused, the impact on victims and the losses and seriousness of the breaches of trust involved are all, in my view, relevant in your case.10

[34]   First, I consider the harm caused by your offending. It is important to recognise that the amount of money lost is not, of itself, an indication of the seriousness of the offending.11 The Court of Appeal in Ross v R12 recognised four categories of harm that can arise in fraud cases. In my view, your case engages two of these categories of harm. Firstly, there was an intended quantifiable loss that did not materialise and, secondly, broader harm has been occasioned by it in the form of reputational loss.

[35]   You did not receive any actual pecuniary benefit or gain from your offending, but there was a quantifiable intended potential benefit. For the YHA building, this is evident in the options you included for investors using PIMCO’s services, to which I have already referred. In relation to Stonehurst, the amount is not easily quantifiable but it would have been significant, given the value of the Stonehurst land and the potential, if your plan had succeeded, for there to be a significant financial benefit to you and your sons via Gallchobhar. The fact these losses did not materialise was not

9      Sentencing Act, ss 9(1)(d), (f), (i) and (4)(a).

10    R v Varjan CA 97/03, 26 June 2003 at [22]. Crown counsel noted this approach has been adopted in relation to s 240 offending (obtaining or causing loss by deception) in R v Rose [2016] NZHC 1109.

11 Ross v R [2019] NZCA 455 at [49]; Cole v Police HC Wellington, AP132/00, 2 February 2001 at [21]; R v Goel, above n 7, at [92].

12 Ross v R, above n 10, at [49]. This case concerned a sentence appeal for three charges of obtaining a credit facility by deception and two representative charges of using forged documents. Mr Ross’ initial end sentence four years and four months’ imprisonment was upheld.

because of anything you did to prevent them from occurring, but rather because the “deals” you proposed simply did not materialise. Your counsel submitted that, had you received an actual pecuniary benefit, you would have terminated your employment at CERA but, as your plans did not eventuate, it cannot be known for sure whether you would have done so and, in any event, the unlawful advantage would already have been obtained.

[36]   Your offending is by no means victimless. First, there is the impact on CERA, Ōtākaro and their employees. This harm is indirect in the sense that these organisations did not suffer any direct financial loss as a result of your offending. CERA was in fact disestablished before the investigation into your conduct even began. However, your offending is likely to have tarnished the reputation of both CERA and Ōtākaro regardless of the time that passed between your offending, which occurred between 2014-2016, the investigation and subsequent trial. This reputational damage could be said to extend even further to encompass the public sector generally.

[37]   The wider reputational damage to New Zealand’s corruption-free reputation can also be taken into account.13 Broader harm of this nature was recognised in R v Nua, where the Court of Appeal noted corruption in one instance can encourage others to follow suit.14 I agree with Ms Toohey that the broader harm from your offending is the potential impact it has on the trust and confidence members of the public vest in holders of public office in New Zealand. This trust and confidence is fragile and can be eroded when official information is misused and disclosed to advance private interests.

[38]   It goes almost without saying that your offending constituted an abuse of trust. You abused your position as a trusted public official. At Ōtākaro in particular, you held a senior position as manager of the divestment team. You were expected to act

13 R v Goel, above n 7, at [85](d).

14 R v Nua, above n 7, at [20]. This case involved a senior customs official who accepted benefits to the amount of $150,000 to $200,000 over a 15 month period, in return for permitting vehicles into the country without odometer inspections or paying GST. There was also a loss of GST revenues of around $293,000. The appeal was dismissed, with the Court of Appeal finding a deterrent sentence in excess of five years’ imprisonment could have been justified as the starting point. The end sentence of four years’ imprisonment was at the upper end of the range, but not manifestly excessive.

with honesty and integrity, and you did not. Despite these observations, I agree with Mr Rapley that a breach of trust is inherent in the offences in respect of which you were found guilty. It follows that I do not count this as an additional aggravating feature of your offending.

[39]   As to the Crown’s submissions that your offending was premeditated and the duration of it are aggravating features, your counsel submits caution is necessary because it is unclear what exactly the jury found you guilty of. While this is true, I have no difficulty in finding that your offending at CERA involved misrepresentations about the anonymous investor and that some degree of planning can be inferred. In relation to Stonehurst, the conviction arises from the information you forwarded to your son, and I agree this can be viewed in isolation. The remaining conviction however can be viewed as part of a chain of events which I conclude did involve a significant degree of planning.

[40]   Mr Rapley submitted that there are mitigating aspects relating to your offending that I need to take into account. He referred to the environment at CERA, Mr Cleverley’s influence and your lack of public sector experience.

[41]   With regard to Mr Cleverley’s role, I accept he knew of your private dealings and had no issue with staff at CERA operating in a manner he described as “kissing frogs”, namely, looking out for business opportunities in the hope that one will eventuate. He actively encouraged you to look to the future and plan for the time when CERA ended. He was your senior and should have provided more guidance to you about what this meant.

[42]   I also accept that you did not have in depth knowledge of the public sector and that this working environment was new to you. But, a lack of experience goes only so far in reducing your culpability. You were warned by lawyers at Lane Neave of a conflict, yet you made up an anonymous investor. Corrupt knowledge is an element of the offence you were found guilty of by the jury. It is difficult to reconcile that with these mitigating features put forward by your counsel.

[43]   Although there is some basis to the submission that you may not have been specifically aware of the details of the conflicts of interest policy, I can only accept this to a limited degree. Having sat through the case, I consider conflicts of interest and what they meant were regularly discussed with staff members. The policy was displayed in the office area. Although you and Mr Nikoloff spent time out in the field, there would also have been times when you were in the office and present at team meetings. I have already referred to Mr Cleverley’s leadership or lack thereof in this regard.

[44]   But, in any event, it is not plausible in my view to say that a person with your commercial experience would not understand what the basics of a conflict of interest involved. Conflicts of interest are not unique to the public sector. And, in any event, the rationale for them is easily able to be understood. In the private sector, insider trading is prohibited. In the public sector, the same applies.

[45]   I do not find it plausible that you failed to understand these concepts simply because they were not specifically pointed out to you. Mr Wells from the YHA, Mr Maloney and Mr McKenzie from Tulla Group and Mr Stephenson from BUPA had no difficulty immediately identifying your potential conflicts of interest. It is evident to me that, even if you were less sure about what was appropriate when you were employed by CERA, by the time you were employed by Ōtākaro, you would have been well aware of what was required.

[46]   I assess your culpability for the offending in relation to Stonehurst to therefore be greater than your offending while you were an employee of CERA.

[47]   Overall, I accept that there were other factors at play that likely created an environment where you began to believe your actions were acceptable. This reduces your culpability, but only in my view to a limited degree.

[48]   I note there is no established benchmark for cases of this kind. Ms Toohey refers to R v Palmer as the leading authority for offending under s 105A.15 And then what I do is go through the cases, I am not going to read them out to you now but they

15     R v Palmer, above n 7.

will be in my written sentencing notes for you and your counsel to consider. And then I refer to the cases that Mr Rapley also referred to in my written sentencing notes.16

[49]   In R v Palmer, the defendant was a senior fixed interest dealer for the Government Superannuation Fund where he used information acquired in that capacity for his own personal benefit, totalling around $215,000. That offending occurred once over a 24 hour period. The Court of Appeal determined a starting point of three to four years’ imprisonment would have been appropriate.

[50]   In R v Goel, Mr Goel’s offending under s 105A attracted a starting pint of three years’ imprisonment, with an end starting point of four years and four months’ imprisonment when taking into account his convictions for bribery and obtaining by deception.17 Mr Goel’s offending included him aiding and providing information to three different companies in procurement processes for particular tender contracts, which involved millions of taxpayer dollars, over a period of 15 months, as well as receiving bribes of over $70,000.

[51]   Mr Rapley also referred to a number of cases for comparison purposes. In R v George, Mr George worked for Rodney District Council then Auckland Transport and oversaw roading contracts, receiving over $100,000 worth of gifts from a contractor over seven years.18 This attracted a starting point of three years and nine months’ imprisonment, which was reduced to 10 months’ home detention. Deterrence was an important factor in setting the starting point, although I note a pecuniary benefit was actually gained, and the duration of Mr George’s offending was much longer than in your case.

[52]   In R v Rasila, Mr Rasila corruptly accepted a bribe of $15,000 in his role as a procurement relationship specialist employed by a council.19 The bribe was made in exchange for Mr Rasila facilitating a contract to be awarded to an associate, despite having obtained a lower quote elsewhere. The council paid approximately $27,000 more, while the associate’s company made profits under the contract of $57,000. The

16     Paras [49]-[54] were not read out in Court.

17     R v Goel, above n 7.

18     R v George, above n 7.

19     R v Rasila, above n 7.

Court adopted a starting point of 18 months’ imprisonment, with an end sentence of five and a half months’ home detention.

[53]   Your case, in my view, is comparable but more serious. The duration of your offending was over a longer period and involved two separate courses of conduct reflected in the three charges for which you are to be sentenced.

[54]   Sarah v R and R v Pakau involved employees of the New Zealand Police passing on information to people they knew to be involved in criminal offending.20 In both cases, a starting point of three and half years’ imprisonment was considered appropriate. Your counsel submitted the fact that the offending in those cases involved information that was passed on to criminals elevates the seriousness of them well above yours. I agree with this analysis.

[55]   Mr Gallagher, you were a public official in your role at CERA, and once that organisation came to an end, at Ōtākaro. Information provided to officials is accompanied with the expectation that it will be used for proper purposes. As Ms Toohey highlighted in her submissions, the standard expected of public officials is very high. This is necessary to maintain confidence in public office. So, by using the information you obtained through CERA and Ōtākaro for your own potential financial gain, you breached the trust, not only of CERA and Ōtākaro, but the Christchurch community and general public as well.

[56]   While any offending by public officials is serious and requires denunciation, the background in which your offending arose cannot be ignored either. CERA was established following the February 2011 earthquake. At a time when Christchurch was focused on rebuilding, you took advantage of your role as a public official, a position of privilege, to try and further your own personal interests. In my view, because of this, the need for denunciation is particularly strong.

[57]   With regard to deterrence, while I accept you will not commit the same or similar offences in the future, there is nonetheless a need for deterrence to prevent others from offending in this way.

20     Sarah v R, above n 7; and R v Pakau, above n 7.

[58]   Taking into account the matters I have referred to, including the cases cited to me by counsel, I assess the starting point for your offending to be a term of two years six months’ imprisonment.

Personal and mitigating matters

[59]   I now outline matters relating to your personal situation and mitigating matters. Mr Gallagher, you appear before the Court at the age of 65 for the very first time. A discount to reflect this is entirely appropriate. The law enables me to take into account your previous good character. Your lack of previous convictions is only one aspect of this. However, there is plenty to suggest, in your case, that you are and have been a person of very good character.

[60]   I received numerous letters in support of you which speak to your good character, and I have read all of them. This included letters from your wife, three children, and brother, as well as numerous members of the community. All were unwavering in their support of you, and it is clear that you are a respected member of the community. I acknowledge that you have contributed significantly to your community in Ashburton for decades, including participating in fundraising groups, mentoring younger people, and actively participating in various committees and a local board. All these things are matters which you should be very proud of.

[61]   The letters I have referred to have also described the stress this case has caused you and your family. Scrutiny from the public and media has no doubt been very difficult. Your business management consultancy business has been affected. You have lost clients as a result of your offending. This is a consequence arising from your offending, but it is not something that justifies an additional deduction.

[62]    You have also provided a letter which I have also read very carefully. You said you made “errors of judgement”, thinking it was “okay” to do what you were doing. You referred to the lack of training you received and what you say is your mistake in trusting the lawyers involved and Mr Cleverley. These comments could be seen as trying to blame others or minimise what you did. However, you accept you made mistakes and say you have learnt from them. You refer to the past seven years as a sentence in and of itself. You accept responsibility for the impact your offending has

had on your colleagues at CERA and Ōtākaro, as well as your business coaching and mentoring clients. You are, above all, sorry and remorseful for the impact this situation has had on your family.

[63]   Your counsel has submitted a discount for remorse is appropriate. You expressed in your letter that you regret your actions. I accept this is the case. Unfortunately, some of the letters of support for you appear to deflect blame on others and “the system”, and do not acknowledge that a jury found you guilty of these serious charges. I am concerned that, if the people who surround you consider you have done nothing wrong or in some way minimise the seriousness of your offending, you too may share the same views or be encouraged to do so. I am not sure whether you have attempted to disabuse your supporters of the seriousness of your offending. This is relevant to the issue of remorse and whether the remorse you express is really more attributable to the situation you find yourself in rather than true remorse for your offending.

[64]   Having said all of this and having articulated it in the way I have, I am nonetheless persuaded that it is appropriate to provide you with a discount for remorse. It will be part of the global discount I allow, that I will outline shortly.

[65]   Your counsel also submits a discount for undue delay is appropriate. The investigation by the State Services Commission began in 2017. You were charged on 14 April 2019 and your first trial began on 16 August 2021. Due to COVID-19, this was aborted and your new trial began on 13 February this year. Your counsel also describes you having to hound the Serious Fraud Office for the years prior to charges being laid.

[66]   In Bublitz v R, the Court of Appeal applied a credit of 19 months for undue pre- trial delay which was a result of failures by the prosecution, and it also recognised the efforts made by the defence to shorten what in that case was the second trial.21 This amounted to a reduction of almost 40 per cent from the adopted starting point.

21     Bublitz v R [2019] NZCA 364, [2019] 3 NZLR 533 at [164].

[67]   In your case, the delay was not due to anything you did. However, equally, I do not consider the delay was solely attributable to the Serious Fraud Office or the Crown. COVID-19 and the impact it has had on everyone contributed sadly to your situation.

[68]I am not satisfied a discount for undue delay is warranted.

[69]   But taking all of these matters into account, I consider a discount of 20 per cent is available for mitigating factors. I adopt five per cent to reflect your lack of previous convictions. I adopt 10 per cent for your previous good character and five per cent for your remorse. As you have heard, most of this deduction reflects your prior good character and significant community service.

[70]   Applying this discount to your starting point of two years six months’ imprisonment means that your end sentence, were I to impose it, would be one of two years’ imprisonment.

Imprisonment or Home Detention

[71]   I now consider whether or not imprisonment should be the outcome or home detention.

[72]   The PAC report writer assessed you as at low risk of reoffending but noted that you firmly believed that you were not corrupt. Despite noting this comment, the PAC reporter recommended a sentence for you of home detention.

[73]   Your counsel submits that is the least restrictive outcome which is appropriate in your circumstances.

[74]   I accept that this is the least restrictive outcome, however, the other principles of sentencing engaged in your case include the need to denounce your conduct and the need for the sentence to deter others from offending in a similar way. By a very narrow margin, I am persuaded that home detention is the appropriate outcome. However, you need to understand that the outcome has been extremely finely balanced. A sentence of imprisonment could equally have been justified. Had you in fact

financially benefitted from your offending or had there been a loss in terms of monetary loss to either CERA or Ōtākaro, I would have imposed a sentence of imprisonment.

[75]   But, the sentence of home detention is not, in my view, sufficient on its own to denounce your conduct or to reflect the need to deter others. A sentence of community work is also warranted - and a significant one.

Result - Mr Gallagher

[76]Please stand Mr Gallagher.

[77]   On the three charges of corrupt use of official information, you are convicted and sentenced to 12 months’ home detention with the special conditions outlined in the PAC report to apply. I also sentence you to 200 hours’ community work.

[78]Thank you. If you could please be seated and I will now turn to Mr Nikoloff.

Mr Nikoloff

[79]   As I outlined at the outset, Mr Nikoloff, you appear for sentence following your conviction on one charge of corruptly using official information. This related to the events that occurred in relation to the YHA.

Starting point

[80]   Ms Toohey for the Crown submitted a starting point of three years’ imprisonment is appropriate for you. Mr Shamy submitted the starting point should be 18 months to two years’ imprisonment.

[81]   Ms Toohey submitted four aggravating features were applicable to your offending, being the extent of loss and harm, abuse of a position of trust, premeditation and the duration of the offending.22

22     Sentencing Act, ss 9(1)(d), (f), (i) and (4)(a).

[82]   Your offending occurred while you were employed by CERA. The observations I made about the offending in relation to Mr Gallagher apply to you. Both of you were involved in PIMCO and, like Mr Gallagher, you were a shareholder in the company. Although you did not receive any financial benefit as a result of your offending, as I outlined in relation to Mr Gallagher, this does not, of itself, determine the seriousness of your offending. As with Mr Gallagher, I take into account that, had the YHA transaction been completed as you expected, PIMCO would have benefitted in a financial way and significantly so. This would, in turn, have benefitted you.

[83]   I have also referred to the reputational damage your offending caused to CERA, regardless of the fact that it was disestablished in 2016, and I have referred to the impact your offending is likely to have had on the public sector more generally.

[84]   Your offending was clearly an abuse of trust as well. Your role as an investment facilitator at CERA was that of a public official. You obtained information in your role that was to be used only for proper purposes. In using that information for your personal gain, you breached the trust inherent in your role and took advantage of the privileged position you were in. Rightly, this aspect of abuse of trust must “take centre stage” as it did in the case of R v Chapman.23

[85]   Mr Shamy submitted on your behalf that your offending was unsophisticated and not particularly complex. He submitted this is evident by the fact those approached by you via email, Messrs Tan, Yap, Kwon and Yau, were not interested in engaging with the YHA project. The preparation of brochures and other efforts to develop and on-sell the YHA building were similarly unsophisticated, and the fact you and Mr Gallagher were never in a position to actually purchase the YHA furthers this. I agree with Mr Shamy’s submissions on this point.

[86]   I then outline two cases which I consider are relevant to your offending. I am not going to go through them now but you can read my discussion about them in my sentencing notes. The cases concerned are R v Palmer and R v Goel.24

23     R v Chapman (1997) 14 CRNZ 664 at 667.

24     Paras [87]-[88] were not read out in Court.

[87]   In R v Palmer, the offending arose from a one-off transaction from which Mr Palmer used information he obtained in his official capacity for his own personal gain, the total benefit he gained being over $200,000.25 A starting point in the range of three to four years would have been appropriate.

[88]   In R v Goel, an initial starting point of three years’ imprisonment was adopted for Mr Goel’s offending under s 105A that involved him aiding and providing information to companies in procurement processes for particular tender contracts, which involved millions of taxpayer dollars.26

[89]   But, I consider your offending is less serious than both of these cases and justifies a much lower starting point.

[90]   The principles of denunciation and deterrence must be at the core of any sentence I impose on you today, as they were for Mr Gallagher. As I have mentioned, your offending constituted a direct breach of trust, exacerbated in my opinion when taking into account that CERA was established post-earthquake to help rebuild the Christchurch CBD. Because of this, your sentence also must appropriately denounce your offending.

[91]   Your culpability for the offending is significantly less than Mr Gallagher’s. It only involved the proposed transactions in relation to the YHA building and, in respect of that, only some of them. I accept that, over this period, you were also involved in a large number of other legitimate projects for CERA.

[92]   Bearing in mind parity and the matters to which I have referred, a starting point of 18 months’ imprisonment is, in my view, appropriate to reflect your offending.

Personal and mitigating matters

[93]   I now address your personal and mitigating matters. Mr Nikoloff, like Mr Gallagher, you appear before the Court as a first offender. You are 60 years old. Like

25     R v Palmer, above n 7.

26     R v Goel, above n 7.

Mr Gallagher, a discount is available to reflect this, which will be incorporated into the global discount I adopt shortly.

[94]   I received letters of support of you from Mr White, Mr Kennedy and Mr Harrison. All have worked with you in some capacity. They speak of you as a valuable business member, someone who helps others and someone who acts with integrity. You are described as trustworthy. To them, your conviction has come as a shock because they consider it so out of character. The letters also explained the stress and stigma you have experienced as a result of this case. However, as I have already noted, this is a natural consequence of being charged and convicted. Having said this, it is clear to me from your references that you are a person of previous good character who is highly though of by others.

[95]   You have expressed remorse for your conduct while at CERA which led to your conviction. This was raised in the reference letters and in your PAC report. You acknowledge what you did was wrong and take full responsibility for it. A discount in my view is available for this remorse.

[96]   The PAC report writer assessed you as a low risk of re-offending. The report writer said you did not believe you had done anything wrong until the Serious Fraud Office began their investigation and that you did not understand at the time the privilege you had in being in possession of information that could be used for personal gain. You are assessed as a person who has been very slow to admit your wrongdoing but someone who now fully admits it. The report writer observed you struggled with the fact of your offending, and I consider this means you struggled with the fact that you did it in the first place and perhaps also that you weren’t aware that what you were doing was wrong. The report included a brief overview of your employment history, which includes working as a business mentor, often at no cost. You are assessed as someone who has the ability and motivation to continue to contribute to society in a positive way. A sentence of home detention is also recommended for you.

[97]   I consider a discount of 20 per cent is available to you for mitigating factors. You have displayed more remorse for your offending than Mr Gallagher, but your

community involvement over the years has been less than his. The deduction applied for both of you is the same but for different reasons.

[98]Applying this discount to your starting point of 18 months’ imprisonment

lowers your end sentence to, were I to impose it, 14 months’ imprisonment.

Imprisonment or home detention

[99]   I am not, however, persuaded that imprisonment is the right sentencing response for you. Home detention is also available and is a significant sentence in its own right. You are assessed as have a low risk of re-offending. In my view, a sentence of home detention for you would appropriately serve the purposes of denouncing your conduct and deterring others. It is also the least restrictive outcome.

[100]I intend to impose a sentence of seven months’ home detention.

Result - Mr Nikoloff

[101]Could you please stand Mr Nikoloff.

[102]   Mr Nikoloff, on the charge of corruptly using official information, that is Charge 3, you are convicted and sentenced to seven months’ home detention with the special conditions that appear in the PAC report dated 23 June 2023.

[103]I will ask you now both please to stand down.

Harland J

Solicitors:

A M Toohey, Christchurch

J R Rapley KC, Christchurch S J Shamy, Christchurch.