Rae v Commissioner of Police
[2024] NZHC 3417
•18 November 2024
ORDER PROHIBITING PUBLICATION OF NAMES, ADDRESSES OR IDENTIFYING PARTICULARS OF CONNECTED PERSONS (REDACTED) MADE IN THE COMMISSIONER OF POLICE v RAE HC WELLINGTON CIV-2020-485-043, 21 FEBRUARY 2020 (MINUTE OF DOOGUE J) IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-043
[2024] NZHC 3417
UNDER Section 56 of the Senior Courts Act 2016 IN THE MATTER
of an application for leave to appeal
BETWEEN
DAVID CHARLES RAE
Applicant
AND
THE COMMISSIONER, THE NEW ZEALAND POLICE
Respondent
AND
SARAH LOUISE RAE
First Interested Party
S LIMITED
Second Interested Party
R LIMITED
Third Interested Party
A.V.A CONSULTING LIMITED Fourth Interested Party
Hearing: 22 October 2024 Appearances:
D C Rae in person via VMR for Applicant
S B McCusker and O J Cann for Respondent
Judgment:
18 November 2024
JUDGMENT OF GRICE J
(Leave to appeal)
RAE v COMMISSIONER OF POLICE [2024] NZHC 3417 [18 November 2024]
Introduction
[1] Mr Rae applies for leave to appeal the decision of this Court dated 29 May 2024 dismissing his application for non-party discovery against the United States Government.1 The discovery application was brought in anticipation of a hearing regarding an application for civil forfeiture orders brought against Mr Rae by the Commissioner of Police (the Commissioner) under the Criminal Proceeds (Recovery) Act 2009. The matter is set down for trial in May 2025.
[2] The forfeiture application concerns New Zealand bank accounts said to be connected to Mr Rae’s alleged money laundering activities in relation to two Medicare fraud schemes in the United States. Mr Rae pleaded guilty to three counts of money laundering in the United States in relation to those allegations.
[3] The discovery application sought orders for discovery of 16 classes of documents, which Mr Rae contends are held by United States authorities and are relevant to his defence of the forfeiture application. This Court concluded that those documents were not materially relevant to the proceedings.
[4] The applicant submits that leave should be granted because the appeal has reasonable prospects of success, he will be unable to have a fair trial without the documents sought, and the proposed grounds raise matters of general importance, including the application and construction of s 47 of the Evidence Act 2006 and the admissibility of materials from a United States conviction.
Background
[5] Mr Rae pleaded guilty to two counts of money laundering in an indictment in New Jersey and one count of money laundering in an indictment in South Carolina. The terms of the plea agreement that Mr Rae entered into with the United States Government were that he would pay the sum of USD 1,775,000 in relation to the indictments and forfeit his interest in property referred to a schedule. In general terms,
1 Commissioner of Police v Rae [2024] NZHC 1384 [High Court judgment].
the allegations against Mr Rae were that he was in the business of offering international business structures through vehicles incorporated in various jurisdictions.2 The structures offered by Mr Rae were used to assist the architects or proponents of two fraudulent schemes to dissipate the funds from their fraudulent activities in order to avoid detection. One of the schemes related to durable medical equipment and the other was a genetic cancer screening scheme. Both sought to take advantage of the Medicare system of medical insurance operating in the United States, through schemes involving commissions, or “kickbacks”, for referrals to the providers of the equipment or screening. At least in respect of the medical equipment scheme, it was also alleged that there was dishonesty involved, as there was no genuine need for the medical services.
[6] The Commissioner issued proceedings and obtained restraining orders in relation to funds in excess of $10 million held in various New Zealand ANZ and BNZ bank accounts, and now seeks forfeiture orders in relation to those bank accounts.3
[7] The Commissioner and the defendant’s cases are summarised in the High Court judgment as follows:
[55] The Commissioner alleges Mr Rae laundered the proceeds of offences committed under United States federal law, namely healthcare fraud, wire fraud, and violations of the Anti-Kickback Statute. He alleges that such offending would also be an offence under New Zealand law, namely obtaining by deception under s 240 of the Crimes Act. The Commissioner further alleges that Mr Rae knew (or was reckless) to this fact, and that he dealt with that property as defined.
[56] The principal issue at trial is likely to be whether the Commissioner can prove on the balance of probabilities that the subject property (bank accounts) represent tainted property or unlawful benefit from significant criminal activity by Mr Rae. The Commissioner does not rely on the United States convictions per se to establish the relevant “significant criminal activity”. He will however likely rely on the Mr Rae’s court testimony in the US.
[57] Mr Rae says his defence is that he was not guilty of the United States offences to which he entered the guilty plea. Further, he says he did not know of the underlying criminality of the schemes and his only role was to develop
2 The details of the alleged fraud giving rise to the indictments are set out in more detail in the High Court judgment, above n 1, at [8], citing Commissioner of Police v Rae [2020] NZHC 3132 [restraint judgment] at [9]–[18].
3 High Court judgment, above n 1, at [7].
tax and investment portfolios for money, whatever its source. He said this was a business relationship only.
[58] Mr Rae also alleges bad faith against the United States government and the Commissioner. He says the items he seeks in discovery will support that allegation.
[8] The Commissioner will seek to rely on evidence relating to the United States money laundering proceedings, and in particular the record of the plea agreement and forfeiture order, as well as the United States court records of the allocution hearing, in which Mr Rae was examined on oath by the Judge and made various admissions, and entered the guilty pleas. In addition, the Commissioner seeks to rely on transcripts of interviews with Mr Rae carried out as part of the United States money laundering investigation. In his submissions, Mr McCusker, for the Commissioner, indicated that the United States court records were before the Court, produced in various affidavits filed in support of the applications for restraining orders. He said they were publicly available records and the Commissioner intended to rely on ss 138(2) and 141(4) of the Evidence Act for their admissibility. Those sections provide for the admissibility of public documents which, by virtue of the definition in s 4, includes official records and documents kept by foreign governments for the purpose of carrying out government functions.
[9] Underlying Mr Rae’s application for third-party discovery is his assertion that he is not guilty of the charges on which he was convicted in the United States following the plea agreement.
[10] The Commissioner says that he must establish money laundering under the New Zealand Crimes Act 1961, and does not seek to establish Mr Rae’s guilt through reliance on the United States indictments. However, he will be relying on various admissions that Mr Rae has made in the United States proceedings, including the plea agreement and the allocution hearing court transcript, as well as available transcripts of the “sting” operation, to prove elements of Mr Rae’s New Zealand based offending.
[11] Mr Rae referred in his submissions to various comments made by Supreme Court Judges in the course of a hearing relating to another matter, which resulted in a decision dismissing an application for leave to appeal against a refusal to
recall a judgment concerning the restraining order, brought by Mr Rae.4 He relied on a transcript of the relatively free-flowing discussion between the Judges, Mr Rae, and counsel for the Commissioner, concerning the basis of Commissioner’s restraining and forfeiture applications. The discussion and comments of the members of the Court were not intended to be determinative nor authoritative. It is of little assistance in this application.
[12] The Commissioner also emphasised the delay in this matter, noting the forfeiture application was filed in May 2021. The hearing was allocated in September 2021 at a time when Mr Rae was legally represented, and no issue was raised at that stage in relation to discovery. The fixture is now set for May 2025 and any appeal would likely delay that hearing. In addition, this application was adjourned for a month from its original hearing date due to Mr Rae not filing submissions in terms of the timetable without explanation.5
The High Court decision
[13] Mr Rae sought third-party discovery from the United States Government in relation to 16 groups of documents,6 which fell into three broad categories: material relating to the “sting” operation; evidence concerning Cargill Consulting Ltd (Cargill); and documents relating to various prosecutorial decisions/relitigation of admitted criminal offending in the United States. Mr Rae claimed the documents sought would support his allegations that the Commissioner had acted in bad faith. The material sought was said to include:7 exculpatory evidence; possibly transcripts from a covert recording device (based on an assumption by Mr Rae that Mr Kimble was an informant likely to be wearing a covert recording device); evidence to support Mr Rae’s contention that he had no criminal convictions (relating to a predisposition element required to be proven in the United States “sting” offence); and information on
4 Rae v Commissioner of Police [2023] NZSC 156, [2023] 1 NZLR 579.
5 Commissioner of Police v Rae HC Wellington CIV-2020-485-43, 24 September 2024 (Minute of Grice J); and Commissioner of Police v Rae HC Wellington CIV-2020-485-43, 25 September 2024 (Minute of Grice J).
6 High Court judgment, above n 1, at [21].
7 At [21].
transcripts recording what Mr Rae said during the “proffer” sessions (also referred to as “302 minutes”) with United States government officials.8
[14] The judgment concluded that, in relation to each of those categories, the material was not “material and necessary”, and thus the test for non-party discovery was not made out. 9
Legal principles on leave to appeal
[15] Section 56(3) of the Senior Courts Act 2016 provides that leave is required in order to appeal any interlocutory decision of the High Court (unless an exception applies under subs (4)). As Mr Rae’s application for non-party discovery was sought in anticipation of the substantive hearing for civil forfeiture orders, it is an interlocutory application for the purposes of that Act.
[16] The Court of Appeal has noted that in considering whether an application for leave to appeal should be granted, “the court should be mindful that”:10
… leave should not be granted unless the proposed appeal raises some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the appeal. Moreover, leave should not be granted unless the proposed appeal has some reasonable prospect of success.
[17] The following considerations, as articulated in Greendrake v District Court of New Zealand, are relevant to an application for leave to appeal:11
(a)a high threshold exists;
(b)the applicant must identify an arguable error of law or fact;
(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;
8 At [21], n 15. This footnote explains that: “A proffer session is a meeting between an individual who is a defendant or a suspect (and their attorney), and United States investigators/prosecutors. The individual at the session presents information as to their involvement or insight into the involvement of others.”
9 High Court judgment, above n 1, at [48].
10 Jindal v Kamal [2024] NZCA 423 at [19], citing Moir v IHC New Zealand Inc [2018] NZCA 130, (2018) 24 PRNZ 45 at [6].
11 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6].
(d)the circumstances must warrant incurring further delay; and
(e)the ultimate question is whether the interests of justice are served by granting leave.
[18]Furthermore, the requirement for leave to appeal has been described as:12
…a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.
[19] Where an interlocutory order has substantive effect but is not covered by s 56(4), the appropriate threshold for leave may be as less than, for example, an application relating to a discovery application.13 This has been described as consistent with the final consideration in Greendrake, namely that the ultimate question is whether the interests of justice are served by granting leave.14
[20] As the appeal for which leave is sought is an appeal against discretion, the higher threshold that applies to such appeals is relevant to the question of whether leave should be given. The Court of Appeal held in Collier v Ngati Rehua-Ngati Wai Ki Aotea that:15
Where the [interlocutory] decision sought to be appealed involves the exercise of a discretion, the task of showing why leave should be given is more difficult. This is because a decision made in the exercise of a discretion is not vulnerable to challenge unless it can be shown that the judge made an error of principle, failed to take account of some relevant matter, factored in the irrelevant or was plainly wrong.
[21] Even if a leave application identifies questions that are capable of bona fide and serious argument on some matters, the appeal still will not have reasonable prospects of success if the court’s decision was also based on other grounds which are not susceptible to challenge.16 In this case, the Commissioner submits that for leave
12 Greendrake, above n 11, at [6] citing Finewood Upholstery Ltd v Vaughan [2017] NZCA 1679 at [13].
13 Simons v ANZ Bank New Zealand Ltd [2022] NZHC 2842 at [7]. Section 56(4) provides that any party to any proceedings may appeal without leave any order or decision of the High Court striking out or dismissing the whole or part of a proceeding, claim or defence, or granting summary judgment.
14 Mathias v Earthquake Commission [2023] NZHC 705 at [21].
15 Collier v Ngati Rehua-Ngati Wai Ki Aotea [2020] NZCA 536 at [14].
16 100 Investments Ltd v Walker [2024] NZHC 93 at [25].
to be granted it must be shown that this Court erred in its assessment of both the materiality of the documents sought,17 and the broader exercise of its discretion to decline discovery on proportionality and public policy grounds.18
Proposed grounds of appeal
[22] Mr Rae raises ten proposed grounds of appeal in his application for leave. The Commissioner opposes the leave application, submitting that none of the grounds identify an error capable of bone fide or serious argument, let alone to the level required for an appeal against the exercise of the discretion.
[23] The 10 grounds overlap to some extent. Before I address each of those in turn, I note that a general thrust, expressed as a “general point” running through Mr Rae’s submissions is that the central issue in this case is that the Commissioner “must prove alleged US criminality afresh” in New Zealand, in accordance with the relevant evidentiary standard. Mr Rae submits that this is not a matter of simply accepting the United States findings, and that it requires “comprehensive and balanced disclosure” to ensure he can contest the allegations fairly.
[24] The High Court judgment noted that in order to obtain an assets forfeiture order, the Commissioner was required to prove that the “tainted property” to be forfeited had been directly or indirectly “derived from significant criminal activity”.19 In this case the “significant criminal activity” relied upon by the Commissioner is money laundering. I noted:20
[12] … The Commissioner says he does not rely on the United States convictions per se. Certificates of those convictions are not conclusive proof of conviction in this country. However the Commissioner will seek to rely on transcripts of the court hearing, in which Mr Rae was questioned by the Judge prior to the entry of the pleas following a plea bargain agreement. The written plea agreement handed up to the United States Court sets out the basis of the guilty plea, and a defendant is questioned by the Judge on that agreement. This process is referred to as the “allocution” process.
[13] Cooke J noted in the restraint decision that the plea and forfeiture agreement and related orders of a United States District Court do not prevent
17 High Court judgment, above n 1, at [59]-[84].
18 At [93].
19 At [10]–[12].
20 Footnotes omitted.
criminal or civil proceedings in New Zealand in relation to the same matters. His Honour further noted that the United States plea and forfeiture agreement expressly recorded that it “…was reached without regard to any civil or administrative matters that may be pending or commenced in the future against RAE…”.
[14]Cooke J also noted in the restraint decision that:
... the Commissioner may need to establish that the schemes were fraudulent as part of establishing the offending under s 243 of the Crimes Act, albeit only to the required civil standard.
[25] I accept the Commissioner’s submission that Mr Rae advances an incorrect premise which runs through many of the proposed grounds of appeal. Rather, than proving the alleged criminality “afresh”, the Commissioner is required to prove that Mr Rae unlawfully benefits from, or that the funds are tainted by, his money laundering in New Zealand in accordance with s 243 of the Crimes Act. This is not the same as a requirement to prove that Mr Rae committed the offence he was convicted of in the United States. While evidence of Mr Rae’s United States conduct will be relevant insofar as it goes to proving elements of the New Zealand based offence, those matters do not require re-litigating his criminal convictions in the United States.
Ground 1: failure to properly balance the applicant’s case and the Commissioner’s case
[26] Mr Rae’s first ground of appeal is that the Court erred in focussing on the Commissioner’s case for forfeiture, without adequately balancing it against the case in opposition. He submits that his case was not a bare denial of the Commissioner’s case, but an affirmative case asserting that he is innocent of any criminal conduct, the proceedings constitute an abuse of process, and the application for forfeiture is brought in bad faith. Mr Rae says that without pleadings, the broad nature of the issues requires the Court to have access to the requested documents, in particular the material upon which the United States indictment was based, to properly evaluate both sides in a balanced manner.
[27] Mr Rae further contends that the Commissioner has introduced United States material, which is excluded under s 47 of the Evidence Act, through the “back door” via the allocution hearing United States court transcript, and that if the appeal is not
granted he will be “deprived of evidence essential to demonstrating his innocence”. He submits that the High Court decision did not properly account for the fact that the discovery sought was fundamental to Mr Rae’s ability to advance a defence, thereby compromising the fairness of the proceedings.
[28] The Commissioner submits that these matters were all taken into account by the Court in the exercise of its discretion. In particular, the Court noted that Mr Rae denied any involvement in criminal activity,21 maintained that the proceedings were brought in bad faith,22 and that his right to a fair trial would be compromised without the documents sought.23
[29]As I noted in the judgment:
[15] At trial, Mr Rae will argue that he was unaware of any underlying criminality in relation to the orthotics scheme, and he did not launder criminal proceeds. In addition, he will say that any funds that R Ltd had in its accounts were paid by Cargill Consulting Ltd (Cargill), a company that was not owned or controlled by Mr Rae. In relation to the cancer screening scheme, Mr Rae will maintain that there was no underlying criminality. The Commissioner will be required to establish on the balance of probabilities the alleged money laundering by Mr Rae and related unlawful benefit.
[30] Mr Rae’s submission that there should be a “balancing exercise between competing interests” misapprehends the test for third-party discovery. I concluded that the 16 groups of documents sought in the discovery application were not “material and necessary”,24 which is the relevant test for third-party discovery.25 Mr Rae does not submit this test was misapplied.
Ground 2: failure to give proper weight to David Touger’s affidavit evidence
[31] The second ground of appeal is that the Court erred in failing to give any or proper weight to the affidavit evidence of David Touger, Mr Rae’s United States attorney, which Mr Rae says formed the foundation of his application for non-party
21 At [34(a)], [35] and [37].
22 At [34(c)–(d)].
23 At [41].
24 At [59]–[91].
25 At [48] and [49], citing Vector Gas Contracts Ltd v Contact Energy Ltd [2024] NZHC 3171, [2015] 2 NZLR 670 at [58] and [59]; and Miller v Flora Properties Ltd HC Christchurch CIV-2010-409- 799, 11 June 2010 at [31].
discovery. He notes that there was no evidence filed by either the Commissioner or the United States Government in opposition to Mr Touger’s evidence, and its uncontested nature makes it “akin to expert evidence”. Mr Rae contends that the Court failed to acknowledge that the absence of opposition increased the weight of Mr Touger’s evidence. He says this evidence confirmed that the requested categories of documents were relevant, existed, and were critical to undermining the Commissioner’s case. Mr Rae further submits that the Commissioner is now attempting to rely on “guilt by association”, through his recent service of five new allocution transcripts.
[32] This Court considered Mr Touger’s evidence,26 as well as Mr Rae’s contention that it was not countered by the Commissioner.27
[33] This ground is based on the Court’s failure to give Mr Touger’s evidence sufficient weight in the assessment of materiality. However the relevance of the material sought is a question of law for the court,28 rather than one based on the opinion evidence of Mr Rae’s United States attorney, who does not depose to have any experience in New Zealand law.
[34] I accept the Commissioner’s submission that the Court took an orthodox approach to non-party discovery in making its assessment. Mr Rae points to no error of principle in the Court’s assessment of Mr Touger’s evidence which might suggest an error in the exercise of its discretion, nor can it be said the assessment was plainly wrong.
Ground 3: error in assessing materiality of documents
[35] Mr Rae’s third ground of appeal is that the Court erred in dismissing the discovery application on the basis that the documents sought were not material. In doing so, Mr Rae submits that the Court erroneously relied on the Commissioner’s submissions, which were contrary to and/or inconsistent with the grounds for forfeiture and the evidence relied upon by the Commissioner. He contends that while
26 High Court judgment, above n 1, at [21], [41] and [62].
27 At [41].
28 Smith v Shaw [2020] NZHC 238, [2020] 3 NZLR 661 at [62].
the Commissioner stated in submissions that certain points were not part of his case, he has not formally retracted any affidavit evidence, which makes it unclear what the case truly encompasses.
[36] Furthermore, Mr Rae says the Court ruled on the issue of materiality based on submissions instead of the “totality and wide-ranging foundation of the evidence”. Mr Rae submits that affidavits such as that of Agent Vanzetta remain unchallenged, which highlight the role of Cargill as a “shell company” used for money laundering, making the requested discovery essential so that he can counter such allegations.
[37] The Commissioner responds that the Court considered all of Mr Rae’s submissions on materiality, and he has not identified the specific evidence that was missed. In particular, the documents sought in relation to the “sting” provision and Cargill were found to be unnecessary, as they sought to contest propositions not advanced by the Commissioner at the forfeiture stage,29 and therefore were not in issue.30 Furthermore, the documents sought relating to the various prosecutorial decisions in the United States criminal proceedings are not necessary, as Mr Rae will be able to give evidence,31 and it should be a “straightforward matter” for him to “identify the activities that generated the kinds of sums in question had they taken place”.32
[38] In addition, the Commissioner submits that the Court cannot have been misled by his submissions, as he explained that he did not rely on propositions that Cargill was a “shell company” for the purpose of his forfeiture application.33 The Commissioner has formally recorded the position on the ownership of Cargill, whether or not it is a shell company, in his written submissions and in the judgment under appeal.34 He says it is not necessary to “formally retract” any affidavits previously filed that had referred to that position.
29 High Court judgment, above n 1, at [62]–[64] and [76].
30 At [51].
31 At [84].
32 Restraint judgment, above n 2, at [39].
33 This Court has also previously rejected these claims: see Commissioner of Police v Rae [2024] NZHC 1585 at [8].
34 High Court judgment, above n 1, at [72].
[39] Furthermore, the Commissioner contends that the lack of pleadings and discovery in these proceedings reflect that they are brought by way of originating application, with the intention of being determined quickly and inexpensively.35 In any event, the position of the parties is clear from the materials.36
[40] I accept the submissions of the Commissioner under this head. The positions of both the Commissioner and Mr Rae were outlined before me and are set out in general terms in the judgment.37
[41] In relation to the issue of the status of Cargill, a matter on which Mr Rae says that the Commissioner has been inconsistent, Mr McCusker emphasised in his submissions that, as recorded in the judgment, the Commissioner accepts “that Mr Rae is not the owner of Cargill, and moreover his position since the beginning of this proceeding has been that Professor Walker is the owner”, and further “the Commissioner does not allege that Cargill is a “shell company””.38 In addition, the Commissioner says he did not advance a position that Mr Rae “controlled” Cargill.39
Ground 4: misapplication of s 47 of the Evidence Act
[42] The fourth ground of appeal advanced by Mr Rae is that the Court erred in its interpretation of s 47 of the Evidence Act. In general terms, this provision provides that proof of a criminal conviction, including convictions in some listed overseas jurisdictions, is conclusive proof that the person committed the offence.40 The United States is not one of the listed jurisdictions.41
[43] Mr Rae submits that the Court is effectively enabling the Commissioner to circumvent s 47 to admit the conviction to establish the proof of the United States offending and related evidence via a “back door”. Mr Rae says that by allowing reference to the court transcripts of the allocution hearing and plea agreement, the Court will permit the use of the existence of the United States convictions and related
35 Doyle v Commissioner of Police [2022] NZCA 2 at [9].
36 High Court judgment, above n 1, at [52].
37 At [12], [46] and [55] for the Commissioner; and at [15], [34] and [35] for Mr Rae.
38 At [72]
39 At [73]
40 Evidence Act 2006, s 47.
41 See the definition of “conviction” under s 4(1).
evidence, despite s 47’s exclusion of foreign convictions. He says the restriction is based on good policy reasons to ensure the exclusion of unreliable convictions. Mr Rae submits that this protection is particularly relevant in the United States context, “where plea agreements are often driven by pragmatic considerations, such as reduced sentences, rather than admissions of guilt”.
[44] I accept the Commissioner’s submission that Mr Rae appears to conflate conclusive proof with admissibility. Section 47 does not render United States convictions inadmissible, but rather provides that they do not constitute proof of an offence in civil proceedings. The Commissioner cannot rely on the mechanics of s 47, which amount to a statutory estoppel, to prevent the relitigation of essential facts of a recognised conviction in the civil proceedings.42
[45] In any event Mr Rae’s submission rather goes to the admissibility of the allocation hearing transcript, not the necessity of non-party discovery. The prosecution documents sought were not necessary as Mr Rae is in a position to deny his involvement in any United States offending by giving evidence and explaining the relevant events from his point of view.43
Ground 5: misunderstanding and misapplying the evidential significance of Cargill
[46] The fifth ground of appeal is that the Court erred in its analysis of the underlying evidential significance of Cargill as the centre of the case. Mr Rae submits that, contrary to the Commissioner’s assertion, Cargill was not a shell company, but was owned by Professor Gordon Walker, who has not been indicted. He says Cargill served as a conduit for all funds transferred into the R Ltd and S Ltd accounts, and therefore establishing its legitimacy is vital to his defence. Further, Mr Rae contends that the documents sought are critical to understanding the true nature of Cargill’s operations.
[47] Mr Rae submits that the Court failed to appreciate that although the United States Government had thoroughly investigated Cargill and Professor Walker,
42 Purucker v Huebler [2023] NZHC 1134 at [10].
43 High Court judgment, above n 1, at [84].
neither were charged. His application sought to obtain documents from the United States investigation to demonstrate that Cargill was a legitimate business, which he says would dismantle the Commissioner’s argument that Mr Rae controlled and laundered funds through R Ltd and S Ltd. Furthermore, Mr Rae contends that the Commissioner’s submissions which minimised the role of Cargill were inconsistent with his initial reliance on Cargill as a key vehicle for the alleged money laundering, and the Court did not properly address this inconsistency.
[48] The Commissioner notes that Mr Rae’s submissions regarding the evidential significance of Cargill were already canvassed in this Court’s judgment.44 As noted above, the Commissioner does not dispute that Mr Rae is not the owner of Cargill nor suggest that it is a “shell” company, therefore it is unclear why these documents would be necessary. Rather, the Commissioner’s case is based on Mr Rae’s admissions under oath to the use of a Cargill bank account for money laundering purposes and evidence showing him offering that account to do so.
[49] As noted in the High Court judgment, while Mr Rae did not seek copies of bank statements, if the Commissioner intended to rely on bank statements it would seem appropriate that all relevant bank statements be produced, if they had not already been provided. The issue was not explored at the hearing on the relevant information and, in any event, I noted that it would be the relevant bank that held that information, not the United States Government.45
Ground 6: misunderstanding the evidential significance of the “sting” evidence
[50] The sixth ground of appeal is that the Court erred in its analysis of the underlying evidential significance of the “sting” evidence, and failed to account for the impact of that evidence on the forfeiture case. Mr Rae submits that the “sting” evidence relates to an operation aimed at implicating him in criminal conduct or revealing his knowledge and intent, and therefore its evidential value is significant. His position is that the “sting” evidence does not support the Commissioner’s case, but rather demonstrates his lack of criminal intent. In addition, Mr Rae says it has the
44 At [81]–[87].
45 At [77].
potential to prove bad faith on the part of the investigating authorities, if it is shown that there was no credible evidence obtained from the “sting” operation. He contends that the discovery sought is essential to show that the “sting” operation was not based on genuine evidence of criminality, but was “an attempt to fabricate or entrap” him.
[51] The Commissioner notes that Mr Rae’s submissions regarding this alleged entrapment are recorded in the High Court judgment, and were taken into account in the Court’s exercise of its discretion.46 Furthermore, the Commissioner does not rely on offences under the “sting” provision as predicate offending in the forfeiture application, therefore the information is not necessary.47 Nevertheless, while the Commissioner does not seek to rely on the proceeds derived from the “sting” provision as predicate overseas offending, the Commissioner pointed out in his submissions on the leave application, that the Commissioner intends to rely on available transcripts of recordings from the “sting” operation to demonstrate elements of Mr Rae’s New Zealand based offending.48 For instance in relation to transfers from the Cargill account to the S Ltd account.
[52] The admissibility of the evidence that the Commissioner seeks to adduce is separate to the issue of whether there should be third-party discovery in relation to the “sting” operation. Mr Rae seeks in relation to the “sting” operation material which he says is relevant to his “predisposition”, or the claim that he had no previous convictions at the time of the operation. Further, it would show that he was cooperating with United States authorities and was misled by Mr Kimble, which might be apparent from, inter alia, discovery of material gathered from covert recording by Mr Kimble, if that indeed had occurred.
[53] None of the information which Mr Rae seeks from the “sting” operation is material or necessary in relation to the present proceeding. Mr Rae is seeking to go on a fishing expedition in which he hopes to establish bad faith on the part of the
46 At [61]–[64].
47 At [62]–[63].
48 The Commissioner points out that the Court incorrectly recorded that the Commissioner did not seek to rely United States evidence in relation to “the sting operation” at [60], however that should have read “the sting provision”. However, in context, it is clear the Court is referring to the fact that the Commissioner is not relying on the “sting” provision as predicate overseas offending.
investigating authorities, not only in the United States, but in New Zealand. As I noted in my judgment, the claims of bad faith have no demonstrated basis.49
Ground 7: misunderstanding the evidential significance of Herb Kimble’s evidence
[54] Mr Rae’s seventh ground of appeal is that the Court erred in its analysis of the underlying evidential significance of Herb Kimble’s evidence and failed to appreciate its “foundational role”, leading to “an incomplete and prejudicial assessment”. Mr Rae contends that without Mr Kimble, there would be no case against him. He says Mr Kimble was sent to “entrap” him, by which time the alleged fraud was already well underway. Mr Rae says these tactics undermine the legitimacy of the investigation, as the use of Mr Kimble and the establishment of a “dummy FBI corporation” indicates that the authorities did not have sufficient evidence against him at the time, and therefore the operation “was a fishing expedition aimed at manufacturing evidence rather than exposing pre-existing criminal conduct”. Mr Rae contends that documents sought relating to Mr Kimble’s activities and communications are crucial to demonstrate that his interactions with him were innocent.
[55]This ground is dealt with in the analysis under ground 6.
Ground 8: error in requiring a finding of perjury in United States proceedings
[56] The eighth ground of appeal is that the Court erred in ruling that Mr Rae’s defence to forfeiture required the New Zealand court to make a finding that he must have committed perjury in the United States proceedings. Mr Rae says that allowing the allocution evidence from the United States while excluding the materials necessary to challenge the validity of the indictment creates a serious imbalance, forcing him into an “impossible position”. He notes that the Supreme Court has previously expressed concern about the nature of plea deals in the United States, recognising that they are often made for pragmatic or strategic reasons rather than actual admissions. No authority is given for this proposition, although Mr Rae may be referring to comments in the transcript of the oral hearing in the Supreme Court to which I have
49 High Court judgment, above n 1, at [85]–[91].
referred above, which I place no reliance on given the nature of the discussion recorded. It was not intended by that Court to be an authoritative determination, but rather a free-flowing discussion with counsel in the course of submissions.
[57] Mr Rae has emphasised that he only pleaded guilty to avoid the cost and time that defending the United States proceedings would entail. Mr Rae also noted in the course of argument that he only entered the plea agreement on the basis that no further recovery would be sought from him beyond the amount he agreed to pay to the United States Government. He said if he had known that the Commissioner would make claims under the Criminal Proceeds (Recovery) Act 2009, he would never have entered the United States plea agreement and pleaded guilty to the United States charges. Those are matters on which he can give evidence at the substantive hearing.
[58] The Commissioner submits that, contrary to Mr Rae’s claims, the purpose of an allocution hearing is to ensure there is a factual basis for a guilty plea to be accepted. Mr Rae’s allocution specifies that he was advised that any false statements could form the basis of a prosecution for perjury, and he confirmed under oath that he was “entering this plea of guilty because [he was] guilty in fact”. That was the basis for the Court’s concern that Mr Rae was effectively inviting it to find that he committed perjury in the United States.50
[59] As I have noted, if the Commissioner intends to rely on the allocution hearing as evidence, a full transcript of the court hearing should be made available to both the court and Mr Rae by the Commissioner.
Ground 9: mischaracterisation of the applicant’s defence as re-litigation
[60] The ninth ground of appeal is that the Court erred in ruling that Mr Rae was seeking to re-litigate the alleged offending in the United States. Mr Rae submits that the alleged offending was never substantively litigated in the United States due to the plea agreement, which he says was not entered as an admission of actual guilt. He notes that Cooke J held that the Commissioner would require substantial assistance from the United States Government in these proceedings, which Mr Rae says is
50 At [93].
because the offending must be proven afresh.51 However, Mr Rae contends that his defence does not seek to re-litigate the United States allegations but rather to challenge the admissibility and weight of that evidence in a New Zealand context.
[61] As the Commissioner submits, the argument that there is no re-litigation is difficult to reconcile with Mr Rae’s submission that the Commissioner “must prove alleged US criminality afresh in New Zealand”, and that he is asserting his innocence. It also flies in the face of the general tenor of Mr Rae’s submissions.
Ground 10: error in balancing the “just, speedy, and inexpensive determination” of the proceedings
[62] The tenth ground of appeal is that the Court erred in balancing the “just, speedy and inexpensive determination” of these proceedings,52 in view of the amount of money involved, the allegations of abuse of process and bad faith, the previous admitted failings of the Commissioner to provide full and frank disclosure, and there being no evidence filed to gainsay the existence and relevance of the discovery sought. Mr Rae says there was nothing to suggest the discovery would be difficult or expensive to provide, and that the final trial is not due to be heard until May 2025.
[63] As the Commissioner submits, Mr Rae has misconstrued the Court’s finding in regard to r 1.2 of the High Court Rules, which was centred around the prejudicial effect discovery would have on the hearing of any proceeding if an order were made. Furthermore, the matters identified by Mr Rae do not address the concerns about the effect this material may have on the proceeding even if the documents were relevant, requiring it to embark on an inquiry in the conduct of a foreign proceeding.
[64] Mr Rae advised the Court in September 2021 that the matter was ready to be set down for hearing, however concerns about the adequacy of discovery were not raised until two-and-a-half years later. In view of the progress to date it is likely that the hearing would be jeopardised if there was an interlocutory appeal. The leave application could not be heard until October 2024. This decision is delivered shortly before the Christmas break and the courts will not open until February 2025. That
51 Restraint judgment, above n 2, at [73].
52 High Court Rules 2016, r 1.2.
leaves only approximately four months before the trial, which has been scheduled for some time. The delay and likely loss of the trial date is a factor that weighs against granting leave, particularly given that the forfeiture application dates back to May 2021.
Other matters relevant to leave
[65] The Commissioner submits that Mr Rae does not identify any question of law or fact capable of bona fide or serious argument. I agree. The proposed grounds of appeal raised by Mr Rae largely restate matters brought up in his submissions on his application for non-party discovery, which have already been addressed in the High Court judgment in detail.
[66] In any event, even if an arguable error is identified, it is not of sufficient importance to outweigh the resulting cost and delay of an appeal. In particular, the identified grounds do not raise any matter of general or public importance, nor do they prevent Mr Rae from raising a defence, as the documents sought either relate to matters which are uncontested or for which he can adduce other relevant evidence.
[67]The application for leave to appeal is declined.
Grice J
Solicitors:
Luke Cunningham & Clere, Wellington for Respondent
Robinson Legal, Wellington for United States Government
0
15
0