The OIO And The Nature Of Being A “Good Character”

- Quentin Findlay


A “goodfella” is defined as a violent criminal involved in organised crime, especially a member of the Mafia in the US. The term entered general parlance as a result of Martin Scorsese’s 1990 semi-fictional movie “GoodFellas”. Ed.

“You can solve all your problems with a label printer” – Scott Salyer, former CEO SK Foods, Los Angeles Times, 17/6/10, “Tomato King Fredrick Scott Salyer’s Journey From Boardroom To Jail Cell”.

In the previous Watchdog I briefly discussed the activities of the Overseas Investment Office (OIO) in relation to its policy on foreign investment. Principally, I was interested in the extent to which the Office approved or declined investment based on the notion of “good character”. I listed several past takeovers which the OIO had approved despite the owners of the parent companies being of less than “good character” as necessitated under the present legislation governing overseas investment (Watchdog 123, May 2010, “Monkeys With Rubber Stamps: The Overseas Investment Office”, Quentin Findlay, http://www.converge.org.nz/watchdog/23/08.htm. Also in the same issue: “Waste Management: Another ‘Good Character’ Case From the CAFCA Archives”, Murray Horton, http://www.converge.org.nz/watchdog/23/09.htm and “Tommy Suharto: One Who Was Never Put To ‘Good Character’ Test”, Murray Horton, http://www.converge.org.nz/watchdog/23/10.htm).

I noted that the OIO had been satisfied of the “good character” of those implicated despite well documented claims to the contrary. One of those meeting the requirement of having “good character” by the OIO was SK Foods, which was until recently one of the principal owners of Cedenco, and its former Chief Executive Officer (CEO), Scott Salyer. Mr Salyer has recently stood trial on 12 charges of corruption in the United States (”SK Foods sold its customers organic paste that wasn’t organic, changed production dates to make the product seem fresher than it was and altered quality-control documents to hawk paste with mould content that was higher than levels permitted by the Food and Drug Administration, according to court documents. ‘You can solve all your problems with a label printer’, Scott [Salyer] told a former SK Foods President, in 2007, according to court documents”; Los Angeles Times, 17/6/10, “Tomato King Fredrick Scott Salyer’s Journey From Boardroom To Jail Cell”).

Former senior managers of SK Foods, 11 of whom were also convicted of corruption and fraud, were quick to “dob” in Salyer to the authorities, particularly since it meant reduced prison time or penalties for them. More recently CAFCA has complained about the “good character” of Goldman Sachs, which has been involved in US civil court actions about its dealings with collateralised debt obligations (CDOs), sub-prime mortgages and that it “materially misstated and omitted facts in disclosure documents for a synthetic CDO product it originated called Abacus 2007-AC1”. The investment bank JB Were is Goldman Sachs’ New Zealand subsidiary (at the time of writing CAFCA has not yet received a response from the OIO. In July 2010 Goldman Sachs agreed to pay a total of $US550m in fines to the US Securities and Exchange Commission and compensation to investors who lost money. “The fine was the largest against a financial company in SEC history. The settlement requires Goldman to review how it sells complex financial mortgage investments”. The SEC’s enforcement director said: “This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing” www.time.com 15/7/10. Ed.).

OIO’s Ideological Bias

CAFCA has long maintained that the OIO and its predecessor, the Overseas Investment Commission (OIC) operates an “open door” policy toward foreign investment and that a “roll up, roll up, nobody refused” mentality inhabits the organisation. Such a mentality is, of course, in line with that same ideology which inhabits current political decision making (and has done for the past 25 years), and has directly influenced the current Overseas Investment Act under which the Office operates. The notion then of “good character” as a prohibition against sales becomes laughable in such circumstances, as the OIO will (and has) approved the vast majority of them based on this overwhelming ideological bias.

It could be said that this statement is harsh, based as it is on own perceptions of the OIO. However, the evidence presented thus far would suggest that the OIO does operate on a lax and what could be described as a laissez faire attitude toward foreign investment. Indeed, the attitude shown by the Office is a demonstration of how far the neo-liberal agenda has penetrated sections of the public sector and a prime reason as to why political involvement in terms of investment and sales has to be kept.

In Watchdog 108 (April 2005) a number of articles were dedicated to changes in overseas investment laws, principally the repeal of the former Overseas Investment Act 1973 and the Overseas Investment Regulations 1995 and its replacement with a new Act governing investment and sales. The new Overseas Investment Act 2005 contained the lofty premise that “The purpose of this Act is to acknowledge that it is a privilege for overseas persons to own or control sensitive New Zealand assets”. Yet, I would propose that the actual purpose of the Act was to actually weaken that privilege by weakening political involvement over foreign investment and sales and effectively hand the decision-making process across to the newly formed OIO.

In that same April 2005 issue of Watchdog (number 108), Murray Horton dedicated the cover article* to the submission of Mark Dunlop to Parliament’s Finance and Expenditure Select Committee, which was considering the new Act. Horton wrote that Dunlop’s submission was “…eyebrow raising and very much in the man bites dog category… attacking both the present foreign investment regime and the new Bill… by a former (but very recent) insider, a man very much in a position to know what he was talking about”. *”Former OIC Insider Strongly Critical Of Foreign Investment Regime”, http://www.converge.org.nz/watchdog/08/01.htm. Ed.

Dunlop described himself as a self-employed lawyer and analyst, who had spent time working in the OIC on a fixed term contract from January to August 2004. Dunlop’s comments were revealing in terms of how the legislation and the OIC worked and the extent to which overseas investors and their advisors evaded the then current law. Dunlop argued that the primary objectives and approach of investment needed to be prescribed in the Bill itself and not tacked on later through regulation.

Dunlop’s observations have been largely proved correct as in the five years since its passing a number of turkeys unleashed by the liberalising aspect of the 2005 Act have come home to roost. However, where Dunlop’s observations let him down were in relation to political interference in the OIC/OIO. Dunlop maintained that Ministers and Parliament should not interfere in the processes. He noted that this interference was partially the reason as to why the Commission operated in the manner that it did. Freed from political interference the bureaucrats in the Commission would (more) correctly be able to oversee the functions of the Act.

This assumption rests on the premise that the OIC/OIO was administered by pragmatic (and non-political) civil servants and was not ideologically driven. The sad fact is that the public service is ideologically driven and has been so since the late 1980s.This is emphasised by the fact that major investments such as the aborted Auckland Airport sale to the Canadian Pension Plan Board were not denied by the OIC/OIO but, by the supposed “representatives of the people”, the politicians. Indeed, in the same Watchdog in which Dunlop was expressing his concerns, Bill Rosenberg detailed the extent to which the OIC had attempted to get senior Labour Ministers to reverse their vetoes regarding the selling of Brierley shares in Sealords to foreign fishing companies.

Minimal Political Oversight

The Overseas Investment Act 2005 and the associated Regulations actually provide the OIO with the means to be ideological, allowing the Office to interpret the regulations in any manner it sees fit with minimal oversight. For example, the Regulations for the assessing of overseas investment in sensitive land (Section 28) allow the Office to determine as to whether the “overseas investment will or is likely to result in other consequential benefits to New Zealand”. They ask the Office to interpret as to whether the refusal of an application for consent will, or is likely to: adversely affect New Zealand’s image overseas or its trade or international relations; and/or result in New Zealand breaching any of its international obligations. Sub-sections F and G ask the Office to assess whether “overseas investment will, or is likely to, give effect to, or advance a significant Government policy or strategy” and whether “the overseas investment will or is likely to assist New Zealand to maintain New Zealand control of strategically important infrastructure on sensitive land”. These are political questions which are being determined by unelected people.

It is in this context that the notion of “good character” which is determined in the regulations has to be examined. What determines “good character” is ill defined and is therefore left open to the interpretation of the OIO. The OIO has admitted that it relies on the “say so” of the individual or individuals concerned as to whether they are of “good character”; this is often based on a lawyer’s declaration. The OIO has also admitted that it does not police these references. It is akin to having the following (absurd) conversation:
OIO: “Good sir, are you of ‘good character’?”
Investor: “Why certainly I am of ‘good character’, sir. Here is a letter attesting to it. I am a jolly good fellow”.
OIO: “Jolly good, sir! This proves that you are of ‘good character’ and a jolly good fellow to boot”.
All: “Hip Hip Hooray!” All sing ‘For He’s A Jolly Good Fellow’”.

Given the following, the response by the OIO in relation to two takeovers, one by Kraft and the other involving an Australian takeover of SkyCity cinemas, is not that surprising. In both cases, the OIO stated that it was in New Zealand’s best interests to have these investors takeover the industries in question. In the case of Kraft, the OIO noted that “declining consent would also likely result in New Zealand’s international business image being adversely affected”. In the case of the Australian takeover of SkyCity Cinemas, it said that declining the application would have “adversely affected New Zealand’s image overseas”. Murray Horton stated in a media release on the issue that it was “blatant political advocacy” by the OIO. However, I would define it as the logical outcome of an Act that allows the OIO to be blatant political advocates.

The issue of the independence of the OIO freed from ideological bias has been brought to the fore again with the possible sale of the former Crafar farms to a Hong Kong-based firm, Natural Dairy (NZ) Holdings. Natural Dairy is being fronted by another firm, New Zealand-registered UBNZ. UBNZ has apparently reached an agreement with the receivers to buy Crafar farms, but this is conditional on OIO consent. In a media release dealing with the matter, Green Party Co-Leader, Russel Norman commented that the recent visit by the Chinese Vice President, Xi Jinping, would see the Government and the Overseas Investment Office put under pressure to approve such deals. Norman stated that: “Recent decisions by the Overseas Investment Office have shown ‘improved relations with foreign powers’ being given as a reason for allowing foreign investment in New Zealand. New Zealand’s image overseas has also been cited in recent OIO decisions as a reason not to turn down applications”.

The OIO has, however, been very quiet on the matter. This is despite UBNZ improperly purchasing some of the Crafar farms without OIO consent. The OIO merely asked UBNZ to apply for retrospective consent, never mind that UBNZ had acted illegally. When the retrospective consent from UBNZ was thrown out due to incomplete paperwork and an incorrect application fee, the OIO merely asked them to reapply. Added to this have been questions as to the “good character” of May Wang, the New Zealand Chinese woman who holds 80% of UBNZ and is its public face. However, since May Wang and her supporters have attested to her “good character”, she therefore must be of “good character” – jolly good!

Even John Key Has Some Misgivings

For its own part, the Government has been trying to put a good face on overseas investment. Speaking from Hong Kong (5/7/10), Prime Minister John Key promoted the value of increasing Asian, and principally Chinese, investment in the New Zealand economy. Key made the most of the continued growth of the Chinese economy during the recession and said that trade and investment between both countries should be increased. However, it would appear that the politicians are feeling the heat over the issue. In much the same way that Labour was subjected to popular unrest over the proposed sale of Auckland Airport, National is being put under pressure in relation to large scale farm sales. At the same time that John Key was talking about the need to increase overseas investment, he also gave tacit support for the recently announced Landcorp bid for the Crafar farms. Key opined that although he could not speak about the Crafar farms issue openly, his preference was for “productive” land to stay in New Zealand hands. Key further commented that: “Looking four, five, ten years into the future I’d hate to see New Zealanders as tenants in their own country and that is a risk, I think, if we sell out our productive base, so that’s something the Government will have to consider”.

Later in July Key announced that the Government’s review of the Overseas Investment Act, which has been underway since 2009, would now reconsider farm and other land sale rules. Key said: “The concern, I guess, is that there is so much wealth out there that they could literally buy New Zealand’s productive base. It’s not impossible. That’s the question – what do we want to be? Do we want to be tenants in our own country or do we want to own our own destiny?” (Press, 28/7/10, “Rethink on overseas landowner rules”, Martin Kay and John Hartevelt). Ed.

Key is quite correct in this assertion. Such consideration does need to be made by the Government. It needs to be discussed in public by the politicians and by Parliament, acting as the representatives of the people. Not by an unelected, seemingly ideologically driven agency, whose approach is so lax and passive that it relies on the news media and public information to identify and notify it of foreign land deals. In 2005, Mark Dunlop stated that the Overseas Investment Bill was fundamentally flawed and what was required was a transparent and robust regulatory regime. This, he said, could only come about if the fundamental issues canvassed by the submitters to the Bill were addressed. Five years on those concerns raised by the submitters have not been addressed and nor are they likely to be in the future. However, one of the key starting points would be for the politicians to act as the people’s representatives, instead of the OIO, and to start to make the difficult decisions.


Murray Horton, “Former OIC Insider Strongly Critical Of Foreign Investment Regime”, Foreign Control Watchdog 108, April 2005 http://www.converge.org.nz/watchdog/08/01.htm.

Bill Rosenberg, “CAFCA Submission On The Overseas Investment Bill”, Foreign Control Watchdog 108, April 2005, http://www.converge.org.nz/watchdog/08/02.htm.

Murray Horton, “First Ever Conviction Of Foreign Landowner; Huge TNC Transgressions Go Untouched”, Foreign Control Watchdog 110, December 2005, http://www.converge.org.nz/watchdog/10/03.htm.

Media Release: CAFCA – “Chinese Buy Up Of Dairy Farms. Get Used To It: This Is What A ‘Free’ Trade Agreement Looks Like,’ 25/3/10, http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Statements/ChineseDairy.html

Media Release: CAFCA – “Blatant Political Advocacy And None Too Subtle Implied Threat From OIO”, 15/6/10, http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Statements/Blatant.html

Media Release: Green Party (NZ) – “Chinese Visit Likely To Put NZ Under Pressure On Crafar Farms Deal”, 17/6/10.

Los Angeles Times, 17/6/10, “Tomato King Fredrick Scott Salyer’s Journey From Boardroom To Jail Cell”.

NZ Farmer’s Weekly 10/5/10, “OIO Wants Answers”.

NZ Farmer’s Weekly, 19/5/10, “UBNZ Just Latest To Duck Watch”.

NZ Herald, 5/7/10, “PM Warns Against Kiwis Becoming ‘Tenants’”.

Overseas Investment Regulations 2005 http://www.legislation.govt.nz.

Pedro Morgan, Overseas Investment Office, letter to Murray Horton, CAFCA, re Official Information Act request about good character inquiry, Goldman Sachs and its NZ subsidiary. 15/6/10.

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