Not guilty verdict in $750m insurance company collapse

Thursday, 21 September 2023

Former CBL chief executive Peter Harris stands outside the High Court in Auckland after being cleared of eight charges brought by the Serious Fraud Office.

The former chief executive of collapsed insurer CBL has been found not guilty at the High Court in Auckland of charges brought by the Serious Fraud Office.

Peter Alan Harris from Takapuna had denied five charges of theft by a person in a special relationship, two charges of obtaining by deception and one charge of false accounting.

CBL Corporation, which was once valued at $750 million, was put into liquidation by the High Court in Auckland in 2020, leaving many KiwiSaver funds having written down to zero the value of the shares they owned in the company.

Harris, who entered the court leaning on a walking stick as a result of having suffered a stroke, was cleared of all charges by Justice Michael Robinson, who said he would publish his judgment after the hearing.

Carden James Mulholland, CBL’s chief financial officer, was found not guilty of three charges oftheft by a person in a special relationship, obtaining by deception and false accounting.

CBL Insurance was not a household name, but did do some local insurance business, providing guarantees to buyers of new homes that they had been built without any defects.

The Independent Review by John Trowbridge and Mary Scholtens QC of the Reserve Bank’s Supervision of CBL Insurance Ltd was released in July 2019.

Most of its business was overseas, including insuring French home-builders against the risk there were defects in their homes.

Investors valued the company at just under $750m, but in 2018 CBL was put into liquidation, prompting the Reserve Bank Te Pūtea Matua to order a review of whether it had done a good job regulating the company.

That review found the Reserve Bank could have done more to protect investors, and should have prevented CBL from listing on the NZX in 2015.

Former CBL chief executive Peter Harris uses a walking stick after suffering a stroke.

The charges related to a series of transactions taken by Harris and Mulholland in the run-up to the failure of CBL during a period in which the Reserve Bank had directed that before entering any transaction or series of related transactions involving payment or transfer of assets in excess of $5m, CBL and its parent company CBL Corporation must consult with it.

Harris had long pleaded his innocence, and in 2020 had said he was “very disappointed” the SFO had taken action against him.

Speaking outside the High Court after being cleared of all charges, Harris said he would issue a statement shortly.

The Serious Fraud Office issued a statement that said it was “considering” the verdicts, but did not say whether it would appeal.

It said the SFO would “continue to prioritise investigating allegations of corporate fraud that threaten New Zealand’s reputation as a safe place to do business”.

The CBL failure was one of New Zealand’s largest corporate failures, it said.

“This was an important case for the SFO to take as the alleged conduct threatened New Zealand’s reputation as a safe place to do business and the trust placed in our institutions and business community,” says SFO director Karen Chang.

“As New Zealand navigates a period of economic uncertainty, it is particularly critical that we investigate allegations of serious and complex fraud that undermine confidence in our businesses, regulatory systems and financial controls.”

CORRECTION: An earlier version of this story incorrectly named Justice Michael Robinson as Robertson. (Amended at 11.20pm, September 22, 2023)