Judges slam Serious Fraud Office overreach and oppressive orders

The Court of Appeal has condemned the Serious Fraud Office for indiscriminate and unlawful fishing expeditions when it orders citizens, banks, phone companies and even airlines to hand over vast amounts of data on people under investigation.

A long-running fraud case involving a trust overseeing the $10 million proceeds of an upper Waikato treaty settlement collapsed spectacularly on Friday morning as a result of the appeal court finding.

The landmark ruling is likely to impact other SFO prosecutions that have relied on its misuse of compulsory interview and production powers, and overly broad search warrants.

Parliament might need to change the law to force the SFO under alternative search and surveillance legislation, or re-write the SFO Act to make its practices legal in the future.

Making the SFO's unlawful behaviour more acute, politically, is that its practices were also deployed against political parties in the period under review, when it charged figures from National, Labour and the NZ First Foundation over political donations.

Senior political figures and parties were hit with the secret compulsory interview and production orders and vast troves of data seized and searched.

Today in the High Court at Rotorua, the SFO abandoned six remaining charges against a businessman and Māori trust chair from an inquiry dating back to 2016. Justice Kiri Tahana brought the case to an end.

The SFO withdrawal followed a successful challenge by lawyers for the businessman and an inaugural trustee of the Waikato River Authority, Roger Pikia, to a High Court ruling that had largely okayed the SFO's secret orders, interviews and searches.

But in the Court of Appeal ruling from August, which can only be made public now the High Court case is over, Justices Forrie Miller, Murray Gilbert and David Goddard found 118 out of 203 exercises of SFO powers to be unlawful. That made large parts of the alleged evidence amassed by the SFO inadmissible.

The SFO actions included demanding years of banking, phone and travel records on Pikia, and phone call, text and data records from Pikia, his partner Casey Te Rangi, and others including Tainui leader Tukoroirangi Morgan and Willie Te Aho and numerous others.

The late Sir Wira Gardiner, a leading public servant, had also been compelled secretly in 2019 to attend an SFO interview as part of the inquiry.

The vast SFO sweep using compulsory, unlawful orders hit government agencies, local bodies, credit card companies, a health board, the Waikato River Authority, plus Air New Zealand, the Racing Board, accounting firms, Sky City Auckland and many others. They joined eight banks and three telecommunications companies.

Pikia's barrister Fletcher Pilditch KC and solicitor Chris Morris had pursued the appeal after the High Court first rejected most of Pikia's arguments that the SFO's use of its powers had been unlawful.

The appeal court found a total of 101 orders under Section 9 of the Serious Fraud Office Act, compelling individuals to appear for interviews or to provide documents, data and devices, were unlawful.

A further 17 actions related to search warrants, involving the Te Arawa River Iwi Trust, Pikia and others were declared unlawful.

The Court of Appeal's judgement is unusually strong in its conclusions:

"Given the defined and limited parameters of the frauds properly under investigation, we are driven to the conclusion that the number and breadth of the notices and warrants was unnecessary, unreasonable and oppressive."

It said the SFO's "approach involved significant overreach, looking for evidence of any misconduct in 'the affairs of Roger Pikia' regardless of whether or not such evidence was within the proper scope of the authorised investigation."

The SFO drafted its search warrants and notices to those targeted in a way "plainly designed to capture the broadest possible range of information.

"This is the antithesis of the correct approach, which requires the provision of as much specificity as is reasonably possible in the circumstances and targeting only information relevant to the frauds under investigation.

"The indiscriminate approach adopted is evidenced by the fact that the SFO gathered more than one million documents from numerous sources covering much of Mr Pikia's personal and business dealings over a period spanning seven years," the judges wrote.

"It is not simply a matter of hindsight that comparatively few of these documents will have any relevance to the prosecution."

The Court of Appeal said the SFO Act was out of date and needed urgent review. It suggested an update of that law or that the SFO be moved under the auspices of the Search and Surveillance Act 2012.

In one part of the appeal court judgment, the SFO is found to have told a judge who issued a search warrant in 2017 in the Pikia case that any irrelevant material would be destroyed, when that is not the SFO standard practice.

The appeal judges noted: "It is hard to understand how this assurance could be given."

SFO investigators wrongly used Section 9 notices to gain access to Cloud-stored data, the court found.

They also used Section 9 notices to compel people to hand over cell phones, computers or other electronic devices, but this was unlawful, as that section applied to 'information' and 'documents' not devices.

An investigator said in evidence during the case that the SFO had used S9 notices to obtain devices since that person began work there in 2000.

The Court of Appeal disagreed with the High Court judge, Justice Edwin Wylie, that some s9 notices were justified "because investigators did not know whether any other offending may have occurred".

"It seems clear the notices were deliberately framed much wider than that to enable a wide-ranging audit of Mr Pikia's affairs looking for any offending, regardless of whether it was within the legitimate scope of the investigation," the appeal judges found.

They said it would have been impossible for people being handed the broad warrants and notices to know what was and was not covered by them.

An SFO forensic accountant had said it was standard practice in fraud investigations to carry out what he referred to as a "bank sweep" to all relevant banks. This applied not just to the person under investigation but to "any person or entity of potential interest".

The appeal judges said that approach was unjustified and "serves to confirm the unbounded nature of the financial audit that is apparently carried out as a matter of routine in any case of this type".

On the prominent Tainui leader Tukoroirangi Morgan, the Appeal Court said he and Willie Te Aho were not being investigated.

"It is difficult to see how the SFO could be justified in searching all their phone and text communications over a period of some six months, including personal and private communications, irrespective of whether these were with Mr Pikia.

"This appears to have been a substantial and unjustified invasion of their privacy.

"The same can be said for the four months of private communications between Mr Pikia, his children and Ms Te Rangi that were all reviewed by the SFO. The senior investigator accepted there was no suggestion that Ms Te Rangi or the children were involved in Mr Pikia's business affairs."

On s9 orders, the Court of Appeal said: "It seem the objective of these notices was to carry out a form of general surveillance to determine how these individuals were responding to the SFO's investigation, rather than to obtain documents or information having any direct relevance to the suspected frauds being investigated.

"Parliament cannot have intended that s9 powers could be deployed to enable this form of surveillance in circumstances where no judge could properly authorise it under s10(2) by issuing a search warrant."

Pikia had been accused in December 2020 of obtaining by deception, two charges of corrupt acceptance of a gift by an agent, receiving a secret reward for procuring a contract, perverting the course of justice, conspiring to commit an offence, and dishonestly using a document. He pleaded not guilty to all charges. (One had been withdrawn before Friday)

The SFO's withdrawal of the charges against Pikia brings the case, which was meant to go to trial in July 2025, to an end.

In a statement Friday morning the SFO director Karen Chang said "The notice and warrant procedures referred to by the Court in its ruling were executed several years ago and do not represent SFO's current practice. With the rapid advancement of technology and associated impact on the nature of evidence over the intervening years, the SFO has introduced significant changes to how we collect, review and disclose digital evidence. These changes have ensured we can appropriately utilise the powers granted pursuant to our 1990 legislation in the modern digital environment.

"As a result of these actions, we have been able to manage the impact of the Court's judgment on our operational activities and active investigations. The SFO remains focused on tackling serious fraud and corruption, and we continue to prosecute and secure convictions.

"We note the Court of Appeal's observations about the currentness of the SFO Act, and we will support any efforts to modernise and enhance the SFO's operational and legislative framework to ensure it continues to function effectively and appropriately in today's complex digital and online environment."

On the Pikia case, Chang said: "I stand by the original decision in 2020 to commence these proceedings given the collection of substantial evidence supporting multiple serious charges against the defendant during the SFO's investigation. "

She revealed the SFO had wanted to press on, but its request to the Solicitor-General for permission to appeal the Court of Appeal judgment to the Supreme Court was declined.

"The effect of the recent Court of Appeal's findings is that there now remains insufficient admissible evidence to justify proceeding further with this case. Under these circumstances, the Crown has made the appropriate decision."

- This story was first published by Newsroom