or Misleading Information and Breaching the
Code of Ethics)
At a hearing of the Disciplinary Tribunal of the Institute of Chartered Accountants of New Zealand held on the 30th day of July 2003, at which the member was present and represented by counsel, the tribunal recorded that Richard Anthony Johnston, chartered accountant of Auckland, pleaded guilty to the following charges and admitted the following particulars, subject to a reservation with regard to the words "designed to conceal", in particular (c):
THAT in terms of the Institute of Chartered Accountants of New Zealand Act 1996 and the Rules made thereunder, and in particular Rule 21.30:
? the member has been guilty of misconduct in a professional capacity;
? the member has been guilty of conduct unbecoming an accountant;
? the member has been guilty of supplying information to the institute which is false or misleading;
? the member has breached the institute's Code of Ethics, specifically, Fundamental Principles 1 and 5, and Ethical Guideline No. 1, clause 5.
IN THAT
? In relation to his conduct as a chartered accountant, the member:
(a) incorrectly advised the institute and/or the member's partners in a professional accounting firm ("the firm") and/or the National Business Review that the member had no direct or indirect financial interest
in a company ("the company") when, through a discretionary trust ("the trust") and/or because of the member's creditor relationship with the company, the member thought he had such an interest, or intended to have such an interest;
(b) failed to disclose to the institute and/or the member's partners in the firm and/or the National Business Review the existence (and details) of
the trust and its interest in the company and/or the member's creditor relationship with the company, when the member was specifically asked whether he had a direct or indirect financial interest in the company;
(c) demonstrated a lack of professional integrity and professional judgment by entering into an arrangement designed to conceal the member's and/or his family's intended financial interest in the company and then relying on those arrangements to deny any such interest in his dealings with the institute;
(d) either caused or potentially caused the firm to
breach the institute's independence requirements by undertaking the audits of two companies associated with the company when the member and/or his family intended that the member and/or his family would have a direct or indirect material financial interest in the company and the member failed to disclose this interest or intended interest;
(e) put the member's firm in a position where it had to resign the audits for the two associated companies;
(f) supplied false or misleading information to the institute:
(i) by stating, in a letter to the institute dated the
28th day of February 2002, that the member did not have a direct or indirect financial interest in the company (when the member intended to have such an interest); or
(ii) by stating, at a meeting with the institute on the
4th day of December 2002, that the member did have a direct or indirect financial interest in the company (when, as the member then alleged, he did not have such an interest) but intended to have such an interest; or
(iii) by stating (or allowing it to be stated) in a letter from the firm to the institute that the member had advanced $600,000.00 to the company by way of a loan (when, the member then alleged, he became a creditor of the company for this sum by default).
(g) wasted institute resources through inconsistent representations to institute staff and/or the member's partners at the firm as to his interest in the company.
The tribunal found the member guilty as charged and the particulars proven.
Orders of the Tribunal
Following consideration of evidence and submissions for the professional conduct committee and submissions made on behalf of the member, the tribunal made the following orders:
(a) Pursuant to Rule 21.31(b) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Richard Anthony Johnston be suspended from membership of the institute for a period of three years from the date of written notice of these orders.
(b) Pursuant to Rule 21.31(c) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Richard Anthony Johnston pay a monetary penalty of $15,000.00.
(c) Pursuant to Rule 21.31 (d) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Richard Anthony Johnston's certificate of public practice be cancelled and returned to the institute forthwith.
(d) Pursuant to Rule 21.31 (k) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Richard Anthony Johnston be censured.
(e) Pursuant to Rule 21.33 of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Richard Anthony Johnston pay to the institute the sum of $18,270.00 (inclusive of G.S.T.) in respect of the costs and expenses of the hearing before the disciplinary tribunal and the investigation by the professional conduct committee.
In reaching its decision, the tribunal considered that the conduct described above involved deliberate concealment of a material factual position, which demonstrated a serious lack of integrity.
The tribunal took into account that no client had suffered and that the member had co-operated with the institute and pleaded guilty.
The tribunal, however, considered that the fine and suspension reflected the seriousness of the misconduct.
In accordance with Rule 21.35 of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal directed that the decision be published in the
New Zealand Herald, the National Business Review,
the New Zealand Gazette and the Chartered Accountants Journal of New Zealand with mention of the member's name and locality.
Right of Appeal
Pursuant to Rule 21.41 of the Rules of the Institute of Chartered Accountants of New Zealand, which were in force at the time of the original notice of complaint, the member may, not later than 14 days after the notification of this tribunal to the member of the exercise of its powers, appeal in writing to the appeals council of the institute against the decision.
No decision other than the direction as to publicity shall take effect while the member remains entitled to appeal or while any such appeal by the member awaits determination by the appeals council.
Dated this 31st day of July 2003.
A. N. FRANKHAM, Tribunal Chairman.