New Zealand’s biggest tax fraudster and his family have lost a long-running battle to keep millions of dollars worth of real estate and other assets that police say are the proceeds of his crimes.
Gisborne farmer John Bracken was jailed in May 2021 after he was found guilty of 39 charges of dishonestly using a document for a pecuniary advantage.
He was jailed for more than six years and released on parole in mid-2024.
Bracken ran a scam through his company, Bracken Enterprises Ltd (BEL). He submitted false invoices for more than $133 million between 2014 and 2018, which led to him receiving $17.4m in GST refunds he was not entitled to.
Since 2018 police have had restraining orders over eight properties, 10 vehicles, farm vehicles and plant, a boat and other assets in which Bracken, his company, or the Bracken Family Trust had an interest.
The properties included two farms worth tens of millions of dollars, a property near Ōhope with a rateable value of $1.75m, and three residential properties in Gisborne, valued at $1.4m combined.
Late last year Justice Dale La Hood heard the Commissioner of Police’s application for a profit forfeiture order over the properties in which Bracken held an interest. Police can seize assets believed to be derived from or used in criminal activity under the Criminal Proceeds (Recovery) Act.
The commissioner originally sought assets worth $17.4m, but by the time the matter made it to court this was reduced to about $16m as property and cash had been released to satisfy mortgage and rates debt.
Most of the funds illegally obtained by Bracken – about $13.6m – had been put into farm and residential real estate held by the Bracken Family Trust, and Justice La Hood had to determine whether the trust assets should be subject to the forfeiture.
He also had to determine whether Bracken’s family members, particularly his wife Margaret and son Robert, were entitled to retain an interest in property and assets.
The commissioner said the financial affairs of Bracken, his company and the trust were so interlinked at the time of the offending that they were indistinguishable, and that much of the proceeds of the fraud were directly applied to purchasing assets for the benefit of Bracken, the farming enterprise and his family.
A holiday home valued at $1.45m was paid for entirely with direct proceeds of fraud, as was a collection of farm properties together known as Burnbrae, valued at $6.9m.
The commissioner said Margaret Bracken was the only other effective trustee, and the stable relationship between her and Bracken meant he could influence her decision-making to a high degree.
This was illustrated by the fact she “had no knowledge or interest in the abrupt exponential growth in trust assets”, including BEL (of which the trust was the 99 per cent shareholder), and the fact “she was unaware of the fraud leading to the massive enrichment of the trust”, the commissioner said.
If the trust was allowed to keep those assets, Bracken and his family would be free to enjoy the fruits of his offending by virtue of them having been held within a trust structure, the commissioner claimed.
Bracken said there was no benefit from the fraud because BEL now owed Inland Revenue more than $40m due to penalties and interest. He said any unlawful benefit he might have received had been nullified.
Justice La Hood disagreed, and noted he was bound by case law that held that potential future recovery by Inland Revenue did not negate an unlawful benefit that has already been received.
He ruled that although Bracken had been removed as a trustee from the trust in 2024, he was still a beneficiary and therefore had an interest in property.
Most of the assets held by the trust were acquired through Bracken’s criminal activities.
After his release on parole Bracken moved back to the farm and Justice La Hood said he continued to have the practical ability to exercise effective control over trust property.
Whether Margaret could be given relief from the forfeiture order due to her property relationship interests under the Property (Relationships) Act was also considered in the decision.
The commissioner said Margaret’s “wilful blindness” towards Bracken’s crime was relevant.
She enjoyed the proceeds of her husband’s fraud for a number of years, including the conversion of their previously uneconomic farm to a substantial landholding by acquiring the neighbouring properties.
By 2018, Bracken was generating fraudulent “income” of more than $7m a year and it was relevant that Margaret apparently never questioned this “abrupt change of fortune”, the commissioner said.
Bracken’s lawyer argued that granting the commissioner’s application would cause extensive hardship. Family members would lose their homes and the family farm and their generational connection to it. They would have to relocate and find new jobs and sources of income. The lives of Bracken’s grandchildren would be disrupted and there would be mental distress, including humiliation and shame.
Justice La Hood accepted the commissioner’s view that there were concerning aspects of Margaret’s conduct. Although she did not have knowledge of the offending, as a trustee and shareholder of BEL, “her lack of inquiry into the extraordinary increase in the trust property and income of BEL… was at the very least careless”.
He said Margaret and Robert appeared to blame the commissioner for their current predicament rather than appreciating that the consequences they had suffered were the direct result of Bracken’s “extremely serious criminal offending”.
But he also noted that Margaret had shouldered a heavy burden in raising two children and supporting her husband’s business and farming activities over a long, stable marriage, and that she would suffer substantial hardship if her home on the family farm was forfeited and she was forced to relocate.
Justice La Hood said he also had to strike a balance between granting relief to innocent family members and the Criminal Proceeds (Recovery) Act’s deterrence and profit elimination purposes.
In the end he considered the appropriate relief was for all the primary beneficiaries of the trust to retain the original farm property, which was valued at $3.7m.
That would enable the commissioner to recover approximately $13m of the $17.3m proceeds of the offending. The remaining proportion of the fraud proceeds were never accounted for, and remain outstanding.