But the method he devised would ultimately land him in court where he and an associate have now been fined $440,000 for breaching the Overseas Investment Act. <\/p>\n
A just-released High Court decision by Justice Layne Harvey details how Klaus decided to purchase a 91ha olive grove at Raupunga in Northern Hawke\u2019s Bay in 2021.<\/p>\n
Investigators at the Overseas Investment Office would later allege that Klaus had no intention of keeping the property – or even making a profit – and planned to flip it soon after taking ownership to access his crypto funds.<\/p>\n
The problem was that due to its size and nature, the land was deemed sensitive under foreign buyer rules and Klaus needed Overseas Investment Office (OIO) consent. <\/p>\n
The Land Information NZ prosecution related to a 91ha land purchase in Raupunga, Northern Hawke’s Bay.<\/p>\n
The decision says Klaus took legal advice about how to structure a company to avoid needing the regulator\u2019s approval. <\/p>\n
The OIO said his plan involved using an \u201cassociate\u201d to illegally skirt New Zealand\u2019s foreign buyer regime. <\/p>\n
Klaus contacted business associate Mike Newcomb. They formed a New Zealand company called Let\u2019s Go Property Investments in May 2021. Klaus held 24% of the shares while Newcomb held the remaining shares and was also appointed company director.<\/p>\n
But investigators said it was Klaus who was pulling the strings. <\/p>\n
He found a non-cash platform and used his crypto to buy the Hawke\u2019s Bay property for $4.5 million on May 18, the decision says. Newcomb signed the sale and purchase agreement, which stated that the company did not need OIO consent.<\/p>\n
Klaus indicated to Newcomb that the company would purchase the property so the pair could run a beverage business together, with Klaus acting as an Australian distributor. <\/p>\n
\u201cHowever … Mr Klaus\u2019 intention was to on-sell the land to convert his cryptocurrency into cash,\u201d the decision says. <\/p>\n
\u201cIt is unclear whether Mr Newcomb was aware of this plan.\u201d<\/p>\n
Australian businessman Daniel Klaus has been fined hundreds of thousands of dollars for failing to get consent before purchasing a Hawke’s Bay olive plantation.<\/p>\n
Klaus registered a mortgage over the property and asked Newcomb to guarantee a development loan. <\/p>\n
However, Newcomb got cold feet and the relationship soured. Newcomb pulled out of the company and all the shares were transferred into Klaus\u2019 name. Klaus also became the sole director. <\/p>\n
The decision says that immediately after purchasing the property, Klaus began to discuss on-selling it, then discharged his mortgage the following month.<\/p>\n
The OIA was tipped off to the case days later. Investigators contacted Klaus and asked him to explain the purchase and the reasons for the company\u2019s structure. <\/p>\n
He said he intended to sell the property \u201curgently\u201d but refused to give the regulator an undertaking to put any sale proceeds in trust, should a prosecution take place, the decision says. <\/p>\n
The property was sold in November that year for $3.1m – $1.4m below what Klaus paid just six months earlier. <\/p>\n
\u2018Conduct was financially motivated\u2019<\/p>\n
Both Klaus and Newcomb left New Zealand after the OIA investigation commenced and neither took part in the proceedings, the decision says. <\/p>\n
The regulator argued that Klaus always intended to buy and immediately on-sell the property to cash out his cryptocurrency. A real estate agent told investigators Klaus was \u201chappy to accept a lower value than that which he had paid\u201d.<\/p>\n
Unable to buy the property himself, he\u2019d incorporated Let\u2019s Go, with Newcomb \u201cplaying the necessary role for compliance\u201d. <\/p>\n
\u201cAlthough Mr Klaus did not expect to make a financial gain, and was even willing to make a loss, his conduct was financially motivated in that he aimed to use the transaction to cash out a reasonable amount of his cryptocurrency,\u201d the regulator contended. <\/p>\n
\u201cTo achieve this, he was prepared to circumvent New Zealand law.<\/p>\n
\u201cIn short, the regulator argued that the evidence suggested Mr Klaus intentionally, or at the very least recklessly, breached the Act.\u201d<\/p>\n
The judge found Klaus was either negligent or reckless as to whether his actions were unlawful. He had sought ways to circumvent the obligations he faced.<\/p>\n
Australian businessman Daniel Klaus has fallen foul of New Zealand’s foreign buyer rules.<\/p>\n
After being advised of the legal situation relating to ownership rules, he responded: \u201cI wanna buy under company to save all the drama. How can I construct a company so I can own it through company?\u201d<\/p>\n
The decision says aggravating factors were that Klaus had previous misconduct findings with regulatory or compliance authorities.<\/p>\n
According to Australian media reports, he and another of his companies were ordered by a Queensland court last year to pay more than $300,000 in penalties after admitting breaches of the Fair Trading Act for taking customer payments for caravans and then making repeated excuses about why they hadn\u2019t been built. <\/p>\n
It was the second such prosecution involving Klaus for similar offending. <\/p>\n
Klaus had also stopped communicating with OIO investigators and solicitors \u201cand appeared to evade service of the proceeding\u201d, the decision says. <\/p>\n
In terms of Newcomb, it was contended that his failure to take advice or confirm the lawfulness of the transaction indicated \u201cat least negligence, if not recklessness\u201d. <\/p>\n
\u201cHowever, he had a much lesser role in the offending than Mr Klaus and he gained nothing from his participation. Mr Newcomb\u2019s role extended to helping facilitate Mr Klaus\u2019 offending.\u201d<\/p>\n
The judge ordered Klaus to pay $350,000 in penalties. Newcomb was ordered to pay $90,000. Both men were ordered to pay $15,000 costs.<\/p>\n
Neither man could be reached for comment. <\/p>\n
Officials working to find assets linked to pair<\/p>\n
Land Information New Zealand\u2019s compliance leader Susan Smith said the Overseas Investment Act was designed to protect sensitive Kiwi land and ensure any overseas investment was in New Zealand\u2019s interests.<\/p>\n
The act had strict \u201cassociate\u201d provisions that made it illegal for an overseas investor to conceal their identity and evade consent requirements by having a New Zealand citizen make investments on their behalf. <\/p>\n
\u201cMr Newcomb illegally acted as a front-person for Mr Klaus and by doing this breached the Overseas Investment Act.\u201d<\/p>\n
Smith said both men remained outside New Zealand and were yet to acknowledge the penalty decision or make any repayment. <\/p>\n
Land Information New Zealand (LINZ) was working to identify any assets belonging to the pair that could be claimed to help recover the court-imposed penalties.<\/p>\n
\u201cNo assets have been found at this point; however, LINZ will continue to pursue recovery of the penalties and any assets that are discovered in the future through appropriate legal channels.\u201d<\/p>\n
Lane Nichols is Auckland desk editor for the New Zealand Herald with more than 20 years\u2019 experience in the industry. <\/p>\n