Liquidators target Cullen assets
Liquidators are trying to identify and freeze assets owned by Eric Watson’s complex multinational Cullen Group.
But Vivian Judith Fatupaito and Luke Norman from KPMG said they had not had time since their appointment to identify all of Cullen Group’s cross-border interests.
‘‘The liquidators are still working to understand the extent of the assets held within the group,’’ they said in their first liquidators’ report into Cullen Group, which the High Court put into liquidation on December 17.
There was a significant number of related-party transactions to assess, Fatupaito and Norman said in their report published on Christmas Eve.
Cullen Group was part of a complex structure of entities that spanned New Zealand and overseas jurisdictions, including the British Virgin Islands, the United
Kingdom and the United States.
‘‘Since their appointment, the liquidators have worked to identify, freeze and control the group’s assets by placing entities within the group into liquidation,’’ Fatupaito and Norman said.
They had also requested information from various parties, including Watson, Inland Revenue and various advisers to Cullen Group.
They also appealed for creditors to come forward.
The liquidators were not yet in a position to say exactly what Cullen Group owed to creditors but earlier in the month they said Cullen Group owed its two biggest creditors – Inland Revenue and former business partner Sir Owen Glenn’s Kea Investments – about $100 million each.
The liquidators also asked for anyone with information that could help them assess the actions of Cullen Group’s management, to submit it in writing.
‘‘Liquidators can only act on written information, as undocumented information is deemed to be hearsay only and is inadmissible in court,’’ they said.
Cullen Group had been involved in a long-running court dispute with Inland Revenue but costs associated with that battle pushed it into liquidation.
Inland Revenue assessed Cullen Group as having avoided $59.5m in tax as a result of a ‘‘restructure’’ in which Watson exchanged his equity in Cullen
Investments for debt to the same value owing from Cullen Investments’ subsequent owner, Cullen Group.
The debt was ultimately held by Watson, who had moved to live in the United Kingdom, through entities incorporated in the Cayman Islands.
The High Court at Auckland found Watson ‘‘retained a high degree of control over the relevant entities and was on both sides of the loans’’.
Initially, the restructure got a tick of approval from Inland Revenue but it later reassessed the amount of tax Cullen Group should have paid and in March, Cullen Group was ordered by the High Court to pay $51m in tax owed, as well as use-of-money, interest and penalties.
Justice Matthew Palmer ruled that Cullen Group was part of a ‘‘web of entities’’ associated with Watson and designed to reduce its tax.
Cullen Group appealed that ruling. The liquidators said they had agreed with Inland Revenue to delay that appeal until the first available date after March 20, to give them time to decide whether to continue with the appeal.
In October, Watson lost his appeal against paying Glenn’s company, Kea Investments, £43.5m (NZ$87.8m) in compensation plus accrued interest of 6.5 per cent.
‘‘Prior to the liquidation(s) of the Cullen Group, Sir Owen Glenn obtained an injunction against Mr Watson in the United Kingdom that froze his assets for failing to pay an adverse judgment obtained against him,’’ Fatupaito and Norman said.
‘‘The liquidators have been in contact with Sir Glenn’s legal advisers to assess the impact this order has on the liquidations within the Cullen Group and to obtain records in relation to the Cullen Group.’’
Watson became well known to the New Zealand public as a result of his partnership with Mark Hotchin to set up Hanover Finance, and through Cullen Investments’ ownership and subsequent sale of the New Zealand Warriors rugby league team.