Rural accountant hit with censure

An invercargill farm accountant faces professional censure and costs of $19,376 as a result of his actions managing a Southland farm receivership.

The censure was handed down by the NZ Institute of Chartered Accountants (NZICA) disciplinary tribunal, to James Hennessy, of WHK.

It came after Hennessy pleaded guilty to an amended charge of failing to maintain the appearance of objectivity and the appearance of being free from conflicts of interest in managing the receivership.

The institute code of ethics places explicit emphasis on the need for accountants to provide independence “both real and perceived”, the tribunal noted.

 The receivership involved a South Canterbury family that borrowed $10 million for a dairy farm conversion through Allan Hubbard’s Aorangi Securities.

After the appointment of Grant Thornton as statutory manager for the Hubbard business in June 2010, the family business was placed in receivership in March 2011.

Hennessy was appointed by the statutory manager as receiver for the business.

The family’s complaint related to business relationships Hennessy had with the family’s sharemilker.

While working as a sharemilker on the property, the individual was also a client of Hennessy at the time of the receivership.

In its decision the institute noted that although Hennessy advised the sharemilker he would no longer act for him, numerous decisions were made in the course of the receivership that had an impact on the sharemilker, and the outcome of the receivership.

This included leases entered into with the sharemilker and sales of stock to a third-party financier and leased immediately back to the sharemilker.

During the receivership, companies of which Hennessy was a director also entered into grazing and stock leasing arrangements with the sharemilker.

The sharemilker was also a potential buyer of the farm, having expressed an interest in buying it at the time of the receivership.  He had also acted as a livestock agent on Hennessy’s behalf over a period of time, buying and selling livestock.

While not noted in the institute tribunal’s final report, Hennessy’s firm WHK was also the accounting firm that conducted work for the son of the complainant.

However, the disciplinary tribunal ruled that all the key decisions relating to the receivership were taken after Hennessy received independent professional advice, and the secured creditor that appointed him was kept informed and consulted about the decisions.

During 2012 the institute disciplinary tribunal considered 40 matters, with 15 members removed from the register, three suspended and eight censured. The remainder included interim suspensions and other actions.

James Hennessy said his solicitors were deciding whether he should appeal the censure. He refused any further comment, directing The New Zealand Farmers Weekly to a written statement issued by his solicitors.

That statement noted the censure related to a “very minor breach and a breach of appearance only. NZICA in response have applied the minimum censure and no fine.”

Hennessy is also subject to a second complaint lodged with the institute, due to be heard in the new year.

That complaint stems from issues around a farm he sold Southland farming couple Joanne and Darrin Crack in 2008 (Farmers Weekly November 12, 2012).

In their complaint to the institute the couple alleges Hennessy failed to comply with several of the institute’s rules, also around professional conduct and ethics.