Did New Zealand Turn a Blind Eye to Dotcom in Exchange for Cash?

AUCKLAND, New Zealand—While it is true that New Zealand authorities cooperated with U.S. law enforcement in the arrest of Megaupload founder Kim Dotcom, and the government may try to expedite the extradition of Dotcom to the States to face criminal charges related to the massive file sharing operation—even if the local courts see the extradition situation differently—a recent New Zealand Herald article raises some interesting questions regarding how Dotcom and his associates were able to gain such a firm foothold in the country in the first place. The insinuation made is that money, and lots of it, greased the wheels.

“As for money opening doors,” wrote Phil Taylor in the Jan. 28 article, “since setting up home in a sprawling $30 million mansion near Coatesville, built by the founders of the Chrisco hamper empire, Dotcom's dinner guests have included John Banks when he was mayor of Auckland.

“’I met him because he was wanting to be generous to the city,’ the former mayor told the Herald. They also met at the waterfront apartment of property developer Dave Henderson on New Year's Eve 2010 to watch a $500,000 fireworks display paid for by Dotcom.”

How the 38-year-old the German national was able to bypass normal red tape is being questioned presumably because of the global reach of Megaupload, which allegedly generated more than $175 million in criminal proceeds while creating more than a half billion in harm to copyright owners. Few countries, but especially Western ones, want to be known as sanctuaries for digital pirates of this magnitude.

But immigration lawyers quoted in the article insist that Dotcom was not treated favorably, despite being one of the first individuals to be approved for residency under Entrepreneur Plus, a 2009 provision “aimed at attracting wealthy migrants to invest in businesses and create jobs.”

Dotcom, who was granted residency in December 2010, invested $10 million in government bonds and has claimed to have created 20 jobs in the country, was one of the first approved under the new category.

“To date,” the article continued, “10 people have been granted residency under Entrepreneur Plus, with total investment just over $100 million, an Immigration Service spokesman said. Two applicants have been declined.”

Despite the program’s connection to money invested, a character check is also required that includes a police clearance from the individual’s home country, and “applicants have to demonstrate a business record, which… is scrutinized by officials who specialize in dealing with business applicants. Business capacity related to what they plan to do in New Zealand, that their money is from a legitimate source and that tax is paid on it.”

It is perhaps in this area that more investigation may uncover some sloppy legwork by immigration control. If Dotcom is successfully extradicted and then found guilty of the very serious allegations made by the United States, New Zealand may have a hard time arguing that its due diligence was very effective regarding the legitimacy of Dotcom’s money.

On the other hand, even Dotcom’s home country of Germany wiped his record clean of past convictions, including a “two-year suspended jail sentence in 1998 for hacking carried out four years earlier; a 20-month suspended jail sentence in 2003 for insider trading and breach of trust committed in 2001 (both in Germany); a fine imposed last year in Hong Kong for failing to publicly disclose the number of shares he had acquired in 2009. Dotcom's convictions in Germany were expunged under that country's clean slate legislation and he declared the convictions in his application for residency as required.”

Dotcom has reportedly hired “an eminent Queen's Counsel” to help get his out of jail on bail and to fight extradition. Considering the international nature of this case and the fact that all eyes will be on New Zealand as the case unfolds, it will be interesting to see to what extent global politics play in the court’s ultimate decision, if any.

Photo: Kim Dotcom during his arraignment in late January.