Non Raceday Inquiry – MJ Cleaver

Information No. 64901 alleges ten breaches of the New Zealand Rules of Harness Racing by the Defendant, Mr M J Cleaver.

The first five charges alleged that Mr Cleaver, together with John Ewan Korostchuk, did supply false or misleading information to the General Manager of Harness Racing New Zealand in respect of various Applications for Transfer of Horses in that he advised that those horses had been purchased by himself from Mr Korostchuk as follows:

1. On or about 17 April 2001 ? Delivery and Pickup;

2. On or about 17 April 2001 ? The Bragger;

3. On or about 17 April 2001 ? UknowhatImean;

4. On or about 20 August 2001 - Timeticsbye; and

5. On or about 14 March 2002 ? Monica Lewinsky.

Those charges alleged breaches of Rule 1001 (1) (k) which provides as follows:

The second five charges alleged that Mr Cleaver, together with John Ewan Korostchuk, did commit a dishonest or fraudulent act connected with Harness Racing in respect of the various Applications for Transfer of horses referred to above in that he advised that those horses had been purchased by himself from Mr Korostchuk.

The second five charges alleged breaches of Rule 1001 (1) (p) which provides as follows:

Mr Cleaver did not admit the breaches.

Mr Korostchuk stated that in about July 2001, he transferred ownership of the horses THE BRAGGER, DELIVERY AND PICKUP, UKNOWHATIMEAN, MONICA LEWINSKY and TIMETICSBYE to Mr Cleaver. The reason for the transfers of the horses was that Mr Korostchuk was facing criminal charges and, when he was convicted of those charges, he would have been unable to race them. He said that Mr Cleaver did not own the horses and paid no money for them. It was simply a "paper transfer" in order that the horses could race and he still owned the horses. The arrangement was that Mr Cleaver, who was living rent-free on Mr Korostchuk's property, would train the horses and get his 10 per cent as trainer with the rest of any stakes won to be used for the property and "horse costs". No separate account was set up for moneys won. Mr Korostchuk estimated that the horses won about $10,000 in stakes. Mr Cleaver was also training outside horses and getting an income from that.

Mr Korostchuk said that Mr Cleaver sold DELIVERY AND PICKUP for $25,000. Mr Cleaver had not discussed the sale with him and had told Mr Korostchuk that the moneys had been invested.

Mr Korostchuk stated that the horses were still owned outright by him and were only in the name of Mr Cleaver so that they could race. The horses were in the "dummy ownership" of Mr Cleaver but were not actually owned by him.

Mr Korostchuk was questioned by Mr Cleaver and denied that he owed any money to him. Mr Korostchuk was unaware whether Mr Cleaver had kept a record of finances in his diaries. Mr Cleaver's diaries were produced but Mr Cleaver was unable to find any reference in them to accounts or moneys relating to the five horses.

Mr M P Edmonds, Licensed Trainer and Open Horseman, was called to give evidence. Mr Edmonds said that he was training THE BRAGGER for Mr Cleaver while Mr Cleaver was attempting to obtain a licence to train. Mr Cleaver said that he had had a discussion with Mr Cleaver at a race meeting concerning the ownership of that horse. Mr Cleaver told Mr Edmonds that they, Mr Korostchuk and Mr Cleaver, had transferred the horses into Mr Cleaver's name so that he could keep on racing them. Mr Edmonds stated that he was not aware of the circumstances in which the horse had come to be transferred from Mr Korostchuk to Mr Cleaver.

Written statements made by Stephen Dais and Lichelle O?Connell in September/October 2004 were admitted in evidence with Mr Cleaver's consent. Mr Dais had witnessed the signature of Mr Korostchuk on the Application for Transfer of Horse forms in relation to DELIVERY AND PICKUP, THE BRAGGER and UKNOWHATIMEAN. He stated that the forms were all signed at Mr Korostchuk's address in Jarvis Road, Christchurch. Mr Cleaver arrived with the forms, Mr Korostchuk completed the vendor details on each form and signed them. Mr Dais signed as witness to his signature. Mr Dais stated that he understood that, because Mr Korostchuk was facing criminal charges, the horses were being transferred to Mr Cleaver so that the horses could continue to race. He understood that Mr Korostchuk still "silently owned" the horses. Ms O?Connell stated that she had witnessed the signature of Mr Cleaver to the transfers of THE BRAGGER, DELIVERY AND PICKUP and UKNNOWHATIMEAN and the signature of Mr Korostchuk on the transfer of TIMETICSBYE. She thought that, when she witnessed the first three, Messrs Korostchuk, Cleaver and Dais were all present. She stated that her understanding, as far as the changes of ownership for the horses were concerned, was that the transfers were being made because of Mr Korostchuk's pending criminal charges in order that the horses could continue racing. However, she understood that Mr Korostchuk owed Mr Cleaver money, perhaps $10,000, she stated. Mr Cleaver was meeting all costs in relation to the property and the training of the horses. He had told her that having the horses in his name gave him some security for monies owed to him by Mr Korostchuk in that, if the monies were not repaid, he would own the horses.

Mr B A Kitto, Racecourse Inspector for Harness Racing New Zealand, said that he had interviewed Mr Cleaver in Brisbane on 30 June 2003. He produced a transcript of the interview. Mr Cleaver confirmed the transcript as a true record of the interview. He also produced extracts from Mr Cleaver's diaries for 2002/2003. On 27 August 2004 he again interviewed Mr Cleaver and he produced a transcript of that interview. Mr Cleaver did not object to the production of the transcript. The purpose of the second interview was to go through the diaries with Mr Cleaver in an attempt to find a record of any financial transactions between himself and Mr Korostchuk. They were unable to find any such record. Mr Kitto also produced a transcript of an interview that he had with Mr Korostchuk on 21 July 2003. Mr Korostchuk had earlier confirmed the transcript of the interview as being a true and correct of that interview. Mr Kitto also produced copies of the Applications for Transfer of Horse, as lodged with Harness Racing New Zealand, in respect of the five horses.

Mr Cleaver called his brother, Roy Francis Cleaver, to give evidence on his behalf. The witness stated that he believed that the horses DELIVERY AND PICKUP, THE BRAGGER and UKNOWHATIMEAN were transferred to Mr Cleaver for monies owed to him by Mr Korostchuk. As far as the transfers relating to the other two horses were concerned, he said that he had little knowledge of the circumstances surrounding those transfers. As far as he knew, the horses had not been transferred to Mr Cleaver's ownership to enable them to keep racing while Mr Korostchuk was in prison. Mr M J Cleaver introduced a transcript of an interview by Mr Kitto with his brother, Roy. During the course of that interview, Mr Roy Cleaver stated that the horses were transferred to his brother for the money, approximately $10,000 - $11,000, owed to him by Mr Korostchuk. Mr Roy Cleaver said that his brother was living on Mr Korostchuk's property and working for him. He used to visit the property and was aware of what was going on between his brother and Mr Korostchuk and was aware of a debt owed by Mr Korostchuk. He denied a suggestion that the horses were transferred as a matter of convenience so that the horses could race. Mr Roy Cleaver confirmed that his statements contained in the transcript of the interview were true except for the places at which the transfer documents were signed. He believed that the transfers for the first three horses were signed at Mr Korostchuk's home in Dunsandel. He was present at that time as were Mr Korostchuk, Mr M J Cleaver, and Ms O?Connell. He did not recall whether Mr Dais was present on that occasion. He did not remember the date on which the documents were signed.

Mr Roy Cleaver confirmed, under cross-examination by Miss Toohey, that no money had changed hands on the transfer of the first three horses. He confirmed to Miss Toohey that DELIVERY AND PICKUP had been sold and exported to the USA in July 2002 after having earned stakes of $4,735 in New Zealand. He recalled that the horse had been sold for $25,000. The majority of the proceeds went back into Mr Korostchuk's farm and to pay bills, he said. THE BRAGGER had been sold to Australia in April 2003 but he was unaware of the sale price. UKNOWWHATIMEAN, TIMETICSBYE and MONICA LEWINSKY were currently on his stepfather's property in Invercargill.

Mr M J Cleaver, the Defendant, stated the horses were only "very average" horses and were not great earners. He alleged that Mr Korostchuk had only shown interest in the horses when he heard that one of them may have been sold for a lot more than Mr Korostchuk had owed him. There were no contingencies placed on the transfers of the horses. He said the transaction had been the exchange of "poor horses" at the time for monies owed to clear up all debts between the parties. He took over the horses and ran the farm. Mr Korostchuk had said nothing for several months following his release from prison until he arrived one morning demanding the return of his horses. Mr Cleaver was forced to leave the property with the horses and went to the property of Mr Craig Edmonds at Canal Road, Motukarara. The horses UKNOWHATIMEAN, DELIVERY AND PICKUP and THE BRAGGER all went into Mr Edmonds' name as trainer while Mr Cleaver pursued the issue of a licence to himself. The horses were all ready to race at that time. Mr Cleaver said that he believed that Mr Korostchuk had realised that he had given the horses away at less that their true value and had turned up to recover his money.

Under cross-examination by Miss Toohey, Mr Cleaver confirmed that he lived on Mr Korostchuk's property at Jarvis Road, Motukarara, paying no rental but maintaining the property. Mr Cleaver denied that any arrangement existed in terms of which he would receive 10% of winnings as trainer with the balance to be put back into the property. DELIVERY AND PICKUP was sold for $25,000 to the USA. THE BRAGGER went with him to Australia in April 2003. It was later sold as broodmare for $3,000 after failing to perform. Mr Cleaver accepted that the five horses had earned, in total, the sum of $17,993 over the relevant period. The debt owed was approximately $10,000 to $11,000. Miss Toohey put it to Mr Cleaver that the two witnesses to the Applications for Transfer had both indicated a belief that the transfers were being done to enable the horses to keep racing when Mr Mr Korostchuk was ineligible to race them. Mr Cleaver denied that this was the case. Further, he denied telling Mr M P Edmonds that the horses had been transferred to enable them to keep racing. He accepted that Mr Korostchuk would possibly not have transferred the horses to him for no payment if he had not been facing criminal charges. Mr Cleaver stated: "I only seen (sic) it to clear our debts ? to get our debts out of the way I took my opportunity to take the horses ? to clear our debts because if he's going to jail I could see that he wasn?t going to be on a racecourse so it suited both of us. At the time it suited both of us. I?ll take the horses and carry on. We clear our debts. . . At the end of the day, they were transferred to keep racing but also, as I say, to clear all our debts up."

Mr Cleaver, in response to questions from the Chairman, said that the debt had accumulated over a period of time. For example, $1,000 for a carburettor for a motor cycle, parts for a motor home and other "toys" that Mr Korostchuk was accumulating at the time. He would pay for them ? they were good friends. They had worked together for 7 years. There was no discussion relating to repayment of any amount, the debt just built up, Mr Cleaver said. There was an understanding between them. He stated that he believed that Mr Korostchuk understood that the transfer of the horses was in satisfaction of the debt and he recalls that they did discuss it at the time. As far as the signing of the Application to Transfer forms was concerned, Mr Cleaver said that he and Mr Korostchuk signed the documents at the same time, Lichelle O?Connor witnessed the documents at the same time and that he took the papers away for Mr Dais to sign them. He said he believed that the same witness could not witness signatures of both vendor and purchaser.

Miss Toohey submitted, on behalf of Harness Racing New Zealand, that Mr Cleaver had admitted, at least in part, that the arrangement with Mr Korostchuk was an attempt to enable the horses to keep racing and was, therefore, a "dishonest venture" in terms of the Rules. As far Mr Cleaver's allegation that the arrangement was by way of "reimbursement" of a debt of $10,000 to $11,000 that was owing to him by Mr Korostchuk is concerned, this was denied by Mr Korostchuk and it was, therefore, a credibility issue for the Committee to resolve. Miss Toohey referred to the "substantial disparity" between the debt alleged by Mr Cleaver to be owed and the subsequent "windfall" from the stakes won by the horses and the sale of DELIVERY AND PICKUP.

Referring to the credibility issue, Miss Toohey submitted that Mr Korostchuk, although acting out of self-interest in initially reporting the matter to Harness Racing New Zealand, did admit the charges resulting in a substantial period of disqualification (7 years). This was clearly an admission against interest.

Miss Toohey referred also to the evidence of Mr Dais and Ms O?Connell. They had both stated that the transfer of the horses had been made to enable the horses to continue racing. Ms O?Connell also stated that she was aware of the debt owed by Mr Korostchuk to Mr Cleaver. Mr Edmonds had been told by Mr Cleaver that the horse, THE BRAGGER, had been transferred into his name so that Mr Cleaver could keep racing that horse.

Finally, Miss Toohey submitted that the evidence in support of the charges against Mr Cleaver was "overwhelming" and that the true version of events was that the horses were transferred to enable them to continue racing as opposed to a bona fide transaction to settle a debt.

Mr Cleaver declined the opportunity to make closing submissions.

At the conclusion of the hearing, the Committee reserved its decision.

RESERVED DECISION OF JUDICIAL COMMITTEE:

The Committee has carefully considered the evidence of both parties. The Informant's evidence attempted to show that the five horses had been transferred, at various times, from Mr Korostchuk to Mr Cleaver because Mr Korostchuk was facing criminal charges that would prevent any horse owned by him to race, thereby creating what are commonly called "dummy ownerships". The allegation of the Informant was that the horses were still owned by Mr Korostchuk but were in Mr Cleaver's name to enable them to race. The principal witness for the Informant was Mr Korostchuk himself. Mr Korostchuk had reported the matter to Harness Racing New Zealand in March 2003, was subsequently (in February 2002) found guilty of committing dishonest or fraudulent acts in respect of the Transfers and was disqualified for 7 years. Evidence for the Informant was also given by two persons who had witnessed some of the signatures to some of the Transfers, Mr Dais and Ms O?Connell, and also by licenceholder, Mr M P Edmonds, all of whom stated that that they were aware that the horses had been transferred into Mr Cleaver's ownership to enable the horses to continue to race. Mr Dais stated that he understood that Mr Korostchuk still "silently owned" the horses. There was some confusion as to the precise circumstances of the witnessing of the Transfer forms but that confusion did not detract from the credibility of the evidence of the two witnesses. Mr Cleaver's diaries were produced at the hearing but they contained no entries relating to the financial arrangements between Messrs Korostchuk amd Cleaver.

Mr Cleaver's defence to the charges was broadly based on his assertion that the various transfers had been made bona fide and for valuable consideration being in satisfaction of a debt of $10,000 to $11,000 owed to him by Mr Korostchuk. Mr Cleaver called his brother to give evidence in support of this assertion.

It is the Committee's task to weigh up the evidence for both parties and to determine whether the Informant has proved the substance of the charges on a balance of probabilities. This is the standard of proof in these proceedings as provided in Rule 1008A. We take this to mean that if the evidence is such that we can say: "We think it more probable than not", the burden is discharged, but if the probabilities are equal it is not.

In weighing up the evidence, the Committee has had to determine the credibility of the various witnesses and, in particular, the evidence of the principal players ? that is to say, Mr Cleaver and Mr Korostchuk. Both gave evidence in person at the hearing and the Committee was therefore able to assess their respective credibility. Mr Korostchuk was, in the Committee's view, a convincing witness. He confirmed the contents of his original statement made in May 2003 and, under cross-examination by Mr Cleaver, was unshakeable in his evidence that the horses had been transferred to Mr Cleaver by way of a "dummy ownership" transaction purely to enable them to race and he strongly denied that there was any element of a set-off of a debt owed by him to Mr Cleaver. Mr Korostchuk denied that there was any indebtedness. Mr Cleaver, on the other hand, asserted that the horses were transferred to him as part of a bona fide transaction in satisfaction of moneys legally owed to him by Mr Korostchuk and not as means of circumventing the Rules of Harness Racing to enable the horses to race.

On balance, the Committee prefers the evidence of Mr Korostchuk even though he may be described as a co-conspirator. Credibility is added to his evidence by the fact that he had owned up to Harness Racing New Zealand and, further, subsequently admitted five charges of committing a dishonest or fraudulent act arising from the transfer of the five horses. It is reasonable to deduce that Mr Korostchuk would have been unlikely to have drawn the situation to Harness Racing New Zealand's attention, given the likely consequences of his doing so, if the substance of his statement was not correct. Corroboration of Mr Korostchuk's evidence was provided, to varying degrees, by the evidence of Mr Dais, Ms O?Connell and Mr Edmonds.

Mr Cleaver's evidence was not as convincing. His evidence did not totally preclude the inference that at least part of the reason for the transfer of the horses was to enable them to race given that they would otherwise be unable to race once Mr Korostchuk was convicted of the criminal charges which were pending. Mr Cleaver may have believed that moneys were owing to him by Mr Korostchuk, even if Mr Korostchuk did not, and he perhaps saw the opportunity of having the horses transferred into his name to provide some security for repayment of the debt in the future. However, his failure to keep any financial records and the fact that the stakes earned went back into maintaining Mr Korostchuk's property on which he was living and to finance the racing of the horses lend weight to the view that the horses were still owned by Mr Korostchuk.

Messrs Cleaver and Korostchuk may have had differing intentions concerning the transfers of the horses. Mr Korostchuk's intention was clear whereas Mr Cleaver, we are satisfied, shared that intention but also saw the transfers as providing him with some security for repayment in the future of the debt which he claimed he was owed. The Committee is satisfied that, at the time that the transfers were done, it was not part of the terms of agreement between Messrs Cleaver and Korostchuk that the transfers were to be in satisfaction of or as security for any debt that existed between them. There is no evidence of any such arrangement other than Mr Cleaver's own evidence and the evidence of his brother. We do not attach a great deal of weight to the evidence of Mr Roy Cleaver. It is difficult to accept that, if the situation had been as Mr Cleaver asserted, either or both of the parties to the Transfers would not have required some written record of the transactions.

The agreement between Messrs Korostchuk and Cleaver was, the Committee finds, that the horses would be transferred from Mr Korostchuk's name into Mr Cleaver's name in order that the horses could race but that Mr Korostchuk would, notwithstanding the transfers, retain actual ownership of the horses. Mr Cleaver was to obtain a licence so that he would be able to train them. Mr Korostchuk was happy for any stakes earned to be put back into his Motukarara property, on which Mr Cleaver was living rent-free, and to be used towards the costs of racing the horses.

The Committee further finds that Mr Cleaver had conspired with Mr Korostchuk, and they had agreed together, to give false information to Harness Racing New Zealand. That was done for a dishonest purpose and the Committee is satisfied that Mr Cleaver was fully aware of what was going on and knew that it was both dishonest and fraudulent.

The Committee is, therefore, satisfied on a balance of probabilities that, on the basis set out above, Mr Cleaver has, in relation to the Applications for Transfer of Horse for each of the horses DELIVERY AND PICKUP, THE BRAGGER, UKNOWHATIMEAN, TIMESTICSBYE and MONICA LEWINSKY, been guilty of a dishonest or fraudulent act connected with harness racing in breach of Rule 1001 (1) (p) and the charges 6 to 10 (both inclusive) in the Schedule of Charges attached to Information No.64902 are, accordingly, proved. Charges 1 to 5 (both inclusive) of supplying false or misleading information under Rule 1001 (1) (k), being alternative charges, are dismissed.

The Committee requires both parties to make submissions to it in relation to penalty and costs and disqualification of the horses within 14 days of the date of this decision. Submissions are to be forwarded to the Executive Officer of the Judicial Control Authority. A copy of each submission will be forwarded by the Judicial Control Authority to the other party who will have 7 days from the date of service to make any reply to that submission.

CHAIRMAN