One of the most popular stories in New Zealand at the moment (overshadowing even the Matthew Johns gangbang), is that of a couple who absconded with $3.8 million (out of $10 million) accidentally deposited into their Westpac bank account — the same bank I’m with (I checked my account, but still looks like I won’t be running from anyone other than Mastercard for a while).
Leo Gao’s BP service station on Old Taupo Rd., in Rotorua was reportedly on the verge of receivership, but he and his girlfriend, Cara Young’s fortunes changed dramatically when a mistake occured in “a temporary overdraft facility” on his account with a $100,000 limit, “the consequence of which was opening up that limit to $10 million.”

They didn’t waste any time, and shut-up shop on May 6th, the day after it’s thought the money went in, fleeing, it’s believed to Hong Kong. It’s reported that Gao ”attempted to transfer amounts totalling around $6.7m, but the bank… managed to recover $2.8m”. Now the couple are being hunted by Interpol.

Some news stories still place Young in New Zealand, neighbors reporting that she is staying in Blenheim with her Mum. The whereabouts of Huan Di Zhang, Gao’s business partner and 60% owner of the BP station, is also still unknown.

According to the NZ Herald report, “Inquiry head Detective Senior Sergeant David Harvey of Rotorua CIB said police had called on Interpol to help find ‘individuals associated with the account’ who were believed to have fled the country with a large sum of money ‘mistakenly advanced’ by Westpac.”

The Herald also quotes Westpac spokesman Craig Dowling as saying that the bank is “pursuing vigorous criminal and civil action to recover the sum of money stolen”.

However, there will apparently be no “vigorous criminal and civil action” to recover an infinitely larger sum – $4.3 billion – apparently stolen from the New Zealand public. Indeed, according to morbidly obese National MP and Energy Minister, Gerry “Big Jezza” Brownlee, there will be no efforts made at all.

Appearing right next to the headline “$6m runaways have head start” on the NZ Herald’s website today, without any apparent comedic intention, was the headline “Power firms will not have to pay back $4bn – Brownlee”.

According to a Commerce Commission report into the electricity market released yesterday, New Zealand power companies have overcharged customers to the aforementioned sum of $4.3 billion over the last six years, by exploiting “market dominance”.

The report stated that the “big four” power generators, Contact, Meridian, Genesis and Mighty River, exploited “the power the market’s design gives them to command unjustifiably high prices, at least during years when inflows to the hydro lakes are low as they were in 2001, 2003 and 2006.”

However, the report concluded “that this did not amount to a breach of the Commerce Act,” instead being a “lawful and rational exploitation of the opportunities the market gave generators,” meaning “they would not be hauled before a court” or forced to refund their stolen profits.

New Zealand’s electricity generation system is highly weather dependent, having such a large hydro-electric component (the reservoirs of which have often recently run chronically low) and the Herald.co.nz article provides a good, short explanation of the how pricing for this works.

“On the wholesale market, prices are set every half-hour by the most expensive power offered by a generator that is needed to ensure demand is met. If other generators offer their power for less, they still get the higher price. If a generator can be sure it will get to set the price, and it will not be a net buyer (since the same companies are electricity retailers), it has an incentive to set the price high.”

Big Jezza won’t be kicking anyone down a flight of stairs for this one (as I seem to remember him doing in a ruckus a few years back), but did go as far as to say that there is something “fundamentally wrong” with the electricity market (indicating, that with powers of deduction like that, his talents are wasted in politics and would be better spent out solving crimes for the NZ police force).

Defenders of the market, however, say that the $4.3 billion amount arrived at in the Commission’s report is only measured against a “hypothetical competitive price” arrived at by Standford University economics expert Professor Frank Wolak, whose study the Commission’s report was based on, and doesn’t take into account factors like the lakes running low.

In response, the Commission is quoted as saying, “price signals provided when the market was operating competitively were a better guide to when new capacity was needed than the “haphazard and weather-related market power rents that occur periodically under present market circumstances”.”

And it’s these “present market circumstances” that have allowed New Zealand power companies to take these $4.3 billion “extra” dollars from New Zealand consumers, essentially, by exploiting the mistakes in the market’s system – but they will not have to pay the money back.

Gao and his wife, however, who exploited mistakes in his banking system, are being hunted down to the fullest extent of the law. Now, I’m no maths expert, but the $4.3 billion that the power companies stole has to be a few times more than the $3.8 million the couple made off with.

If the couple are expected to pay back the money they took-off with and are subject to “vigorous criminal and civil action” why will New Zealand’s power companies “not have to pay back” what they stole and face no repercussions for taking nearly a thousand times more?

If the power companies were, as the Commerce Commission said, “lawfully” and “rationally” taking advantage of the “opportunities the market gave generators” – that is, exploiting flaws in the system – what makes Gao and Young’s exploitation of flaws in the system that concerns their story so criminally different?

New Zealand‘s power generation system is set up so that ruthless people can exploit its mistakes to the tune of billions, yet it’s not considered criminal.Why are power companies exempt from any repercussions for exploiting customers, but ordinary people subject to “vigorous” pursuit and one would assume equally vigorous penalties? Maybe because they only stole $3.8 million, enough to warrant attention from the criminal justice system, but not enough to be above it.

It’s the old double-standard of the cops chasing down someone who steals a car stereo and beating them up when they arrest them, but shaking the hand of someone like Bernard Maddoff, who stole billions, when they arrest them, and enjoying a “baller-ass spread of cheeses I have never heard of,” as Dave Chappelle’s character said in the skit making fun of this very hypocrisy.

If Gao and Young have to give back their money, so should the power companies.

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