Blaming legal aid changes

Hamish Fletcher at NZ Herald reports:

Lawyer blames bankruptcy on legal aid move

A high-profile defence lawyer who was declared bankrupt yesterday owing about $550,000 to Inland Revenue said his business dwindled and client numbers dropped because of changes to the legal aid system.

Really? I am sure it is possible the changes affected his business but are they why he went bankrupt?

Jeremy Newland Bioletti, who represented disgraced lawyer Barry Hart and Te Rangikaiwhiria Kemara during the “Urewera 4” trial, was adjudicated bankrupt yesterday by Justice Graham Lang in the High Court at Auckland. The application to bankrupt the 52-year-old barrister and solicitor was brought by the IRD, to which he owes about $550,000 in tax, interest and penalties.

The court heard that Mr Bioletti’s tax arrears dated back to 2006 and that his problems during this period were partly caused by some clients not paying their bills.

I also detest clients who don’t pay their bills. But I would also note that if someone is a bad debt, you no longer have to pay tax on the bill they didn’t pay. Of course it can affect profitability, but I am very suspicious that one ends up owing $550,000 in tax and penalties just because of bad debts. One can of course also sue your clients for their bad debts.

Mr Bioletti said outside court that a number of years ago he entered into arrangements with Inland Revenue to pay his tax bill. But when he entered into this deal people accused of complex fraud on legal aid could still pick the lawyer they wanted to represent them, he said.

Mr Bioletti said fraud was one of his specialties and that changes in 2010 meant people on legal aid accused of this sort of crime could no longer nominate the lawyer they wanted to represent them. Instead, lawyers for these cases were selected by legal services.

I’d be interested in how much debt was owing prior to the legal aid changes in 2010, and how much has been incurred since. My suspicion is the vast bulk was incurred prior to 2011 (when the changes were implemented), and may have already been at a level that could not be serviced.

Mr Bioletti said the bankruptcy would have a “pretty bad” effect on his family and that he would appeal against the adjudication.

The non payment of tax also has a pretty bad effect on all those who do pay their tax.

It’s sad to see anyone end up bankrupt, but I think blaming everyone else for what has happened is not the best strategy. Hopefully Mr Bioletti can get through the bankruptcy and carry on his legal career. In some ways bankruptcy can be preferable than having your debts remain a millstone for years to come. On the negative side, it obviously affects credit rating, ability to do certain jobs and run companies etc.