Is Larnach’s castle still New Zealand’s business model?
A Facebook post blames the man. The record points to the system — and the system is still standing.
On 12 October 1898, William Larnach locked himself in a committee room at Parliament Buildings and shot himself. The sitting MP was 65 and laden with debt.
Anarchist History of New Zealand, a Facebook page, marked the 128th anniversary with a three-count charge sheet. Borrowing made him look rich. Looking rich got him elected. Political power then shielded him from justice.
Vogel’s boom ran on London loans, not printed money. This country borrowed to fund infrastructure using over-valued land as collateral. Sound familiar?
My family had been in Otago since before the Treaty when Larnach arrived in 1867. We came with a whaling station. He came to run a bank that serviced the goldfields.
His banking career had been fostered by an uncle who directed the Bank of New South Wales. When his borrowing made other banks wary, the Bank of New Zealand risked taking his account, anticipating “many collateral benefits from the connection”.
Senior bank officials then canvassed for him in his first election. He lost, dropped his main policy and won another seat four months later.
After six months as Colonial Treasurer, he sailed to London to arrange a government loan — and used the trip to float a company selling rabbit-plagued Southland estates to British investors for far more than they were worth.
By the time the 1880s slump left him insolvent, his castle — Italian marble, Welsh slate, Venetian glass — was in his wife’s name. His creditors got little. He tried Melbourne and lost again on land and mining. Connections at home, failure offshore: a very New Zealand career.
He was lucky, too, to escape prosecution for misconduct as a London banker’s agent. But when politics and banking collided, the protection went to someone else.
By 1894 the Bank of New Zealand had lent so recklessly on overvalued property that it faced collapse. Parliament passed its rescue in one night.
A year later the rescued bank bought the failing Colonial Bank. Larnach, a director again, held 1,800 shares. Shareholders got about 11 shillings for each £2 share.
Colonial Treasurer Joseph Ward drew up the takeover legislation. He did not disclose that he and his Bluff firm were heavily in debt to the Colonial Bank — £100,000 by 1895 — and had contributed to its fall.
Larnach, by contrast, told Parliament he abstained from banking votes as an interested party — though that same day he voted for one by mistake.
Ward went bankrupt in 1897 and had to quit Parliament. But the law barred bankrupt MPs from staying, not from standing. He was re-elected within weeks.
A special Act sent his eligibility to the Court of Appeal, which ruled in his favour. He became Prime Minister twice.
The man who declared his conflict died ruined. The man who didn’t ran the country.
We have been running that play ever since.
In 1990 the government spent $620 million recapitalising the BNZ again, in a deal that appeared to favour minority shareholder Fay Richwhite. In 2010 taxpayers paid $1.6 billion to South Canterbury Finance investors — a bill swollen by related-party lending.
Lombard Finance had two former justice ministers on its board. Both were convicted over untrue statements in its prospectus — strict-liability offences requiring no dishonest intent. Sir Douglas Graham kept his knighthood.
The Serious Fraud Office found no grounds to prosecute over Hanover Finance’s collapse. Co-owner Eric Watson was jailed in London for contempt after UK courts found a “willingness to tell outright lies”.
And we still mistake borrowing for wealth. By November 2025 lenders held a record $388 billion against our houses — almost two-thirds of all lending.
Our Transparency International corruption score has slid from 91 to 81 in a decade. We still have no standing anti-corruption commission to ask who knew what — and who owed whom.
Larnach’s heirs fought over his estate and sold the castle in 1906. By 1967 a farmer was penning sheep in the ballroom.
Others restored Larnach’s castle. The system that built it never needed restoring.
