Matt Nippert is a business investigations journalist.

Long lunches, overseas trips - council business culture on trial

Over the past eight weeks the High Court at Auckland has hosted a rare prosecution of alleged corruption in the New Zealand public service. Ahead of the delivery of a verdict next month, Matt Nippert reports on the key players, long lunches and millions of dollars in payments and roading contracts that form the heart of the case.
Defendants Stephen Borlase and Murray Noone at Auckland High Court. Photo / Doug Sherring
Defendants Stephen Borlase and Murray Noone at Auckland High Court. Photo / Doug Sherring

For a bunch of council middle managers, they sure knew how to party. The lower ground courtroom at the High Court at Auckland saw evidence of a $5500 long lunch at Euro that stretched to nearly midnight, Honeymoon accommodation at beachfront hotels in Florida, and thousands of dollars in cash payments - all laid on for local body officials by a mid-level roading contractor.

The two defendants in this criminal trial, former council senior manager Murray Noone and consulting engineer Stephen Borlase, are charged with bribery and corruption over more than a million dollars in payments the Serious Fraud Office allege are related to the awarding of $26 million in council road maintenance contracts.

After a short appearance in the dock on the first day of trial in late September, where the accused pair pleaded not guilty, the duo were granted leave to sit in the court proper.

They set up in the back row where they could have better access to their lawyers and the reams of documentation being picked apart.

The trial began on a busy day for the court buildings on Parliament St, with activity on the floors above sucking attention away from the largest corruption trial seen in New Zealand since MP Taito Phillip Field was laid low by Thai tilers.

At the start of proceedings Colin Craig was upstairs squaring off in defamation action with Jordan Williams; Kim Dotcom was appealing his extradition; and the Financial Markets Authority was taking a rare market manipulation prosecution against Mark Warminger of Milford Asset Management.

Six weeks later, these other hearings had long-concluded, but lawyers acting for Borlase and Noone were only just beginning to outline their defence.

The grinding of wheels of justice - more than a week was spent with a forensic accountant laboriously going through hundreds of invoices - saw a sparsely-populated public gallery.

Occasional visitors included the occasional member of the public - notably anti-corruption campaigner Penny Bright - members of the Serious Fraud Office keeping tabs on their case, and Auckland Council observers understandably keen to get to grips with the potentially toxic fallout.

Prosecutions of alleged corruption in New Zealand are rare, as evidenced by our regular podium finishes in the annual ranks of the least corrupt countries. Will the outcome of this trial change that?

The wheels of justice will turn with an even smaller audience over the next month as Justice Sally Fitzgerald considers her verdict. The trial is judge alone - the vacant jury box was commandeered to store seemingly endless cardboard boxes of evidence - and a hearing is set down for December 9 for verdicts to be delivered.

Stephen Borlase 'The Contractor'

Stephen Borlase appears in the Auckland High Court on charges multi-million dollar bribery charges. Photo / Jason Oxenham
Stephen Borlase appears in the Auckland High Court on charges multi-million dollar bribery charges. Photo / Jason Oxenham

Stephen Borlase, 52, was the only witness called in his defence, and the engineer spent nearly a week giving evidence.

He chronicled being born in Gisborne and schooled in Dunedin, before outlining his qualifications and experience as a civil engineer: A degree from the University of Canterbury; a stint working in the United Kingdom; and then for a business unit of Manukau City Council.

He struck out on his own in 1997, setting up Projenz as a one-man shop geared to win roading council contracts.

Borlase said his only previous brush with a courtroom was a decades-ago university lark that saw him jump off a ferry, and he firmly denied repeated suggestions from prosecutor Brian Dickey that his relationship with Rodney and Auckland council managers represented "the very essence of corruption".

He characterised his gifts to council staff as either "standard business expenses" or simply benevolent.

He said several trips paid for council staff were to assist with family reunions, or hotel accommodation after marriage break-ups.

Borlase maintained this motivation lay behind much of the 20 trips he'd paid for George, and he clearly felt put out that this was now being used against him.

"It's been disappointing and peeved me off a bit ... We thought, in good faith, it was extending help to him in a difficult time."

Murray Noone 'The Manager'

Murray Noone appears in the Auckland High Court. Photo / Jason Oxenham
Murray Noone appears in the Auckland High Court. Photo / Jason Oxenham

Unlike Borlase, Noone elected not to give evidence in his defence.

While silent in open court, he was hardly withdrawn during breaks in proceedings, even jokingly suggesting a press mention of Borlase wearing an open-necked shirt conjured images of Borat's infamous dayglo mankini.

Submissions by his lawyer, Simon Lance, paint him as a successful civil engineer who'd found himself even more adept at strategic consulting.

Evidence provided by his ex wife, Christine Rae, was uncontested by the Crown and said he worked "very long hours".

He clearly found consulting work lucrative: before entering public service with the Rodney District Council in 2006 he billed clients - of whom Projenz was a significant client - an average of $500,000 annually.

His first gig at Rodney District Council - appointed director of transportation in 2006 - saw him given a salary of $165,000 for a four-day-a-week role to allow him to undertake outside consultancy work. Within two years he'd been promoted, to a full-time job paying $231,000.

He jumped salary bands again in June 2010 when he was appointed road corridor maintenance manager at the newly formed Auckland Transport.

Throughout his tenure at the two councils he maintained a financial relationship with Projenz, billing around $8000 a month.

But the discovery of these payments triggered a series of events that led to the scenes at court over the past two months: A subsequent employment investigation into conflicts of interest saw Noone sacked and the Serious Fraud Office called in.

Barrie George 'The corrupt deputy'

Barrie Kenneth James George (Barrie George) in the dock at the High Court at Auckland. Photo / Brett Phibbs
Barrie Kenneth James George (Barrie George) in the dock at the High Court at Auckland. Photo / Brett Phibbs

George was originally charged alongside Borlase and Noone, but pleaded guilty shortly before trial to accepting bribes totalling $103,581.

A shambling 69-year-old, with thick glasses and a tendency to hunch, he gave evidence for the prosecution while wearing a home detention ankle bracelet.

Perhaps understandably - given the very long list of international and domestic travel and slap-up dinners he pleaded guilty to being bribed with - George struggled to recall details of Projenz's largesse.

"They don't stand apart, looking back," he told the court.

He did recall the first time, though. At a 2006 dinner Borlase presented him with an envelope containing an international travel voucher worth several thousand dollars.

George told the court of the misgivings of two of his colleagues.

"Neither one thought it was appropriate in the circumstances that I should accept the gift. Their view was I should have handed it back," he said.

But he said he was reassured by his immediate superior - Noone, who he reported to for much of the period - that gift was just a perk of the job, sparking an ongoing relationship that saw him 10 years later plead guilty to corruption.

"That was really the start of that particular merry-go-round," he said.

The prosecution case

The heart of the prosecution case was laid out by Clive Hudson, a forensic accountant and electronic document recovery expert for the Serious Fraud Office who laid out what he believed was a chain of payments going from Projenz to Noone, and then from council budgets to Projenz.

Hudson spent a week giving evidence, and his web of documents, spreadsheets and tables were regularly pressed into service by prosecutor and Auckland Crown Solicitor Brian Dickey who made much of Projenz's entertainment budget for Noone and his small team - totalling $400,000 during the 2006-2012 period in question.

Dickey told the court the spread of largesse was corrosive:

"The extensive provision of benefits to staff at all levels of their teams resulted in a culture where corruption flourished and was normalised, with no questions asked.

"There was very little chance of disgruntled or principled employees speaking out as everyone was being 'looked after' or was compromised.

"The culture derived from the top, at which Noone was receiving very substantial payments totalling seven figures - all to do his job," Dickey said.

Hudson reported that, prior to Noone joining the RDC, Projenz was barely breaking even on revenues of $1.2m.

Income from council steadily grew, and by 2012 the small company was making annual profits of $3.8m from revenues of $8.2m - almost all of this income from Auckland Transport contracts overseen by Noone and his team.

Meanwhile Noone was sending regular bills to Projenz - averaging $8500 a month - which were being paid into his bank accounts.

The payments came, Dickey said, "despite there being no evidence he did any of the work stated on his invoices".

Hudson drew links between accounting coding on Projenz accounts, with much of the entertainment spending and payments to Noone being linked to specific council roading contracts awarded to Projenz.

To bolster the case this arrangement was secretive, Dickey presented to the court emails circulated among the accused.

Some asked for correspondence regarding travel arrangements to not be sent to council email addresses, others requested long lunch invites not to be circulated, and one from Noone to Borlase said "I will arrange getting one step removed, at my end".

Dickey said the world view of those under Noone at council had become "distorted".

"Gifts and entertainment from the contractor were accepted, undeclared, and considered ok. The Crown says it was definitely not ok - it was in fact criminal."

The defence case

The basic facts of the case - the sums paid and gifts given - are broadly uncontested.

However the defence argues these payments are neither corrupt nor even out of the ordinary. The flowed from a legitimate business culture based on council directives for collaboration between contractors and clients.

Borlase gave evidence and, walked through numerous receipts and invoices by his lawyer Ron Mansfield, repeatedly described lunches, contributions to travel and other expenditure on council staff as "standard industry business expenses".

Asked to expand on how common gifting was within the industry, Borlase said Projenz's entertainment budget was extended to more than just roading staff and included members of the council's finance teams and legal representatives.

The structuring of Projenz's accounts - where payments to Noone were tagged as being related to council contracts - were addressed through questions by Mansfield who painted a picture of mess, not corruption.

Borlase admitted to only have a rudimentary understanding of accounting standards and practices when he struck off on his own to found Projenz.

He said he was more focused on "getting work in, and making sure it was completed to a high standard".

In a similar vein, Projenz's preference to avoid unneeded paperwork was said to explain the lack of documentation for Noone's eight years of consulting work.

Simon Lance, acting for Noone, drew attention to the evidence of Projenz co-founder John Penman who said he was happy with work provided by Noone.

Penman said Projenz was a "non-bureaucratic type of organisation" where verbal reports were "far more desirable than a 50-point written report".

Lance went on to say accusations that his client had fomented a culture of corruption were undercut by revelations Barrie George had accepted $200,000 in travel benefits from HiWay Stabilisers before Noone had even started employment at Rodney District Council.

Lance said Noone had declared all income to Inland Revenue, and though he arguably should have done more to disclose his relationship with Projenz to his employers, the prosecution case had not proven that council tender processes had been tainted.

The Serious Fraud Office's reliance on circumstantial evidence meant not guilty verdicts must be delivered, he said.

"Suspicion plus suspicion only ever equals suspicion. Maybe this thorough investigation, which goes for a number of years, sees suspicions raised: But that is not proof beyond reasonable doubt."

- NZ Herald

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