A roading contractor and a council manager have been found guilty of corruption in a case exposing what the prosecution called a "culture of corruption" among Auckland council staff administering tens of millions of dollars in roading contracts.
Justice Sally Fitzgerald delivered her verdict this in the High Court at Auckland this morning in the long-running trial of former Auckland Transport senior manager Murray Noone and roading engineer contractor Stephen Borlase.
Noone was found guilty on six charges of receiving $1.2 million in bribes from Borlase. Borlase, in turn, was found guilty on eight charges of offering bribes to Noone and other council staff.
Borlase was found not guilty on four charges of dishonestly using a document to allegedly inflate invoices to council.
The corrupt relationship ran from 2006 until 2012, from Noone worked at Rodney District Council, continuing when he joined Auckland Transport following the supercity merger.
Justice Fitzgerald said the prosecution had proved beyond reasonable doubt the $1.2m Borlase paid Noone was connected to the latter's role administering council roading contracts.
Over the course of an eight-week trial Serious Fraud Office prosecutor Brian Dickey outlined a chain of payments going from Borlase's firm Projenz to Noone, and from council budgets to Projenz.
Dickey told the court the spread of largesse by Projenz to Noone and his staff 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.
Justice Fitzgerald said the lack of documentary evidence to support defence claims the payments were unrelated consultancy work helped her reach this decision, as well as the lack of disclosure of this financial relationship to council.
"Noone in particular repeatedly failed to disclose his arrangements to Projenz despite numerous opportunities to do so. I infer from this lack of disclosure that Noone and Borlase knew these arrangements were wrong," she said.
Justice Fitzgerald said the corrupt behaviour of Noone and Borlase should not taint other council staff.
"The finding and observations made are not taken to apply to Rodney District Council or Auckland Transport and their employees more generally," she said.
Convictions against both were entered, and they were remanded on bail for sentencing on February 22.
The Serious Fraud Office, who investigated and prosecuted the case, welcomed the verdict with director Julie Read saying: "It appears that within the road maintenance division during this period the acceptance of gratuities was considered the norm. All of us need to recognise that corrupt activity is at risk of gaining momentum if business turns a blind eye."
During the trial the court heard that, before Noone joined 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 - and 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".
The basic facts of the case - the sums paid and gifts given - was broadly uncontested by the defence.
However lawyers for the accused argued these payments were neither corrupt nor 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".
Justice Fitzgerald, in delivering her verdict, said she found much of his evidence to be "unreliable".
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 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 at Auckland Transport, 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."
After the hearing, Auckland Transport chief executive David Warburton said the case was not indicative of wider issues at the department.
"The type of behaviour exhibited by Mr Noone and Mr Borlase is completely unacceptable in any organisation," he said.
"Their actions are not an indication of any sort of systemic failure but rather those of two individuals betraying the trust placed in them."
Warburton acknowledged the "very thorough and professional" work of the SFO in bringing the matter to court.
He said concerns were raised in 2013 following an internal review of systems and processes by Auckland Transport. As a result, Noone and another staff member were dismissed and the matter handed over to the Serious Fraud Office.
Several Auckland Transport staff and at least one Auckland Council staff member were in court for the verdicts.
They included Auckland Council's integrity manager in internal audit, Gary Hale, Auckland Transport's human resources boss Simon Harvey, communications boss Wally Thomas and senior road maintenance manager Tony McCartney.
They had no comment.
Activist Penny Bright was also in attendance and maintained a vigil outside the court, drawing attention to the fact that today, January 9, is the United Nations internaional anti-corruption day.
Dickey was pleased with the verdicts.
"I hope it achieves what the SFO set out to do, which was to show what pernicious corruption is if it gets hold of an organisation or even just part of an organisation," he said.
Dickey said the judge indicated it was isolated in a particular council but the scale showed how it could get hold.
"We are really pleased, especially with all the money that is going to be spent in all these areas in Auckland over the next 10 to 20 years," Dickey said outside the court.