Zespri CEO Lain Jager. Photo/file
Zespri is heading into the third year of its Serious Fraud Office (SFO) investigation, with $6.3 million spent or provisioned on legal costs and no idea of the focus of the investigation or the time frame for its completion, says chief executive Lain Jager.
"The SFO investigation is ongoing and Zespri continues to fully co-operate," he told the Bay of Plenty Times Weekend in an exclusive interview, noting that Zespri had initiated a wide-ranging overhaul of its compliance processes since the China invoicing issues of 2011.
"The SFO has declined to communicate the focus of its investigation, but has requested several terabytes of information and around 2.8 million historical emails. Providing this information has required extensive legal review."
With no advice from the SFO about the focus of the investigation or the likely time frame, the sooner the investigation runs its course the better, from a Zespri perspective.
As the subject of an SFO investigation, Zespri is subject to the wide-ranging powers of the Serious Fraud Office Act 1990. These give the SFO the power to demand a company to produce for inspection any documents specified in its notice, which the director has reason to believe may be relevant to the investigation.
The act also says the director may require the person producing the document to "provide an explanation of the history, subject matter, and contents of the document and to answer any other questions which arise from that explanation ..."
However, while the Zespri investigation is assumed to relate to the Chinese Customs invoicing fraud issues, Mr Jager said the SFO had never confirmed this.
Read more: Importers create fraudulent invoices
"We're subject to Section 9 requests, which are broad," he said. "We can surmise, as I think most people do, that their interest relates to the historic issues in China. But that is a surmise on our part."
The documents requested by the SFO required legal review, and the sheer size of the task over the past two years had seen the cost run to $4.9 million, with another $1.4 million provisioned for the year ahead, he said.
"This is our best estimate based on work still required to support the investigation. With no advice from the SFO about the focus of the investigation or the likely time frame, the sooner the investigation runs its course the better, from a Zespri perspective."
Zespri is being advised on the SFO investigation by lawyers Scott Barker of Buddle Finlay and John Billington, QC.
Costs related to the investigation were attributable to Zespri's corporate returns and not to the New Zealand kiwifruit grower pools, he said.
Since 2011, Zespri had instituted major restructuring of its procedures under the guidance of external advisers PwC and LRN to develop a wide-ranging ethics and compliance framework, said Mr Jager.
This had included setting up a compliance committee and compliance champions in each key market, a senior manager responsible for compliance, a global training programme, and board monitoring of activities and implementation. Zespri has also retained international law firm Baker & McKenzie to understand and apply global laws into its policy framework.
Mr Jager said the key risk areas that had been reviewed included customs duty evasion by importers, anti-bribery, anti-corruption and anti-money laundering issues, health and safety matters, and fraud prevention.
Zespri took action in Taiwan during the 2014/15 season to replace its then importers after becoming aware of business practices the company considered to be non-compliant.
"We appointed new importers before the season started and achieved successful results," he said.
Revenue from Taiwan was up 40 per cent to US$74.9 million ($107.44 million) in 2014/15 from US$53.2 million the previous year, he said.