Australians join NZ in probe on Cottee exports

By PHILIPPA STEVENSON agricultural editor

Authorities on both sides of the Tasman are investigating Kiwi Dairies' Australian subsidiary Cottee Dairy Products for alleged illegal exporting.

New South Wales-based Cottee is at the centre of allegations of breaches of New Zealand export law involving high-value milk proteins worth $39 million made by Kiwi.

This month the Ministry of Agriculture and Forestry and Kiwi's successor, mega cooperative Fonterra, both launched inquiries into the scandal, dubbed "Powdergate".

Australian authorities told the Business Herald yesterday that they had also begun investigations into Cottee this month after a request from the New Zealand ministry.

Australian Quarantine Inspection Service spokesman Carson Creagh said his service, the Australian Customs Service and the New South Wales food regulatory authority Foodsafe had all begun inquiries.

The investigations related to the alleged export of dairy products from New Zealand without Dairy Board export licences, and the possible rebranding and exporting of New Zealand product as Australian, he said.

The Quarantine Service oversaw export product certification and "there was some concern that some of this product might be relabelled as Australian product and exported".

The American Food and Drug Administration detained four shipments of Cottee product labelled WPC80 stockfeed in April and a further shipment in June because of misbranding.

Dairy Board spokesman Neville Martin said the export licensing body was unaware of the investigations by the Australian authorities.

"We would not necessarily be notified. It would depend on the scope and nature of the inquiries."

New Zealand Customs said yesterday that it was analysing information on the issue published in the Business Herald but had yet to launch an investigation of its own.

Meanwhile, accounting experts have suggested Kiwi could be in breach of the Financial Reporting Act for not disclosing a significant subsidiary in its annual accounts.

Kiwi subsidiary Promak Technology (NZ) holds its parent's 75 per cent shareholding in Cottee but Promak has not been listed in Kiwi's annual accounts since 1998.

Promak's directors are Kiwi's Food Solutions Group executives Paul Marra, Malcolm McCowan and Bernie Radford. Its shareholders are Food Solutions and two companies owned by Mt Maunganui man Geoffrey William Winchester - Xenex Resources and York Concepts.

Through directorships in other companies, Mr Winchester has been linked to South Pacific Distributors, the New Zealand company owned by Cottee director Terry Walter which illegally exported the product at the centre of the scandal.

Another director, Ross Cottee, has been sacked over the matter.

The statement of standard accounting practice requires that disclosures be made of all significant subsidiaries, including their names, interests and the principle activities of the company they invest in.

Kiwi gave no revenue figures for Cottee in last year's annual report but in commentary said Cottee, operating from mid-1997, had since "returned substantial earnings".

The NSW company is listed under Food Solutions Group, which last year had turnover of $214 million.

Kiwi's finance general manager in 1999, Roy Baker, was surprised that Promak had not been listed in that year's report or subsequently.

"Promak was very much a holding company and there was not a lot of trading going on ... that's the only thing I could think about that."

Mr Baker's successor, Bryce Houghton, was unavailable for comment. Outgoing Kiwi chairman Greg Gent referred the Business Herald to Fonterra chairman John Roadley, who refused to comment.